The chief executive officer of Overstock – Patrick Byrne – warns against investing in blockchain. While speaking at an event in New York on Wednesday, Byrne ended his keynote with the statement “Warning! This is all risky, it may all fail.”
The event was hosted by Oppenheimer & Co. – an investment bank and brokerage. Unusually formal in a tie and suit, Byrne electrified what was known to be a fairly low-key audience with his well-honed stump speech for the transformative potential of blockchain. The clients of the investment bank and brokerage occupied almost 150 seats and they were enthusiastically taking photographs of the slides of Byrne showing his vision of the most promising blockchain application.
The CEO of Overstock started his presentation by providing a brief summary of transitional securities trading as well as its downsides – highlighting, as he has been wanting to do for years, the fact that due to the arcane structure of the market today, the ownership of stocks is not direct and somehow dubious.
What can go wrong?
In one of the numerous lines to catch fun from, Byrne said: “All the corporate shares in the United States are owned by the firm called Cede & Co, and what you actually have is a contractual claim against a corporation, which has a contractual claim against another corporation, which has a contractual claim against DTCC, that has a contractual claim against Cede & Co. What can go wrong?”
The CEO went on to say that blockchain, by minimizing the need for trust and enhancing transparency, can bring capital markets to the state where “all sort of systemic risks go away,” as people can’t act dishonestly or alter the process. Byrne mused, igniting a few more chuckles in the room by saying: “Imagine we have a magic ledger that is protected cryptographically, transparent, and public – there would be no way to cheat.”
He also talked about his estimation of the blockchain space in the next couple of years. Byrne said that in the next ten years, all kinds of securities can be tokenized, resulting in a potential value of new blockchain securities of about $914 billion. He later turned over the favorite child of Overstock – tZERO, a security token trading platform.
The trading platform was officially launched this year. However, trading on the platform has so far been slow, and it is only limited to Wall Street hours. The concerns of the structure of the market mentioned are what resulted in the development of tZERO over the last four years, he said. He further added that irrespective of these problems, the firm was still created in accordance with the regulations of the U.S.
The team of Overstock – and that of its venture arm, Medici Ventures – has always been very careful and SEC-conscious in creating tZERO, Byrne added. He said that the firm even bought a piece of Wall Street in form or SpeedRoute – a fintech firm, which was bought in 2015. The process has however been slow but steady. Byrne said he wants to continue focusing on developing tZERO without violating these regulations or harming his prospective users.
He concluded by saying: “We are not going to Mt Gox things.”
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Princess Ogono is a writer, lawyer and fitness enthusiast. She believes cryptocurrencies are the future. When she's not writing, she spends time with her adorable cat, Ginger and works out often.