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What you actually own when you hold a token
The legal chain from your wallet to the shares in custody — and the four places it can break.
What you actually own when you hold a token
You hold a token in a wallet. Behind it: an issuer, a custodian, a brokerage account, and a pile of shares. The strength of your position depends on each link, and the links are not equally visible.
The chain, in order
| #Layer | What it is | Where it can break |
|---|---|---|
| Token | An ERC-20 or SPL token on a public chain | Contract risk, bridge risk if you move it across chains |
| Issuer | The legal entity that issued the token and owes you the claim | Insolvency, or terms that let it suspend redemption |
| Custodian / broker | Holds the underlying shares, usually segregated | Segregation failures, jurisdiction-specific insolvency rules |
| Underlying | The share or ETF itself | Ordinary market risk — the same risk you wanted |
Dinari describes its own version plainly: a dShare is *"a token 1:1 backed by a security, commonly a U.S. equity"*, and a mint only happens once a buy order has actually filled in its brokerage account at Alpaca. Ondo's tokens are issued by a British Virgin Islands entity that holds the securities and passes through the economics — including a 30% withholding on US dividends before reinvestment.
The four failure modes that matter
1. The issuer is the counterparty. If the issuer becomes insolvent and the shares are not properly segregated and bankruptcy-remote, your claim competes with other creditors. No amount of on-chain transparency fixes this, because the shares are off-chain.
2. Custody is concentrated. One custodian holding the shares for thousands of token holders is efficient and is also a single point of failure. Proof-of-reserves attestations help; they are a snapshot, not a guarantee.
3. Redemption can be gated. Issuers reserve the right to refuse a redemption that would breach their compliance obligations, and to require KYC before redeeming. A token you cannot redeem at the issuer may still be sellable on a secondary market — at whatever price that market offers.
4. Your jurisdiction can disqualify you. Ondo's own documentation lists prohibited persons, including everyone in the United States and Canada. Buying as a prohibited person does not give you a redeemable claim; it gives you a token and a legal problem.
What "backed 1:1" does and does not mean
It means the issuer claims to hold one share per token. It does not mean the token is redeemable on demand, that the shares are held in your name, or that the price you pay equals the share price. Kraken's own FAQ says a spread is built into the asset price for every transaction — a cost that exists precisely because the token is not the share.
The practical test
Ask: *if this issuer stopped operating tomorrow, what would I own, and who would I call?* If the answer is "a claim on a segregated pool of shares, administered by a named entity in a named jurisdiction, with a published redemption process", you have a real product. If the answer is vague, the token's price chart is the least important thing about it.
Written for this index. Fee and eligibility statements are quoted from the issuer or venue and dated on /venues and /method. Not investment or tax advice.