This is sort of the idea I've been waiting to come out of the bitcoin universe for some time now. A decentralized stock exchange seems like an obvious killer application for bitcoin. Though, the only thing I don't like about it is counterpart. Was never a fan of them, nor open transactions...
Why go to the SEC? I feel like the advantage of doing something like this would be the ability to build a trading exchange without any authority over looking it.. I'd say that's what's wrong with the current system (NYSE,NASDAQ,etc).
Overstock is already a publicly traded company - anything that remotely hints at trying to circumvent the regulations they're already subject to would be a very bad idea
It's already been trading on CMFX (one of the most reputable Forex markets around, on par with BATS or CME) against the USD for a while now. This is nothing new.
This is great. Patrick Byrne is doing a great service here. Development of crypto-security tools being pushed by an already successful publicly traded company adds instant credibility to the project and will lead many more successful business leaders to give it closer inspection, sooner.
So what happens when somebody doesn't secure the private keys to their Overstock shares well enough? A hacker steals your Overstock shares, and now they own them? What happens if someone steals the shares from the CEO? Obviously the hacker could never make use of those shares or else they would get caught. In a system like this, it can't be truly decentralized, can it?
From a technical perspective, it can. See http://counterparty.io/ for a decentralized exchange in action.
Do you mean you don't think people can be trusted to keep their own shares safe? Securing a large value of cryptocurrency is challenging right now. But if you don't trust yourself to do it, you can hire a third party that you do trust to hold your shares for you.
You could make the same argument with paper money and I think the result would be similar. Theft might be a big issue, but that doesn't mean the system won't work.
A veritable explosion of innovation is coming our way. This decentralized stock exchange is just a hint of what is to come. Technologies using bitcoin, and technologies built on bitcoin, are the next thing that will change the world. Don't get me wrong, I'm happy we're also democratizing taxi services, but democratizing finance makes me so much more excited.
It's an exciting prospect to trade financial assets on a decentralized, trustless network. Definitely the right direction.
But I'm not psyched about having to think about Counterparty's internal XCP currency, even if it isn't used for most purposes. It's an annoying barrier to have to transact in an altcoin to access certain functionality.
Other implementations use pure Bitcoin only, and are much less overwrought with complexity than Counterparty: https://coins.assembly.com
Quite generally, Counterparty functionality that requires the use of XCP simply can't exist on platforms without their own currency. That's why it's there.
The issue I see is there's no avoiding putting your trust in the centralized issuer. You can issue and trade inherently centralized assets on a global ledger, but why? What is the advantage for the common man?
I guess the benefit is that you only have to trust the issuer one time. Once the stock has been issued on the blockchain it cannot be manipulated. With a centralized system you'd have to trust the issuer/exchange on an ongoing basis. Whether this difference matters is kind of a philosophical litmus test that divides the blockchain and non-blockchain (i.e. Ripple/Stellar/OpenTransactions) camps.
The exchange would be based on the counterparty protocol, which allows anyone with a BTC address to issue and back assets in a decentralized manner. We'll have to see how this decentralization leaks into what it means to be a stock exchange.
Can anyone knowledgeable (especially those that do not like bitcoin) weigh in as to why this would be a bad idea ?
I'm asking this sincerely, and not being sarcasm, as I don't know enough about either Bitcoin or stock market to make a judgement. And this seems ... different enough that I'm not sure my reaction should be "damn the future is here", or "what a bunch of craps".
As somebody who did tech work for traders who dealt with a number of exchanges, I am hugely skeptical that an exchange can be fully automated.
A real exchange has an enormous team of well-paid people whose job it is to make sure things run smoothly. They also have incredible power: they can freeze the exchange, limit price movements, undo transactions, kick people out of the market, and who knows what else. They use this power rarely, but when they do market participants are generally glad they did.
I'm sure somebody can automate 90% of the cases, or 99%, or even 99.9%. Most trading is routine. But will this work when there's a war? A financial panic? A major fraud or theft? An exploitation of a previously unsuspected bug?
The New York Stock Exchange has been working this stuff out since 1817 (or 1792 depending on how you count). And we still have things like Black Monday [1] and the 2010 Flash Crash [2].
This will be an interesting experiment, but I will not be surprised at all if it's something most investors avoid for decades because it's a) novel and therefore risky, and b) lacking a lot of the regulatory protections of a real exchange.
As the company issuing shares, unless you get the approval of the SEC (i.e. you're regulated to sell shares to the general public) you will be fined and prosecuted.
It you are a non U.S. based company you will be chased by the SEC for issuing shares to U.S. citizens, which brings you under their jurisdiction(so says them).
Unregulated financial marketplace, what could possibly go wrong?
I'm a big Bitcoin supporter mainly because of the interesting tech opportunities, but I don't like the extremist proponents to deregulation that come with Bitcoin in droves. Take a look at the posts from people who lost their families inheritance when the price drops.
Now I know it's not a level playing field, and I can spend my inheritance on forex in a few hours. I'm not saying that's a good thing, but the fact it's not a level playing field does not mean it's a green light to let these things run without any regulation at all.
People who advocate freedom from all regulation generally are in my experience wholly unsympathetic to those who suffer as a result of it, and are unable to recognise that the theory behind it all is flawed.
There are a lot of ways to abuse information asymmetry in stock markets. Decentralizing and removing oversight makes things more readily abused by creating more forms of information asymmetry.
[+] [-] alphonse23|11 years ago|reply
Why go to the SEC? I feel like the advantage of doing something like this would be the ability to build a trading exchange without any authority over looking it.. I'd say that's what's wrong with the current system (NYSE,NASDAQ,etc).
[+] [-] slg|11 years ago|reply
[+] [-] bdcravens|11 years ago|reply
Overstock is already a publicly traded company - anything that remotely hints at trying to circumvent the regulations they're already subject to would be a very bad idea
[+] [-] iheartmemcache|11 years ago|reply
[+] [-] fnordfnordfnord|11 years ago|reply
[1] http://www.deepcapture.com/
[+] [-] bobjordan|11 years ago|reply
[+] [-] ne0n|11 years ago|reply
[+] [-] deweller|11 years ago|reply
Do you mean you don't think people can be trusted to keep their own shares safe? Securing a large value of cryptocurrency is challenging right now. But if you don't trust yourself to do it, you can hire a third party that you do trust to hold your shares for you.
[+] [-] unknown|11 years ago|reply
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[+] [-] seanflyon|11 years ago|reply
[+] [-] barnaby|11 years ago|reply
[+] [-] barisser|11 years ago|reply
But I'm not psyched about having to think about Counterparty's internal XCP currency, even if it isn't used for most purposes. It's an annoying barrier to have to transact in an altcoin to access certain functionality.
Other implementations use pure Bitcoin only, and are much less overwrought with complexity than Counterparty: https://coins.assembly.com
[+] [-] PhantomPhreak|11 years ago|reply
[+] [-] TylerE|11 years ago|reply
[+] [-] Cyther606|11 years ago|reply
[+] [-] wmf|11 years ago|reply
[+] [-] unknown|11 years ago|reply
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[+] [-] mlubin|11 years ago|reply
[+] [-] NhanH|11 years ago|reply
I'm asking this sincerely, and not being sarcasm, as I don't know enough about either Bitcoin or stock market to make a judgement. And this seems ... different enough that I'm not sure my reaction should be "damn the future is here", or "what a bunch of craps".
[+] [-] wpietri|11 years ago|reply
A real exchange has an enormous team of well-paid people whose job it is to make sure things run smoothly. They also have incredible power: they can freeze the exchange, limit price movements, undo transactions, kick people out of the market, and who knows what else. They use this power rarely, but when they do market participants are generally glad they did.
I'm sure somebody can automate 90% of the cases, or 99%, or even 99.9%. Most trading is routine. But will this work when there's a war? A financial panic? A major fraud or theft? An exploitation of a previously unsuspected bug?
The New York Stock Exchange has been working this stuff out since 1817 (or 1792 depending on how you count). And we still have things like Black Monday [1] and the 2010 Flash Crash [2].
This will be an interesting experiment, but I will not be surprised at all if it's something most investors avoid for decades because it's a) novel and therefore risky, and b) lacking a lot of the regulatory protections of a real exchange.
[1] http://en.wikipedia.org/wiki/Black_Monday_%281987%29
[2] http://en.wikipedia.org/wiki/2010_Flash_Crash
[+] [-] dublinclontarf|11 years ago|reply
It you are a non U.S. based company you will be chased by the SEC for issuing shares to U.S. citizens, which brings you under their jurisdiction(so says them).
[+] [-] TomGullen|11 years ago|reply
I'm a big Bitcoin supporter mainly because of the interesting tech opportunities, but I don't like the extremist proponents to deregulation that come with Bitcoin in droves. Take a look at the posts from people who lost their families inheritance when the price drops.
Now I know it's not a level playing field, and I can spend my inheritance on forex in a few hours. I'm not saying that's a good thing, but the fact it's not a level playing field does not mean it's a green light to let these things run without any regulation at all.
People who advocate freedom from all regulation generally are in my experience wholly unsympathetic to those who suffer as a result of it, and are unable to recognise that the theory behind it all is flawed.
[+] [-] Kalium|11 years ago|reply
[+] [-] frontline|11 years ago|reply
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[+] [-] IkmoIkmo|11 years ago|reply