Tokenized Equity: Six Instruments, Six Payoffs

“Tokenized equity” sounds like one thing. It is at least six. The phrase gets stamped on a registered on-chain share, on a certificate that merely tracks a share’s price, on a right to buy shares that do not exist yet, and on a token that pays you a slice of revenue and never touches ownership at all. Same two words, four legally and economically different instruments—and two more besides.

Only two of the six actually move one-to-one with the underlying share. The other four are options, debt, or pure cash-flow claims wearing the equity label. Confuse them and you mis-price two things at once: the risk (what can go to zero, and against whom you have a claim) and the payoff (linear, convex, or decoupled from the stock entirely).

This is a field guide to all six. For each: what you actually own, the shape of its payoff against the share price, the main trade-off, and where it shows up in the wild.

Three families under one label

The rest of this guide walks the families in order, from the instruments that behave most like a share to the ones that behave least like one.

Family 1—existing equity (linear, delta-1)

These are the only two instruments that earn the name. Each is backed by a real share, so its value rises and falls with the stock in a straight line. The difference between them is whose balance sheet your claim sits on.

Direct tokenized share

The token is the on-chain record of a real share, with a beneficial claim that flows through to the holder. Dividends, and sometimes voting, can pass through. This is delta-1 exposure: the token price tracks the share price, minus tracking error and liquidity spread.

• Pro—the cleanest mirror of the equity; dividend and voting rights can pass through.
• Con—the heaviest compliance load. A regulated custodian and transfer agent must hold and record one real share behind every token.

In the wild. Registered, on-chain securities run through a regulated transfer-agent model—Securitize is the leading example, operating as both an SEC-registered transfer agent and broker-dealer. The high bar for “the token is the share” is set by venues like the Nasdaq tokenized-equity pilot, where a tokenized version must be fungible with, and share the same CUSIP and trading symbol as, the traditional share. Anything short of that is not a direct share—it is the next instrument.

SPV-wrapped share token

Far more common in practice. Shares are placed inside a bankruptcy-remote special-purpose vehicle (SPV), and the token represents an interest in that SPV—or, in several flagship products, a “tracker certificate” that is legally a debt instrument referencing the share. Economically it is still 1:1 with the stock. Legally, your claim runs to the vehicle, not to the company’s cap table, and a credit layer (SPV and issuer solvency) now sits between you and the equity.

• Pro—ring-fenced and prospectus-friendly; one SPV can pool many holders cleanly.
• Con—you are one or two steps removed from the share. No direct cap-table rights, voting usually does not pass through, and tracker-certificate versions are credit instruments, so an issuer default is a credit event.

In the wild. Tokenized public-stock products such as Backed’s xStocks (tracker certificates) and pre-IPO SPV products such as Jarsy (1:1 shares held in an SPV, with a low minimum). Buyers should note that these holders do not own the underlying shares directly—rights run through the vehicle, ideally with an independently verifiable proof-of-reserves.

Family 2—future rights (option-like and contingent)

Here the token is not backed by a share today. It is a contract that might become equity later. The payoffs stop being linear and start bending.

Tokenized SAFE / SAFT

A SAFE (Simple Agreement for Future Equity) is a right to receive equity at a later priced round, usually with a valuation cap or discount. A SAFT (Simple Agreement for Future Tokens) is the same idea for tokens, not shares—and the two are not interchangeable. Tokenizing the contract makes the future-right itself transferable before it converts.

• Pro—cheap, fast, standardized funding that defers the hard valuation question.
• Con—no exposure until it converts, and if the triggering event never happens it can be worth nothing. A SAFE is equity-contingent; a SAFT is token-contingent. Do not merge them.

In the wild. The SAFE is Y Combinator’s standard instrument; the SAFT framework was popularized in 2017 and used in raises such as Filecoin’s.

Tokenized warrant

The right—not the obligation—to buy shares at a fixed strike, often only after the price clears a trigger. This is the convex, leveraged instrument: worthless below the strike, then rising with the stock above it. Per warrant, the intrinsic payoff is simply:

The leverage cuts both ways. A small premium controls upside on the full covered amount, but the warrant can expire at zero, and exercising it mints new shares—so it is dilutive to existing holders. Exercise mechanics matter: a cash (physical) exercise means paying the strike in cash and bringing capital into the company; a cashless exercise nets the cost out in shares, so the holder pays almost nothing but the company raises almost nothing.

• Pro—cheap, leveraged upside; a right, not a duty.
• Con—dead weight below the strike; dilutive on exercise; needs active, well-timed exercise.

In the wild. Token warrants are standard alongside equity in crypto VC rounds (equity now, a token kicker later). The closest public-market cousin is the SPAC warrant, often redeemable for a nominal $0.01 once the stock clears a threshold—a mechanic that effectively forces exercise.

Convertible-note token

Debt that converts into equity at the next round, typically at a valuation cap or a discount. The payoff is hybrid: a debt-like floor on the downside (a repayment claim, subject to solvency) and equity-like upside once it converts.

• Pro—a downside cushion plus equity upside; senior to equity in a wind-down.
• Con—it is real debt, with maturity and repayment obligations; more legal complexity than a SAFE; dilution on conversion.

In the wild. The startup convertible note, put on-chain—the same instrument founders have used for years, now transferable as a token.

Family 3—cash-flow claims (decoupled from equity)

Revenue / royalty token

A contractual cut of revenue, fees, or royalties. This is not equity at all: no ownership, no voting, no claim on enterprise value or exit proceeds. Its value is the present value of an expected stream, so it tracks revenue, not the share price—flat against the stock and shaped more like an annuity. If a return cap applies, the payoff flattens once the cap is hit. Valuing it is a discounted-cash-flow problem, not an equity-comparables one—see DCF valuation for tokens.

• Pro—pays cash flow from day one, no exit required; non-dilutive to founders’ equity.
• Con—no upside on valuation or an acquisition; depends entirely on revenue materializing; capped versions forfeit the tail.

In the wild. Music and IP-royalty tokens, and DeFi fee-share (“real yield”) tokens that route a slice of protocol fees to holders.

How to tell which one you are holding

The label on the listing rarely tells you. Five questions do.

One structural point ties the families together. A wrapped instrument almost never beats holding the share outright. Platform fees, an acquisition premium baked into the wrapper, and the cost of exercising an embedded warrant all leak value. The token’s total economic exposure usually sits below one share. Closing that gap takes real economics—extra warrant coverage, a smaller fee, or a larger reserve—not a better label. Before you decide a token even belongs in the structure, the prior question is whether the asset needs one at all: see when you don’t need a token.

The takeaway

“Tokenized equity” is a category, not an instrument. Inside it sit at least six distinct claims with three different payoff shapes and three different counterparties. The first job of anyone buying, structuring, or modelling one is to drop the label and name the instrument: existing-equity wrapper, future right, or cash-flow claim. Price the risk against that, not against the word on the listing. For a worked example of an equity wrapper at the institutional end of the spectrum—a protocol crossing onto public markets—see from protocol to public equity.