Equity is an ownership interest in an asset, company, or investment. In traditional finance, it is commonly described as the residual value left for shareholders after a firm’s liabilities are paid. In simple terms, equity can be thought of as what owners would receive if all assets were sold and all debts settled.
Equity in companies, startups, and tokenized ownership
In crypto, “equity” often comes up when discussing blockchain companies, exchanges, and infrastructure providers that issue shares to investors, just like any other business. Some projects also explore equity tokens, blockchain-based representations of ownership shares. These instruments aim to bring cap-table style ownership on-chain, potentially enabling faster settlement and broader access, while still relying on legal frameworks that define shareholder rights, voting, and claims on future proceeds.
It is important to distinguish equity from many common crypto tokens. Most utility or governance tokens do not automatically confer a legal claim on a company’s assets or cash flows, even if holders can vote on protocol changes. True equity generally implies enforceable ownership rights in a legal entity, including a residual claim if the entity is liquidated.
Equity in trading accounts and why it differs from “equities”
In trading, equity can also refer to the total value of your account, your cash balance plus unrealized profit or loss on open positions. For example, if you hold an open leveraged position, your account equity changes as the market moves, which affects margin requirements and liquidation risk.
Equity also differs from “equities” as an asset class. Stock markets typically use brokers, clearing houses, and established regulations, while many crypto assets can be transferred peer-to-peer on public networks. Understanding what “equity” means in each context helps users assess ownership rights, risk, and protections, which is why the concept matters across the crypto ecosystem.