Overstock has enabled stock trading on the Bitcoin blockchain

Rage Comment : The experience of multiple blockchain startups has made people fully aware that although blockchain is based on decentralization, the permission of central authorities such as regulators is very important for the development of blockchain at this stage. Therefore, after developing the t0 blockchain platform, Overstock spent a lot of energy and cost to obtain the permission of major US securities trading regulators. Currently, investors can directly trade stocks on the platform through blockchain technology. However, the transformation of the financial market still requires the key power of major participants such as exchanges.

Translation: Annie Xu

Online retail giant Overstock is the first public company to issue shares on the Internet, using the Bitcoin blockchain to issue 126,000 shares.

Overstock has been developing blockchain securities trading through the t0 platform for two years. The company and its CEO Patrick Byrne see blockchain as a way to greatly simplify securities trading and the way capital markets operate.

Blockchain is an online ledger that is controlled by a global network of computers rather than any company or government agency. The Bitcoin blockchain ledger can track anything of value, including currency, securities, bonds, etc. Because blockchain can accurately and cheaply monitor financial transactions without relying on middlemen, it eliminates some of the current market flaws.

Byrne said the securities market is at a major turning point. It means it is groundbreaking and iconic. "It's not a Titan rocket or a moon probe. But it shows a life form." He hopes that t0 technology can be recognized by other financial institutions, not just Overstock.

Ironically, due to legal reasons, the current product demand is more middlemen, which is exactly what blockchain is going to eliminate. In addition to online stock issuance, there are also traditional over-the-counter market transactions. In order to meet the requirements of regulators, corporate blockchain stock transactions must go through middlemen, just like traditional stock transactions. This shows that it will take a long time for blockchain to transform Wall Street.

Therefore, Wall Street is also paying close attention to blockchain applications that are committed to transforming the capital market. Last December, JPMorgan Chase, Wells Fargo Bank, and State Street Bank all joined the open source project Hyperledger. Some banking institutions have also joined the R3 blockchain alliance. Nasdaq-listed companies have begun to try to use blockchain to track private company stock transactions. But it is not clear which technology they will choose or how to deploy it.

Moreover, the current R&D direction is not unified. Goldman Sachs and others recently withdrew from R3. Finadium closely follows the blockchain trends on Wall Street. Rick Stinchfield, the company's technical director, said that the initial rush gradually cooled down, mainly because of the fear of the disruptive nature of blockchain. Banking giants seem to realize that change will not be achieved so quickly. "Currently, R&D has slowed down and gradually stabilized. Bankers and brokers are in risky industries, but they hate technical risks."

New Exchanges

In October, Byrne revealed Overstock's stock issuance plan at the Internet Finance Conference in Las Vegas. Last month, all shareholders of the company had the opportunity to participate in the project. Now the company has delivered the shares to investors' accounts, of which 126,565 shares were completed through the t0 blockchain platform. After that, investors can trade stocks through the blockchain. The U.S. Securities and Exchange Commission (SEC) issued a stock issuance license in December last year. The company spent five to six million US dollars in legal fees in the process of obtaining SEC and FINRA licenses.

t0 has an independent private chain, which seems to contradict the original intention of blockchain. The advantage of blockchain lies in its distributed nature. However, t0 publishes all transaction information on the blockchain and saves all records in private systems on the blockchain. One of Byrne's goals is to build the most transparent market currently.

Patrick Byrne

Byrne said Overstock and t0 are negotiating with governments of multiple countries to build blockchain exchanges. But Stinchfield and others warned that this technology cannot meet the rapidly changing market in the United States. "I can't imagine what Nasdaq would look like on the blockchain. Blockchain cannot be ignored, and regulators will not easily recognize it."

In the near future, such technology is more likely to be used to transform the more obscure processes in the capital market, such as the securities settlement system. Currently, Wall Street's transaction settlement time still takes about three days, and blockchain can achieve real-time settlement.

Ultimately, the main players in the financial market will become stock exchanges, brokers and central securities depositories. Byrne believes that as long as one participant chooses blockchain, the other two will be eliminated, greatly reducing costs. "It's like a game of thrones."

In the short term, it will be a close call, but Stinchfield believes that blockchain will eventually simplify the system. "Blockchain will combine the functions of stock exchanges and custodians. Trading and settlement will become a unified whole." The Internet cannot replace Wall Street yet, but the opportunity for a 21st century securities trading revolution has already emerged.