On July 15, 2019, the CEO of Overstock.com, Patrick Byrne issued a letter to shareholders. In the document, Byrne discusses the current state of Overstock's blockchain ambitions and the company's anticipated goals in the coming years. The document highlights the firm's past achievements and explains how these actions correlate to Overstock's bigger focus of pioneering the digital economy.
Byrne's letter includes a brief overview of Overstock and its relationship to the blockchain technology sector. Notably, Overstock was the first major online retailer to accept cryptocurrency back in 2014. The letter also explains some of the motivations behind the decision, and how it spawned the development of Medici Ventures.
Medici Ventures Blockchain
Medici Ventures is an Overstock subsidiary that focuses on blockchain development. Overstock has spent a significant amount of capital developing the firm. Byrne takes a moment to acknowledge these investments, before explaining why he considered this the best course of actions.
Byrne cites the emergence of security tokens as the evolution of blockchain technology. He references several studies including – Billions to Trillion: Crypto Assets and the Inevitability of Digitization to highlight his point that tokenization of traditional financial assets is inevitable.
To support his conclusion, Byrne quotes some major industry bigwigs including the 2018 NASDAQ Chairman, Bob Greifeld. He quotes the Chairman as saying “100% of stocks and bonds can be tokenized, and in five years 100% of the stocks and bonds on Wall Street will be tokenized.”
Byrne explains that if Greifeld is correct, the tokenized economy will equal close to $500 trillion in the coming years. Additionally, exchanges that handle and offer tokenized securities will experience a huge surge in value. Byrne goes as far as to predict these exchanges value to reach around $1 trillion in the coming years.
At this point in the letter, Byrne takes a moment to reiterate that these are predictions and that nobody knows for sure exactly how long, or if ever, tokenization of the traditional markets will occur in full. After the brief disclaimer, the advantageous CEO takes a moment to discuss Overstock’s past accomplishments.
Overstock Leads the Pack
In April 2015, Overstock filed a self-registration on form s-3 with the SEC to register digital assets via blockchain. The company was among the first to do so. In December 2015, the SEC approved Overstock's request to register security tokens.
In December 2016, Overstock issued the first SEC-registered digital security OSTKO. OSTKO was the first Blockchain-based Series-A preferred stock issued in the world. OSTKO began trading on the licensed exchange PRO Securities ATS.
Currently, OSTKO is only available to accredited investors with legacy accounts on the PRO Securities ATSD system. To be considered an accredited investor, you must show proof of $1 million in assets. Of course, most average investors lack this much capital. Therefore, many investors are unable to participate in trading these tokens in their current status.
In August 2019, resales will commence under rule 144. This means unaccredited investors will be able to participate in the market for the first time. Overstock plans to extend this strategy to other tokenized assets. In particular, the firm seeks to open the doors to global investments of the tZERO token. tZERO is Overstock’s native security token.
Byrne expressed his pleasure with the ability to allow more investor participation. Also, he touted deals with other registered digital asset exchanges including the Boston Security Token Exchange (BSTX). Notably, BSTX was the first regulated national security exchange in the US.
Byrne took a moment to explain Overstock's competitive advantages in the sector. He cited the previously mentioned accomplishments. He also touched on the firm's previous work with the SEC, and the fact that the tZERO token is SEC-registered.
Byrne explained the huge work and financial investments made to date, and why he considers these moves to be critical in the company's efforts to position itself as a leader in the digital economy. Additionally, he cited protection from fraud and the ability to leverage efforts as the main reasons why security token ownership will expand.
Overstock has Grand Plans
tZERO, Medici Ventures, and the entire Overstock blockchain movement is impressive, and there is still much more planned for the near future. Byrne explained how these technologies are not only important to consumers but also revolutionary to governments.
The CEO explained how many countries lack the ability to incorporate traditional monitoring and enforcement methods utilized by developed countries. The infrastructure costs are just too high. Overstock plans to reduce these costs through the use of blockchain systems.
As an example of these grandiose plans, Byrne cited the firm’s agreement with Zambia. Here, Overstock plans to provide blockchain services to the nation, including land governance. Byrne takes a moment to describe why land governance is at the core of a society's structure, and why a blockchain-based system is inevitable. The program goes under the name MLG, and it’s a real game-changer
Crypto Central Banking
Byrne's blockchain ambitions don't stop there. The firm has already begun development on a cryptocurrency central banking system. The crypto central bank is called Bitt. Bitt already has a partnership with the Eastern Caribbean Central Bank in Barbados. The firm also utilizes engineers from the Utah-based Medici team.
Overstock wants to provide more transparency and regulatory capabilities to countries suffering from poor money management, or economic collapse. In the paper, he cites many failed Middle Eastern countries, as well as Venezuela, as examples of governments unable to protect their currency from rapid inflation.
The Perfect Storm
Overstock wants to combine all of these platforms together, MLG, tZERO, and Bitt, to form a stack. This stack would allow governments to issue currencies, monitor monetary activity, and enforce regulations more effectively. The systems would reduce the costs associated with these tasks significantly.
Byrne Has Much More to Come
After laying out his company's extraordinary plans, Byrne took a moment to discuss some other platforms that are in the works. Without naming the platform, he discussed the possibility of a peer-to-peer lending app in the future. Peer-to-peer lending apps are now more popular than ever. Blockchain technology makes these technologies more efficient and safer than previous versions.
Overstock is Aiming for the Stars
Byrne ends the letter with a brief discussion on the competition his firm currently faces in both the blockchain and retail market sectors. He explains that Overstock has a significant lead in these areas and that the company should be able to improve it’s positioning further in the coming months.