Wired reports that the Securities and Exchange Commission (SEC) has approved a plan for Overstock.com to issue company stock using blockchain technology. As Cade Metz notes, this represents “a significant shift in the way financial securities will be distributed and traded in the years to come.”
This decision is a major victory for Overstock CEO Patrick Byrne, who has long advocated the potential for blockchain, the technology behind bitcoin, to decentralize – and revolutionize – the financial services industry. As Metz explains:
The blockchain is essentially an enormous database that runs across a global network of independent computers. With bitcoin, this ledger tracks the exchange of money. But it can also track the exchange of anything else that holds value, including stocks, bonds, and other financial securities. Overstock has already used the blockchain to issue private bonds, which did not require explicit regulatory approval. Now, the SEC has told the company it can issue public securities in much the same way.
Byrnes spoke twice at the Mises Institute this year, both as a keynote speaker at the Austrian Economics Research Conference and as this year's mystery speaker at Mises University.
At AERC, Byrne spoke to the virtues of this new approach to issuing stock:
The virtues of the blockchain is that it would be that it's peer-to-peer settlement - no centralized settlement, no manipulation...And most importantly, there's nothing to capture. It’s consensus based. It's stateless.
At Mises U, he explained how he his work with the blockchain has been inspired by the work of F.A. Hayek:
I’m not doing this because I want to create a new monopoly. On the contrary, I want to create a bomb to blow up these central institutions.
Whether it’s a single company, or a stock exchange, or an entire society, we know — thanks to Hayek — that information is best used when it’s not centralized and when it’s not being monopolized by some central institution. We know that flat and non-hierarchical systems use information best. I’ve tried to do that with my own company because it works better that way. And society at large will work better as well, if we can get rid of these old institutions and hierarchies. New innovations like the block chain can make this possible.
