Last week, Overstock.com filed paperwork to begin offering stock (and perhaps other securities) in a digital form. The company's CEO, Patrick Byrne, has been planning this move since last summer, when he announced at a Bitcoin 2014 that he wanted to list Overstock on a blockchain-based exchange. I'm absolutely excited to see Byrne continuing to piece together his futuristic vision, but I fear that the road will not be as smooth as some others expect.
Overstock's involvement in the cryptospace began early last year, when the company became the largest internet retailer (at the time) to accept Bitcoin. Byrne's commitment to cryptocurrency is a direct result of the corruption that he has witnessed in our traditional financial system. These steps toward moving Overstock onto a blockchain are part of his constant efforts to avoid that corruption.
I really am glad that Byrne is trying to make all of this happen, but I think it will be difficult for him to finalize the project. The problem is that Overstock has been forced to ask for permission to make this blockchain dream a reality. The news here is that the company filed with the Securities and Exchange Commission. Do we really expect a government agency to expressly allow people to start trading stock in a decentralized manner? Sure, people already trade less official companies on blockchains, but to my knowledge, no one has asked for permission yet.
As WIRED put it,
Byrne hopes to offer stock that’s controlled not by a central stock exchange such as the NYSE or the NASDAQ, but by a network of machines spread across the internet—machines outside the control of any one central authority.
Did you catch that? "Machines outside the control of any one central authority." Just like with Bitcoin itself, no one will be in charge of whatever network Overstock is traded on. No one will be able to instantly turn it off or change the rules if something goes wrong. The government is founded on control and authority, so how could they let this fly? I don't think they will, at least not without gaining special oversight privileges that would likely defeat the purpose of the whole system.
Obviously, Bitcoin makes a great metaphor for this situation. Imagine if Satoshi had asked the Federal Reserve for permission to start his decentralized currency. He would have been turned down in an instant. His only hope would have been to include some sort of special controls that the Fed could use to manage and manipulate the network and the currency. The stated purpose of those controls would surely be to protect citizens from fraud, recessions, and the like, but of course we know the Fed would abuse those powers.
Bitcoin only managed to stay decentralized by initiating its growth among people who were willing to move forward without permission. Fortunately, we can still use it in that way, but there are also many regulated companies built around Bitcoin. For example, exchanges in the US must be registered money services businesses and New York is coming closer to enacting BitLicense regulations. Those companies can certainly still be helpful, but they will always be severely handicapped by the law.
Satoshi understood all of that. He knew that asking for permission would be pointless. In fact, he was so sure that the government would look down on his idea that he didn't just skip the permission stage. He also decided to keep his entire identity a secret.
I'm not trying to blame Byrne for asking permission - I know that a company as big as Overstock would get in huge trouble for not going by the book - but I think we should recognize that he will have a tough time. I would be extremely surprised if the SEC approved this first request. Instead, they will require Byrne to give the government extra privileges on the network. Then we'll see Byrne's true colors. Will he allow our tyrants to have any special control (even a little bit?), or will he hold firm and aim to create a true decentralized network?
Leave a comment and let me know if you agree! Will the SEC grant Byrne permission? If not, will he cave to their demands?