block

BLOCKCHAIN: Overstock's Alternative Trading System vs Decentralized Exchanges

Source:  RadarRelay    

Source: RadarRelay
 

 It's important to have a zero in the name of your token exchange. Here are two interesting data points, as tokens transition from internet curiosities to something closer to legal financial instruments. The first is Overstock's t0, and Alternative Trading System set up to create a market for ICO tokens as regulated securities. This offering will be launched in partnership with RenGen, a fintech firm, and Argon Group, an early entrant in the "crypto investment bank" space that advises on ICOs.

This was a meaningful move for Overstock, but one that has been building for years as the company explored blockchain technology, hired the right talent, and issued its own securities on the blockchain. Traditional financial firms are all looking for ways to onramp safely into crypto, and a regulated exchange for tokens without legal risk seems like a reasonable approach. However, all efforts like this, as well as those by centralized crypto-exchanges like Coinbase and Kraken, remind us of Napster and the Digital Rights Management days in music. Sure, file sharing of mp3s was more popular than ever at that time. But activity either went through a centralized set of servers that could be shut down, or came bundled with ridiculous built-in restrictions on where the files could be played and how. Sound familiar?

That situation led to BitTorrent, a way of sharing media that shards files to users and removes the need for a central server. This is why it has been impossible to stop international music sharing -- there is nothing to shut down but millions of computers running some software. The crypto-finance equivalent is the concept of decentralized exchanges, with project 0x having raised $24mm in a somewhat recent ICO. They are building the ecosystem (check out their vision) for OTC-like functionality to be embedded within software tokens themselves, with 9 different implementations in flight. One such example is crypto-derivatives. If these concepts succeed, then no amount of existential attempts from regulators (see latest Token Economy for updates on South Korea, China, Australia, Switzerland and US) will matter. Pandora's box has opened.