Medici: First Digital Security Aims to Put Wall Street Out of Business

Patrick Byrne, CEO of Overstock, has taken the first steps toward putting Wall Street out of business. In April of this year, Byrne registered $500 million worth of equity in Overstock with the Securities and Exchange Commission. His goal was to use blockchain technology—the technology behind the crypto-currency, Bitcoin—to create a securities market that would exist across computers globally without middlemen traditionally associated with capital markets like the New York Stock Exchange, or clearinghouses, like the Depository Trust & Clearing Company.

Basically, this new blockchain based securities exchange, which Byrne calls “Medici,” is a decentralized, open source, peer-to-peer, system that posts all transactions in chronological order on a public ledger. Under this system, users will be empowered to send money over the Internet simply and efficiently with little to no transaction fees depending on how the money is spent or traded.

Last Friday, thanks to Byrne and Overstock, the world’s first-ever cryptobond has officially been offered. According to the story, which first appeared in Politico, this is a huge deal. Here’s why:

“This system would do something no other stock exchange has ever done. It would skip the centralized clearinghouse entirely, and keep track of trading, clearance, and ownership on everyone’s computers at once. It would transform processes that now depend on centralized institutions for trust, and let people instead transact directly with one another.”

This is the SEC’s first move in regulating Bitcoin 2.0. For many people, Bitcoin seems like a crazy futuristic type of currency that will never take off. But those people tend not to be informed about the technology behind it. The same thing happened when email was created. People didn’t understand the point of it or what it meant and many of them poo-pooed it. It’s now hard to even imagine a world where email didn’t exist.

I believe the same will be said of Bitcoin. Unlike our current fiat currency, which is backed by debt, created out of thin air, and supplied by the Federal Reserve or central banks, Bitcoin is backed by a decentralized and transparent open source technology. This digital money has a finite supply, like gold, that is predetermined by math. Because this is not a fiat currency, it is not inflationary. The value is determined by supply and demand. Because of it’s instant nature, money can be delivered within seconds—even internationally. Politico also adds that Bitcoin,

“Establishes un-forgeable digital signatures for all the players in a market to verify their transactions, and forces every actor to maintain their own record of everyone else’s transactions. So at any given time, anyone in the Bitcoin market is helping verify the behavior of the entire market.”

And because Bitcoin payments don’t require high transaction fees for processing like credit or debit cards, they are becoming the preferred method of payment for consumers and vendors. Many mainstream companies such as Amazon, Overstock, Target, Victoria’s Secret and Whole Foods have already adopted the use of Bitcoin along with many other local businesses like restaurants and bars. I myself have even booked airfare, hotels and movie tickets using BTC.

This is only the beginning of what I truly believe is the future of money. Infrastructure surrounding this technology is still emerging but I believe it has the power to take money back from the banks and Wall Street and give it back to the people.

What do you guys think about the SEC’s first move toward regulating Bitcoin? Do you believe this technology has the power to give financial control back to the people? Debate below. I want to hear your opinions even if you disagree. It’s the conversation that matters.