Blockchain, the conceptual engine underlying Bitcoin, has far-reaching potential to revolutionize much more than just our system of currency. The Agora Voting Project uses a blockchain to facilitate a secure electronic voting system and has already been used in Spanish Congress. Bitcloud is a project that aims to create a decentralized, alternative Internet based on a technology similar to blockchains. Now Patrick Byrne, the pioneering CEO of Overstock, wants to remake the stock market the same way.
Overstock was already one of the first large vendors to accept Bitcoin, and did $126,000 worth of Bitcoin transactions in the first 24 hours. Clearly though, Byrne has much larger plans for incorporating decentralized systems in the marketplace. On Tuesday, Overstock posted on their blog a rough outline of all the potential ways that a business could issue cryptosecurity.
Essentially, instead of having a central stock exchange such as NASDAQ or the Chicago Stock Exchange, trades would be executed and cryptographically confirmed on a decentralized, public ledger that can be viewed by anyone at anytime—a blockchain. Overstock is the first to admit that this is all still theoretical:
"However, how a public company would issue a cryptosecurity has yet to be established. So as to reduce regulatory opposition a cryptosecurity should, at least initially, mimic as closely as possible the economic and legal rights of common stock, but because the characteristics of and methods of issuing a cryptosecurity may be novel, how such a security may be issued and traded, and the risks associated therewith, deserves careful thought."
Byrne's motivation in creating a decentralized system for trading securities is apparent as he has a history of picking fights with the giants of the stock market. In 2007, Overstock went after 12 brokerage firms on Wall Street, suing them for $3.48 billion. The company accused them of naked short selling, which is when brokers sell shares of a stock that they don't actually have, intending to drive the price down and then purchase it at a lower price. The lawsuit is ongoing.
Byrne is of the opinion that questionable regulatory practices will send us into another massive recession unless something changes soon. Earlier this year, he told Wired, who calls him the Bitcoin Messiah:
"Someday, either zombies walk the earth or something close to that. Bitcoin is the solution."