The new Medici?
When online retailer Overstock began accepting bitcoins in January, many in the crypto community cheered the move as an important step in the currency's eventual universal acceptance. What most didn't realize, though, is that buying goods is not all Overstock CEO Patrick Byrne has in mind.
In an Oct. 6 announcement, Byrne revealed that he was planning a completely decentralized financial exchange using blockchain technology. Byrne, whose disdain of Wall Street is well documented, said he thinks this system will ultimately replace the New York Stock Exchange and the Nasdaq.
"We can bring a technology to market that does everything that Wall Street does," he said. "We will have made the biggest financial disruption in 800 years."
Harkening to the advent of modern banking in the Renaissance, Overstock has dubbed its project "Medici." Byrne said it may eventually replace retail as the primary focus of his company.
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Marketing and bluster aside, Medici offers a clear value proposition: An equities or bonds exchange that cuts out the middlemen could offer greater efficiencies and cost-savings—and allow for the layman to more readily participate in the market.
Although that task may seem daunting from a regulatory standpoint because it seeks to fully upend the current system, Byrne predicted he will be offering the first securities over his exchange in April as "early indications are actually quite positive" from regulators.
Any new exchange will be examined closely by the Securities and Exchange Commission to make sure it satisfies regulatory requirements for fair trading and adequate disclosure, Shadab said.
Also, the technological and regulatory hurdles facing Medici are not necessarily as trivial as Byrne thinks, said Charles Hoskinson, director of the Bitcoin Education Project, who has been involved with several blockchain projects.
"From a technology perspective I think it's dumb, and from a regulatory perspective I think it's very risky," Hoskinson said, explaining that a decentralized system will probably not offer adequate regulatory oversight, and that storing every transaction on a blockchain is a needlessly resource-intensive strategy.
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Byrne said he plans to issue a cryptosecurity called "O-coin" as the first on Medici. It would be "an approximation of the legal and common rights" of Overstock's common stock, but it would only be a small offering, he said.
While the technological infrastructure for many of these applications have not been built yet, groups with names like Counterparty and Ethereum are now working to do just that. And while many of these developers have converted into foundations for the spread of their protocols, their work has reportedly attracted interest from tech investors.
One source with knowledge of Ethereum's beginnings said that investment offers valued the project at about $500 million, and that Google Ventures was one of the interested parties. "That's a big number isn't it? That's an impressive number?" Ethereum Chief Communications Officer Stephan Tual said when asked about the figure, before adding that "I don't think the concept would work if we had accepted money."
Google Ventures did not respond to a request for comment.