How Does a Tokenized Security Handle Voting Rights When the Underlying Asset Has Governance Features?
The smart contract typically maps the token holder's balance to a proportional number of voting rights. For on-chain governance, a token holder can use their tokens to vote directly on proposals via the contract.
For off-chain assets, the token holder votes on-chain, and a custodian or governance layer executes the aggregated vote in the traditional system.
Glossar
Voting Rights
Authority ⎊ Refers to the entitlement granted by token ownership or staking commitment to influence the future direction and parameter settings of a decentralized protocol.
Voting
Governance ⎊ Voting within cryptocurrency, options trading, and financial derivatives represents a mechanism for stakeholders to exert influence over protocol parameters, listing decisions, or the direction of decentralized autonomous organizations (DAOs).
Tokenized Equity Voting
Instrument ⎊ Tokenized Equity Voting refers to the governance right embedded within a digital security token that represents fractional ownership in a traditional asset, such as corporate stock or a fund.
Tokenized Security
Security ⎊ A Tokenized Security is a digital asset issued on a blockchain that represents ownership or economic rights in an underlying traditional financial instrument, such as a stock, bond, or fractional real estate share.