eResearch | On June 27 2019, tZero, a subsidiary of Overstock.com Inc. (NASDAQ: OSTK; LSE: 0KDU; DB: OVER), announced the launch of the tZero Crypto Wallet (“tZero Crypto”), a blockchain driven mobile platform used to hold, sell, and buy Bitcoin (BTC) or Ether (ETH). This platform creates the necessary foundation for tZero, when the Company receives its own broker-dealer license, it can then start to provide trading services for securitized assets and traditional equities.
tZero is managed under Medici Ventures, an Overstock subsidiary, launched in 2014 to create a separate entity focused on investing in innovative solutions that leverage blockchain solutions. tZero plans to be the leader in bringing greater security, transparency, and efficiency to the capital markets utilizing blockchain technologies.
To support the development of tZero Crypto, tZero initially announced funding of US$404 million from GSR Capital, a Chinese investment firm and Makara Capital, a Singapore Private Equity firm. On March 2019, the two firms decided to lower their collective investments to US$100 million, and in May, GSR Capital took the first step and funded US$5 million to the Company. The deal valued tZero at US$1 billion, a valuation 50% percent lower than its previous valuation in 2018.
What differentiates tZero Crypto from its competitors is it allows companies to create securitized tokens with automated integration of regulatory obligations through permission driven “smart contracts”, a self-executing contract written directly into the code of the blockchain network. Tokenization makes it possible for retail investors to invest into exclusive assets such as real estate, art, films, and sports teams, which are traditionally not traded due to complexity in securitization.
Once an investor decides to invest into a company (or asset) and downloads tZero Crypto onto their smartphone, the digital wallet generates a cryptographically encrypted private key that is stored directly into the investor’s smartphone, which provides assurance that funds are held by only the investor in their own digital wallet. This decentralization mitigates the risk of hackers gaining access to all of the information compared with a system that holds the information in a centralized exchange or platform. In case someone steals the user’s smartphone, biometric authentication specific to each user is then used to access the personal account. To add additional assurance for wallet users, a Private Key Recovery System is in place, which allows users to retrieve funds if they lose their private key or smartphone. The application is currently compatible with iOS devices and is expected to be released soon on the Android platform.
Last year, OverStock’s CEO, Patrick Byrne announced that the Company plans to sell its multiple decade old e-commerce business, as it intends to focus on its blockchain opportunities through Medici Ventures and tZero.
OverStock closed the week at $19.01 and is up 34.5% year-to-date but down 51.1% year-over-year, compared with the S&P 500, which is up 23.1% year-to-date and up 7.6% year-over-year.
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Overstock.com Inc (NASDAQ: OSTK; LSE: 0KDU; DB: OVER)
Located in Utah, United States, Overstock started with a focus on e-commerce retail, exclusively selling surplus and returned merchandise on an online market. In 2014, it launched a blockchain investment management arm called Medici Ventures, and has since become a leader in the blockchain industry. Overstock is currently trading at US$19.01 per share with a market capitalization of US$679 million.
Bitcoin (BTC)
Bitcoin, a decentralized digital currency, was the the first blockchain application and cryptocurrency, created by an unknown identity who uses the name Satoshi Nakamoto. BTC currently trades at US$11,597 with a market capitalization of US$207.1 billion.
Ethereum (ETH)
Ethereum is an open source, public, blockchain based programming platform for the development of blockchain applications. Ethereum trades through their token, Ether, which is used by developers for a “gas” fee when facilitating transactions on the platform. ETH currently trades at US$274.12 with a market capitalization of US$29.2 billion.
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1-Year Stock Chart Overstock versus S&P 500
