Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Bitcoin Stock Exchange Could Be "More Valuable than Alibaba"

Currencies / Bitcoin Oct 22, 2014 - 06:02 PM GMT

By: Money_Morning

Currencies

David Zeiler writes: When Overstock.com Inc. (Nasdaq: OSTK) Chief Executive Officer Patrick Byrne launched a wiki page to explore the possibility of a Bitcoin stock exchange, it was hard to imagine the project getting past the idea stage.

But Patrick Byrne is a man on a mission.

Driven by a deep mistrust of Wall Street, Byrne has announced the creation of a division within his company charged with making this dream a reality.


He's calling it "Medici" after the legendary family of Renaissance-era Italian bankers that pioneered the double-entry system of accounting.

"This could be as big, or bigger, than the Internet," the eccentric chief executive gushed to Wired earlier this month.

The basic idea is to create a stock trading system that uses Bitcoin's public ledger of transactions, the blockchain, to bypass Wall Street's institutions.

The wiki page helped Byrne find 13 groups already working on similar ideas. Byrne and his team quickly determined CounterParty was the best of the lot. So he hired two of the three co-founders.

That pair, along with several others, will become part of a new division within Overstock funded with 5% to 10% of Overstock's cash flow.

"We have, essentially, an open checkbook for them to build the crypto alternative to Wall Street," Byrne said in a speech given at the Inside Bitcoins Conference on October 6.

To navigate the many thorny legal and regulatory issues, Byrne said he has enlisted the services of blue chip legal firm Perkins Coie.

How far he gets is another question, but make no mistake – this man is serious.

"The Most Hated Man on Wall Street"

The roots of Byrne's crusade go back to the 2002 Overstock IPO, when he became aware of some unsettling practices on Wall Street.

By 2005 he became notorious for accusing Wall Street of "naked short selling." In naked short selling, a trader doesn't borrow shares to sell on the market – they simply sell shares they don't have. Those doing it, Byrne said, were manipulating stock prices for their own gain.

Byrne also accused Wall Street of corruption and of having ties to organized crime. His persistent attacks soon made him "the most hated man on Wall Street," a title he still wears with pride.

Byrne has taken it upon himself to purge the bad actors from the system. Or as he puts it, "drag Wall Street behind the barn and kill it with an ax."

While a Bitcoin stock market is a certainly a long shot, investors would reap several benefits if Byrne somehow pulls it off.

Here's what you can expect…

Why We Need the Medici Bitcoin Stock Exchange

To understand what Byrne hopes to achieve with the Medici Bitcoin stock exchange, you need to know something about what he's trying to fix.

In his speech, Byrne gave a little history lesson about how stock ownership is recorded.

In the old days, shares of stock were represented by paper certificates. But by the late 1960s, as volume reached ever-higher levels, the paper system became unwieldy.

So in 1973, the big investment banks of Wall Street got together and created the Depository Trust & Clearing Corp. (DTCC). The DTCC's electronic settlement system solved the problem of rising trading volume.

But it created a system in which the actual ownership of stock became a much fuzzier affair. "You think you own stock, but you don't," Byrne said in an interview on the Let's Talk Bitcoin podcast. "What you own are contractual rights against contractual rights against contractual rights. Someone somewhere down the line has the property rights."

Byrne maintains this system is not trustworthy and is subject to Wall Street manipulation.

"I believe the settlement system has been compromised and some bad people have figured out how to use that," he said. "Regulators don't understand that there's a lot of market-rigging going on. What Bitcoin presents – what the blockchain presents – is a way to have a peer-to-peer, one-to-one settlement system that doesn't run through any centralized institution that the bad folks can hijack."

Byrne has little faith in government regulators to protect investors. "The regulators are shoeshine boys for the people who benefit from the corruption," he said. A Bitcoin stock system, based on mathematics, would be incorruptible.

"That's why the crypto revolution is so necessary," Byrne said.

The First Step Is the Hardest

Byrne does not – at this point, anyway – envision a system that would supplant the New York Stock Exchange and Nasdaq. Instead, he sees Medici as a parallel stock trading system.

In other words, if a company wants to allow trading of its stock on Medici, it will not have to withdraw its listing from the exchange it's on now.

It's hard to say how many stocks already on the major exchanges may opt to list on an upstart exchange like Medici. But Byrne does know who would – startups who want to go public without the hassle and expense of dealing with Wall Street. He intends for Medici to undercut Wall Street's fees for bringing a company public by about 20%.

"Startups get a lot less of the money than they otherwise could because there are so many middle men," Byrne told Wired. "We hope to really increase the efficiency of the market."

As time goes on, the transparency of a Bitcoin stock system – and its immunity to much of Wall Street's monkey business – could also attract companies listed on the major exchanges.

Whether Byrne can get Medici off the ground mostly depends on the skill of his Perkins Coie legal team to resolve the regulatory issues. But a new Bitcoin stock exchange would clearly disrupt the financial status quo.

And for retail investors, there's actually a way to play this. Since Medici is part of Overstock.com, OSTK shares will benefit from the stock system's success. And down the road Byrne said he plans to spin off Medici from Overstock, which would further enrich shareholders.

"Building this – and being the company that owns this – can be more valuable than Overstock," Byrne told Wired. "It can be more valuable than Alibaba."

Everything you wanted to know about Bitcoin: Earlier this month a new documentary on Bitcoin was released. "The Rise and Rise of Bitcoin" tells the history of the digital currency and offer's a layman's explanation of how it works. It's way more than a geeky currency story…

Follow me on Twitter ;@DavidGZeiler.

Source : http://moneymorning.com/2014/10/20/this-bear-market-indicator-is-off-the-mark/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules