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Overstock.com Assembles Coders to Create a Bitcoin-Like Stock Market

129 points by PhantomPhreak 12y ago

PhantomPhreak 12y ago
The title is misleading: the exchange will actually be built on top of Bitcoin using Counterparty (counterparty.io).
- IkmoIkmo 12y ago
  Indeed, the article does mention this later on.
deleted 12y ago
[deleted]
Cyther606 12y ago
The issue I see is there's no avoiding putting your trust in the centralized issuer. You can issue and trade inherently centralized assets on a global ledger, but why? What is the advantage for the common man?
- deleted 12y ago
  [deleted]
- wmf 12y ago
  I guess the benefit is that you only have to trust the issuer one time. Once the stock has been issued on the blockchain it cannot be manipulated. With a centralized system you'd have to trust the issuer/exchange on an ongoing basis. Whether this difference matters is kind of a philosophical litmus test that divides the blockchain and non-blockchain (i.e. Ripple/Stellar/OpenTransactions) camps.
- mlubin 12y ago
  The exchange would be based on the counterparty protocol, which allows anyone with a BTC address to issue and back assets in a decentralized manner. We'll have to see how this decentralization leaks into what it means to be a stock exchange.
fnordfnordfnord 12y ago
Given Patrick Byrne's history[1] with stocks, markets, regulators, etc. I am not surprised to see him involved in this kind of project. [1] http://www.deepcapture.com/ http://www.deepcapture.com/
alphonse23 12y ago
This is sort of the idea I've been waiting to come out of the bitcoin universe for some time now. A decentralized stock exchange seems like an obvious killer application for bitcoin. Though, the only thing I don't like about it is counterpart. Was never a fan of them, nor open transactions... Why go to the SEC? I feel like the advantage of doing something like this would be the ability to build a trading exchange without any authority over looking it.. I'd say that's what's wrong with the current system (NYSE,NASDAQ,etc).
- iheartmemcache 12y ago
  It's already been trading on CMFX (one of the most reputable Forex markets around, on par with BATS or CME) against the USD for a while now. This is nothing new.
  - kasey_junk 12y ago
    This is the sort of thing that is exceedingly hard to have a measure for, but CMFX is in no way on the same level as BATS or CME. Also, Bitcoin being traded on a forex exchange has nothing to do with the article.
  - jzwinck 12y ago
    If "CMFX is one of the most reputable Forex markets around," why can't I seem to find their official website? Do you have a link?
- slg 12y ago
  I am curious how someone can come away from the last decade of Wall Street behavior and conclude the answer to the problem is less regulation.
  - awt 12y ago
    If there were a law that could prevent regulatory capture then I would say go for it, more regulation.
bobjordan 12y ago
This is great. Patrick Byrne is doing a great service here. Development of crypto-security tools being pushed by an already successful publicly traded company adds instant credibility to the project and will lead many more successful business leaders to give it closer inspection, sooner.
ne0n 12y ago
So what happens when somebody doesn't secure the private keys to their Overstock shares well enough? A hacker steals your Overstock shares, and now they own them? What happens if someone steals the shares from the CEO? Obviously the hacker could never make use of those shares or else they would get caught. In a system like this, it can't be truly decentralized, can it?
- deleted 12y ago
  [deleted]
- deweller 12y ago
  From a technical perspective, it can. See http://counterparty.io/ http://counterparty.io/ for a decentralized exchange in action. Do you mean you don't think people can be trusted to keep their own shares safe? Securing a large value of cryptocurrency is challenging right now. But if you don't trust yourself to do it, you can hire a third party that you do trust to hold your shares for you.
  - ne0n 12y ago
    "Do you mean you don't think people can be trusted to keep their own shares safe?" Well, to a degree, yeah. Most people don't know how to properly keep them safe. The main thing I'm trying to say is that it's potentially easier to steal shares, and there is really no way of reversing it if it's decentralized. If you know some shares are stolen, can you invalidate them, or reissue shares? It's not really completely decentralized if you can. There is probably still a central authority for creating and issuing shares, but they will allow you to trade the shares in a peer-to-peer way.
    - ThomPete 12y ago
      Just thinking loosly here. It my understanding that the decentralized part refers to the networked validation. I.e couldn't you imagine a setup where the network collectively invalidates a set of shares and re-issue them back to the original owner. A kind of distributed jury system. Now the problem of course is that the jury could be wrong and I have no idea about the actual implementation but it seems to me like a potential solution in the future.
NhanH 12y ago
Can anyone knowledgeable (especially those that do not like bitcoin) weigh in as to why this would be a bad idea ? I'm asking this sincerely, and not being sarcasm, as I don't know enough about either Bitcoin or stock market to make a judgement. And this seems ... different enough that I'm not sure my reaction should be "damn the future is here", or "what a bunch of craps".
- Kalium 12y ago
  There are a lot of ways to abuse information asymmetry in stock markets. Decentralizing and removing oversight makes things more readily abused by creating more forms of information asymmetry.
- frontline 12y ago
  stealth takeovers, stealth monopolies, the fact that its unregulatable and illegal as fuck under US law
  - micah541 12y ago
    One easy solution is to force key holders to de-anonymize themselves if they want to take any shareholder actions, such as voting. This wouldn't be an issue for 99% of us - just because I own a few TSLA shares doesn't mean I'm ever going to pound my fist on Elon Musk' desk and demand something - But if someone does buy up a large portion of the corporation and tries to use it to vote - they would have to declare "Hi, I am Carl Icahn, I own the following private keys XYZ and I'm demanding that we liquidate our assets and build a giant statue to the sky" or whatever. This prevents the Taliban or Chinese hackers from seizing control of a US corporation.
- wpietri 12y ago
  As somebody who did tech work for traders who dealt with a number of exchanges, I am hugely skeptical that an exchange can be fully automated. A real exchange has an enormous team of well-paid people whose job it is to make sure things run smoothly. They also have incredible power: they can freeze the exchange, limit price movements, undo transactions, kick people out of the market, and who knows what else. They use this power rarely, but when they do market participants are generally glad they did. I'm sure somebody can automate 90% of the cases, or 99%, or even 99.9%. Most trading is routine. But will this work when there's a war? A financial panic? A major fraud or theft? An exploitation of a previously unsuspected bug? The New York Stock Exchange has been working this stuff out since 1817 (or 1792 depending on how you count). And we still have things like Black Monday [1] and the 2010 Flash Crash [2]. This will be an interesting experiment, but I will not be surprised at all if it's something most investors avoid for decades because it's a) novel and therefore risky, and b) lacking a lot of the regulatory protections of a real exchange. [1] http://en.wikipedia.org/wiki/Black_Monday_%281987%29 http://en.wikipedia.org/wiki/Black_Monday_%281987%29 [2] http://en.wikipedia.org/wiki/2010_Flash_Crash http://en.wikipedia.org/wiki/2010_Flash_Crash
barisser 12y ago
It's an exciting prospect to trade financial assets on a decentralized, trustless network. Definitely the right direction. But I'm not psyched about having to think about Counterparty's internal XCP currency, even if it isn't used for most purposes. It's an annoying barrier to have to transact in an altcoin to access certain functionality. Other implementations use pure Bitcoin only, and are much less overwrought with complexity than Counterparty: https://coins.assembly.com https://coins.assembly.com
- PhantomPhreak 12y ago
  Quite generally, Counterparty functionality that requires the use of XCP simply can't exist on platforms without their own currency. That's why it's there.
  - jc123 12y ago
    Why didn't you join Overstock, why only Robby?
- TylerE 12y ago
  Counterparty isn't an altcoin. All XCP transactions are BTC transactions.
deleted 12y ago
[deleted]
guiomie 12y ago
With the current low price of bitcoins, wouldn't it be a good time to burn bitcoins into XCP ?
- eric_bullington 12y ago
  That opportunity was only available at the start of the Counterparty project. The burn-in period ended a good 6 months ago, I believe.
Eliezer 12y ago
Whether Overstock succeeds in this or not, it's coming and it will be huge; I so predict.
- eru 12y ago
  Interesting in puttings odds and money behind that?
barnaby 12y ago
A veritable explosion of innovation is coming our way. This decentralized stock exchange is just a hint of what is to come. Technologies using bitcoin, and technologies built on bitcoin, are the next thing that will change the world. Don't get me wrong, I'm happy we're also democratizing taxi services, but democratizing finance makes me so much more excited.
izelnakri 12y ago
check the overstock's original website, after few seconds it was evident that I shouldn't be bothered reading the article.
- nobleach 12y ago
  I'm confused by what that might mean.
  - seanflyon 12y ago
    I think izelnakri is saying that overstock.com is poorly made and concludes that they will not be successful in this new project. (I disagree)
    - nobleach 12y ago
      Got it. Thanks.
danohuiginn 12y ago
I'm nitpicking, but it's bizarre to see Karl Popper being described as an "economist".

129 points by PhantomPhreak 12y ago

PhantomPhreak 12y ago

The title is misleading: the exchange will actually be built on top of Bitcoin using Counterparty (counterparty.io).

IkmoIkmo 12y ago
Indeed, the article does mention this later on.

deleted 12y ago

[deleted]

Cyther606 12y ago

The issue I see is there's no avoiding putting your trust in the centralized issuer. You can issue and trade inherently centralized assets on a global ledger, but why? What is the advantage for the common man?

deleted 12y ago
[deleted]
wmf 12y ago
I guess the benefit is that you only have to trust the issuer one time. Once the stock has been issued on the blockchain it cannot be manipulated. With a centralized system you'd have to trust the issuer/exchange on an ongoing basis. Whether this difference matters is kind of a philosophical litmus test that divides the blockchain and non-blockchain (i.e. Ripple/Stellar/OpenTransactions) camps.
mlubin 12y ago
The exchange would be based on the counterparty protocol, which allows anyone with a BTC address to issue and back assets in a decentralized manner. We'll have to see how this decentralization leaks into what it means to be a stock exchange.

fnordfnordfnord 12y ago

Given Patrick Byrne's history[1] with stocks, markets, regulators, etc. I am not surprised to see him involved in this kind of project. [1] http://www.deepcapture.com/ http://www.deepcapture.com/

alphonse23 12y ago

This is sort of the idea I've been waiting to come out of the bitcoin universe for some time now. A decentralized stock exchange seems like an obvious killer application for bitcoin. Though, the only thing I don't like about it is counterpart. Was never a fan of them, nor open transactions... Why go to the SEC? I feel like the advantage of doing something like this would be the ability to build a trading exchange without any authority over looking it.. I'd say that's what's wrong with the current system (NYSE,NASDAQ,etc).

iheartmemcache 12y ago
It's already been trading on CMFX (one of the most reputable Forex markets around, on par with BATS or CME) against the USD for a while now. This is nothing new.
- kasey_junk 12y ago
  This is the sort of thing that is exceedingly hard to have a measure for, but CMFX is in no way on the same level as BATS or CME. Also, Bitcoin being traded on a forex exchange has nothing to do with the article.
- jzwinck 12y ago
  If "CMFX is one of the most reputable Forex markets around," why can't I seem to find their official website? Do you have a link?
slg 12y ago
I am curious how someone can come away from the last decade of Wall Street behavior and conclude the answer to the problem is less regulation.
- awt 12y ago
  If there were a law that could prevent regulatory capture then I would say go for it, more regulation.

bobjordan 12y ago

This is great. Patrick Byrne is doing a great service here. Development of crypto-security tools being pushed by an already successful publicly traded company adds instant credibility to the project and will lead many more successful business leaders to give it closer inspection, sooner.

ne0n 12y ago

So what happens when somebody doesn't secure the private keys to their Overstock shares well enough? A hacker steals your Overstock shares, and now they own them? What happens if someone steals the shares from the CEO? Obviously the hacker could never make use of those shares or else they would get caught. In a system like this, it can't be truly decentralized, can it?

deleted 12y ago
[deleted]
deweller 12y ago
From a technical perspective, it can. See http://counterparty.io/ http://counterparty.io/ for a decentralized exchange in action. Do you mean you don't think people can be trusted to keep their own shares safe? Securing a large value of cryptocurrency is challenging right now. But if you don't trust yourself to do it, you can hire a third party that you do trust to hold your shares for you.
- ne0n 12y ago
  "Do you mean you don't think people can be trusted to keep their own shares safe?" Well, to a degree, yeah. Most people don't know how to properly keep them safe. The main thing I'm trying to say is that it's potentially easier to steal shares, and there is really no way of reversing it if it's decentralized. If you know some shares are stolen, can you invalidate them, or reissue shares? It's not really completely decentralized if you can. There is probably still a central authority for creating and issuing shares, but they will allow you to trade the shares in a peer-to-peer way.
  - ThomPete 12y ago
    Just thinking loosly here. It my understanding that the decentralized part refers to the networked validation. I.e couldn't you imagine a setup where the network collectively invalidates a set of shares and re-issue them back to the original owner. A kind of distributed jury system. Now the problem of course is that the jury could be wrong and I have no idea about the actual implementation but it seems to me like a potential solution in the future.

NhanH 12y ago

Can anyone knowledgeable (especially those that do not like bitcoin) weigh in as to why this would be a bad idea ? I'm asking this sincerely, and not being sarcasm, as I don't know enough about either Bitcoin or stock market to make a judgement. And this seems ... different enough that I'm not sure my reaction should be "damn the future is here", or "what a bunch of craps".

Kalium 12y ago
There are a lot of ways to abuse information asymmetry in stock markets. Decentralizing and removing oversight makes things more readily abused by creating more forms of information asymmetry.
frontline 12y ago
stealth takeovers, stealth monopolies, the fact that its unregulatable and illegal as fuck under US law
- micah541 12y ago
  One easy solution is to force key holders to de-anonymize themselves if they want to take any shareholder actions, such as voting. This wouldn't be an issue for 99% of us - just because I own a few TSLA shares doesn't mean I'm ever going to pound my fist on Elon Musk' desk and demand something - But if someone does buy up a large portion of the corporation and tries to use it to vote - they would have to declare "Hi, I am Carl Icahn, I own the following private keys XYZ and I'm demanding that we liquidate our assets and build a giant statue to the sky" or whatever. This prevents the Taliban or Chinese hackers from seizing control of a US corporation.
wpietri 12y ago
As somebody who did tech work for traders who dealt with a number of exchanges, I am hugely skeptical that an exchange can be fully automated. A real exchange has an enormous team of well-paid people whose job it is to make sure things run smoothly. They also have incredible power: they can freeze the exchange, limit price movements, undo transactions, kick people out of the market, and who knows what else. They use this power rarely, but when they do market participants are generally glad they did. I'm sure somebody can automate 90% of the cases, or 99%, or even 99.9%. Most trading is routine. But will this work when there's a war? A financial panic? A major fraud or theft? An exploitation of a previously unsuspected bug? The New York Stock Exchange has been working this stuff out since 1817 (or 1792 depending on how you count). And we still have things like Black Monday [1] and the 2010 Flash Crash [2]. This will be an interesting experiment, but I will not be surprised at all if it's something most investors avoid for decades because it's a) novel and therefore risky, and b) lacking a lot of the regulatory protections of a real exchange. [1] http://en.wikipedia.org/wiki/Black_Monday_%281987%29 http://en.wikipedia.org/wiki/Black_Monday_%281987%29 [2] http://en.wikipedia.org/wiki/2010_Flash_Crash http://en.wikipedia.org/wiki/2010_Flash_Crash

barisser 12y ago

It's an exciting prospect to trade financial assets on a decentralized, trustless network. Definitely the right direction. But I'm not psyched about having to think about Counterparty's internal XCP currency, even if it isn't used for most purposes. It's an annoying barrier to have to transact in an altcoin to access certain functionality. Other implementations use pure Bitcoin only, and are much less overwrought with complexity than Counterparty: https://coins.assembly.com https://coins.assembly.com

PhantomPhreak 12y ago
Quite generally, Counterparty functionality that requires the use of XCP simply can't exist on platforms without their own currency. That's why it's there.
- jc123 12y ago
  Why didn't you join Overstock, why only Robby?
TylerE 12y ago
Counterparty isn't an altcoin. All XCP transactions are BTC transactions.

deleted 12y ago

[deleted]

guiomie 12y ago

With the current low price of bitcoins, wouldn't it be a good time to burn bitcoins into XCP ?

eric_bullington 12y ago
That opportunity was only available at the start of the Counterparty project. The burn-in period ended a good 6 months ago, I believe.

Eliezer 12y ago

Whether Overstock succeeds in this or not, it's coming and it will be huge; I so predict.

eru 12y ago
Interesting in puttings odds and money behind that?

barnaby 12y ago

A veritable explosion of innovation is coming our way. This decentralized stock exchange is just a hint of what is to come. Technologies using bitcoin, and technologies built on bitcoin, are the next thing that will change the world. Don't get me wrong, I'm happy we're also democratizing taxi services, but democratizing finance makes me so much more excited.

izelnakri 12y ago

check the overstock's original website, after few seconds it was evident that I shouldn't be bothered reading the article.

nobleach 12y ago
I'm confused by what that might mean.
- seanflyon 12y ago
  I think izelnakri is saying that overstock.com is poorly made and concludes that they will not be successful in this new project. (I disagree)
  - nobleach 12y ago
    Got it. Thanks.

danohuiginn 12y ago

I'm nitpicking, but it's bizarre to see Karl Popper being described as an "economist".