tZERO traded the world’s first digital security, but as of Jan. 25, it is now live for customers to begin trading digital securities or Security Tokens.
If you are an accredited investor, you can now sign up to trade securities on the tZERO platform, and the company’s own tokens have now reached the secondary market.
tZERO is the world’s first fully compliant and regulated security token platform. The concept of a security token and an STO (Security Token Offerings) has been a popular application of blockchain technology, following the ICO wave.
Security tokens are essentially shares of a company’s equity that exist on a blockchain; however, this structure allows for certain benefits. One of those is a dramatically reduced settlement time, or a t-0.
The name tZERO is a nod to the traditional t-3 or t-2, which refers to the two to three days it takes a traditional security to settle after someone buys or sells a piece of stock. T-0 implies that the exchange of securities settles instantly and is one of the benefits of launching securities on a blockchain.
“The world of security tokens has lacked a regulated venue for secondary trading,” said Saum Noursalehi, CEO of tZERO. “The trading of our own security tokens is the crossing of the Rubicon for the new world of digital assets. This will create liquidity, democratize access, bring transparency and efficiency to global markets and accelerate the adoption of security tokens.”
On the immediate horizon, tZERO has been contracted to create a digital token for trading cobalt by private equity firm GSR Capital. The token will assist the process of trading, tracking, and buying cobalt.
In early January, tZERO filed a patent for a “crypto integration platform” for trading digital assets. The patent describes an application for receiving orders from brokers and then translating those orders directly to a digital asset exchange.
tZERO has been in the works for years. It recently concluded a $134 million token sale in August. The platform has been pioneered by Overstock.com CEO Patrick Byrne, a strong believer in blockchain and cryptocurrencies. Patrick Byrne recently spoke at the North American Bitcoin Conference, which the Crypto.IQ team attended. During the address, he said the platform was ready, and the launch was around the corner.
Byrne has been a speaker at the NABC before, and in 2018, he explained his approach and the value of tZERO. During this address, Byrne outlined the issues he is trying to solve with the tZERO platform, even stating that the simplest solution to the problems of Wall Street is to “take (Wall Street) behind the barn and kill it with an ax.”
Byrne outlined how a huge amount of revenue is derived by securities lending practices and that these practices led to the 2008 financial crisis. He said brokers were lending securities to short sellers even when the securities were not available.
Brokers are essentially loaning out their clients’ stock for profit without compensating the client and also selling short positions that don’t exist. This creates more stock in the system than ever actually exists. In 2008, there were trillions of dollars worth of securities in the market due to settlement practices than ever existed.
Pension funds are currently cracking and are suing investment banks over these lending practices.
The goal of tZERO is to replace the role played by these brokers with a blockchain network. tZERO will reduce the opacity of the market and create much greater transparency. It will reduce the costs to short sellers, ensure all shorts are “honest” shorts, and reduce costs to pensions.
According to some reports, many Pensions are going broke because they have been assuming a seven percent actuarial assumption (a risk premium) when the actual assumption is closer to three percent. This four percent difference in premium constitutes 75 percent of the revenue of investment banks like Goldman Sachs.
tZERO can solve the pension fund crisis and deprive investment banks of these types of gains.
Byrne claimed that blockchain may even hold a solution to global poverty. Five billion people live in parts of the world where assets are not governed by ledgers, yet those five billion people own a variety of assets.
But because they are disconnected from large scale ledgers, they cannot participate in the larger global systems, and when people lack property rights, violence and crime proliferate.
These five billion cannot use their assets as holdings against credit for civic purposes. Byrne outlined a number of scenarios where lack of access to ledgers empowered vigilante and extremist groups and how access to ledgers created economic proliferation and widespread increases in quality of life once they were adopted.
The tZERO vision is to create a globalized ledger, following the ideas of Hernando DeSoto, to lift five billion people out of poverty through access to a globalized ledger system.
While its application is specifically focused on trading security tokens and the securitization equity, Byrne hinted that there is much more to come.