In a letter to shareholders published in advance of an upcoming earnings report, Overstock CEO and blockchain advocate Patrick Byrne defended his vision of “tokenization” and digital assets which he believes are the “killer app of the blockchain revolution.”
Overstock (NASDAQ:OSTK) subsidiary tZero is looking to lead the security token sector as both a trading platform and primary issuance service. Byrne pointed to the current “$500 trillion of assets” he expects will be tokenized at some point in the future.
“Of course, lots of things could prevent that from happening. Maybe Bob Greifeld is wrong and not everything on Wall Street gets tokenized,” stated Byrne. “Maybe what happens on Wall Street does not happen globally. Maybe the 0.18% relationship will not hold. Meaning: I do not know what the value of security token exchanges is going to be in five years. But the arithmetic looks pretty compelling. As the lawyers say, “California highway mileage will be lower,” and “Don’t run with that stick, you’ll poke someone’s eye out.” “
The 0.18% relationship referenced a hypothetical percentage of assets managed on blockchain which equals approximately $900 billion.
Byrne admitted that he has made “many mistakes over the years” but he “got this one right.”
“Years ago, we saw that security tokens were potentially the killer application of the blockchain space, and we moved heaven and earth to build what was needed. We bought the right foundational companies, SpeedRoute and PRO Securities. When it came time, we carved an army of technologists out of Overstock to build everything that tZERO needed, spent tens of millions of dollars on lawyers and regulatory work, and are now open for business. Trading will be infinitesimal to begin with, but I think that in the race to seize a share of that $900 billion value (or whatever value security token exchanges turn out to have), tZERO has the pole position.”
While Byrne remains firmly bullish on tZero and blockchain in general, Overstock has struggled in the past year in the highly competitive e-commerce marketplace. Byrne said their strategy has been effective as the retail portion of the company “should generate enough cash to substantially cover Blockchain’s operating cash burn.”
“Thus, an important strategic consideration to note is that we are not in a place that we have to sell.”
But while Overstock is not in a position where it is compelled to sell, according to Byrne, he has long stated his intent to sell the e-commerce segment “if it makes sense and we get a good offer for a good home for it.” Otherwise, they will operate it forever.
The letter in its entirety is embedded below.
Overstock.com Patrick Byrne Letter to Shareholders from CEO Patrick M. Byrne 7.15.19