At the Money20/20 Conference in Copenhagen on Thursday morning, Patrick Byrne of Overstock and t0 discussed challenges to traditional settlement infrastructure and the opportunities provided through using blockchain technology to process bonds settlements. Mr. Byrne started off by telling a story of the United States capital market in the early 1960’s, whose employees had difficulty managing the quadrupling of paper work by delivery persons on bicycles. As a result, the DTCC was created to create a central, counter-party clearing.
Patrick Byrne on Traditional Finance
These systems were not always robust, however. “What really happened in 2008, the settlement system froze.” remarked Byrne. “As I became aware of the system, I became aware of the mischief that was going on. That there was the opportunity for systemic risk.”
Now, however, we can have trusted, peer-to-peer asset exchange that can eliminate this risk. As a result, Mr. Byrne outlined, there is an ongoing move away from relying on a sole ability to enforce a currency’s value through the strength of government enforcement. “Let’s imagine a new world, a world with a ledger…And imagine this ledger was cryptographically protected and public and transparent. All that’s happening is that a ledger entry is being made… and you can do this on Wall Street too. Shares of stock can instead by tokens, coins.” Showing a moving picture which showed changes in the moving parts within a network graph, Mr. Byrne pronounced that the current systems can be replaced through cryptographic and distributed systems instead of legacy ones.
Both t0 and Overstock have been leaders in this space, working transparently with regulators to do everything they can to demonstrate the ability to work with the establishment and trading of securities on a blockchain. Jokingly referencing that the officials had “Sprinkled SEC Holy Water” on their initiatives, Byrne pronounced that Overstock is ready to issue Blockchain ETF, ADR through t0 and in partnership with NASDAQ, and are leaders in the means towards creating blockchain hosted securities trading. Overstock is currently the only company with SEC approval to issue a blockchain security and also to trade blockchain based shares. Look for the precedents and lessons learned here by both regulators and companies to be applied by other interested parties in coming months and years.
When asked if it will be one of the only exchanges using the blockchain, Mr. Byrne said that his group is ready to license out his software to other organizations, yet is a bigger fan of letting others in the space develop cryptographic solutions that are independently tested, rather than having t0 become a monopolistic central point to the industry.
At the end of the talk, Mr. Byrne promised that the movement ongoing right now is indeed historically impactful, and that the recent interest by banks and regulators in understanding this technological paradigm shift is well-founded. “I’m all over the world these days. I’ve never seen what’s happening over the last 4 months… The early folks of the internet thought that they were working with the Guttenberg bible. Yet, the people working with this are saying that it will be more impactful than the Internet itself.”
What do you think about t0 and their initiatives to trade securities on a blockchain? Will the disruption of Blockchain on securities markets be more impactful than the invention of the internet? Share your thoughts below!
Images courtesy of hiCenter, Patrick Byrne.