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Keynoting at the Inside Bitcoins Conference in Las Vegas, Overstock CEO Patrick Byrne wowed the crowd by announcing a stock market based on the Bitcoin block chain protocol.
Keynoting at the Inside Bitcoins Conference in Las Vegas, Overstock CEO Patrick Byrne wowed the crowd by announcing a stock market based on the Bitcoin block chain protocol. Byrne stated:
“Overstock went public in 2002. And it became very clear to me, very quickly, that there was a tremendous amount of criminality on Wall Street. And I was asked to take part. Then in 2007, a very well known hedge fund manager sat me down on Wall Street and said, ‘You need to understand, Patrick, you’re the most hated man I’ve ever known in my entire life. I hope they chisel that on my mausoleum some day: ‘The most hated man on Wall Street in 2007.'”
Overstock.com was one of the first major retailers to begin accepting Bitcoin. But now due to the company’s success with the digital currency, Byrne is setting course for a major expansion into Bitcoin. Now Overstock.com, in cooperation with Counterparty, plans to create a new platform - code named Medici - that will allow the retailer to issue corporate stocks online and eventually host a whole range of financial services on top of a global network.
If the plan is realized, this will effectively circumvent legacy stock exchanges like the NYSE and NASDAQ. The project could be a major breakthrough for the blockchain, although a few Bitcoin exchanges already exist and SecondMarket has even filed the paperwork with the State of New York to open the first regulated Bitcoin exchange. There is even talk that NASDAQ will be adding Bitcoin to its own exchange sometime next year.
The Medici project is spearheaded by Byrne, who has been a fervent supporter of the cryptocurrency for quite some time, even going so far as to use 3% of company profits towards promoting Bitcoin. Byrne spoke at the Inside Bitcoins in Las Vegas conference about Bitcoin and announced that Overstock is planning to shake up the financial world with their new platform:
“There is an opportunity to recreate the financial world as we know it in the parallel universe that is the blockchain.”
According to Byrne, decentralization is the key to success. The project is still several months from a potential launch and Byrne said that he plans to ask regulators to approve the new platform and has enlisted the services of Perkins Coie law firm.
The big difference between this new paradigm and current exchanges is that with current exchanges only cryptocurrencies can be traded. Medici will be using the Bitcoin algorithm allowing both startups and established businesses to make their companies public while at the same time charging about 20% less than traditional exchanges.
This means that these securities will be controlled by cryptographic algorithms running across computers spread across the globe, not by a centralized stock exchange and powerful interests like the banks and large businesses and, thus, leveling the playing field and lowering barriers to entry for just about anyone.
- Patrick Byrne
Byrne has hinted in the past that such a project was needed and now he has set a clear goal and pinned his hopes on Counterparty - a protocol for the creation and use of decentralized financial instruments using Bitcoin as a transport layer. Counterparty’s Robby Dermody, one of the project’s developers, seems to echo Byrne’s philosophy:
“Startups get a lot less of the money than they otherwise could because there are so many middle men. We hope to really increase the efficiency of the market. If you shop for linens on Overstock, you can get a new mattress too. And now—oh by the way—you could also spend $10 more and invest in the company.”
The developers will work within Overstock until the software is fully developed and then they will be spun off into a separate company to give them room to further develop and add new services without the influence of big interests. Both companies want to “democratize” stock markets in much the same way that cryptocurrencies are democratizing payments and money transfers.
But Byrne has anything but a good history with financial regulators due to him being a staunch advocate for reform for many years. This might make the given project an uphill battle at best.
On the other hand, the company does earn more than US$1 billion in annual revenue and this could make them a force to be reckoned with in the financial world. There is also little doubt that the cryptocurrency world is solidly behind the project as Counterparty’s own altcoin (XCP) soared more than 50% after the announcement.
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