Overstock.com, the American online retailer is making its moves into the tokenized securities space. The company has recently filed an S-3 form with the United States Securities and Exchange Commission (SEC), which is for its blockchain-based digital preferred stock.
Considering the potential of blockchain in the world of finance and investment, this moves assumes significance. It also underlines the growing realization that blockchain goes well beyond cryptocurrencies, and it can potentially help to record anything that has ownership.
Since the advent of Bitcoin a decade ago, cryptocurrencies like Bitcoin and Ether have often overshadowed the potential of blockchain. The fact that blockchain can help to create cryptographic tokens with secure transaction records has far more utility though!
Bitcoin and Ether are cryptographic tokens too, however, they were conceived as the medium of payments. Having said that, Ethereum is also a platform for developing smart contracts and distributed apps (DApps). Ether fuels the calculations on this platform, therefore, it can also be considered as a utility token.
However, in recent years, another use of cryptographic tokens have attracted the attention of market observers and experts. Consider the fact that stock and securities trading transactions take a significant time overall, despite the actual trading transaction being very quick.
Tokenized securities intend to transform this scenario. That’s where lies the real significance of the move by Overstock.com.
Tokenized securities: A transformative opportunity
Why does a stock or securities trading transaction take a long time despite the actual trading being quick? Well, the process involves multiple other entities for settlements, therefore, there are other transactions around the main transaction.
Not only do these associated transactions increase the processing time, but they also require transaction fees. In short, the process involves several middlemen. Blockchain, with its decentralization, distributed ledger, transparency, immutability, and smart contracts can remove these middlemen.
Stocks and securities investment contracts have ownership, therefore, they are good candidates for tokenization. Tokenized securities will reduce the transaction time by eliminating the middlemen, moreover, they fully comply with the applicable securities regulations.
Overstock.com, the Internet retailer headquartered in Midvale, Utah, USA, intends to issue blockchain-based preferred stocks. The shareholders of the company will receive one blockchain-based preferred stock for every 10 common shares they own.
For this, the shareholders need to set up accounts with Dinosaur Financial Group so that they can access the PRO securities trading system. tZERO, a blockchain start-up have developed this system. This subsidiary of Overstock.com had earlier patented a blockchain solution to ease the trade audit process.
Will blockchain transform securities trading?
Some experts believe that blockchain could help to tokenize assets worth $544 trillion! Will moves like that of Overstock.com catalyze this transformation? Watch this space for more exciting news on tokenized securities.
