Just recently, the CEO of Overstock announced that their subsidiary tZERO would be having an ICO in the middle of November 2017. Upon the announcement the shares of Overstock increased meaning that there is more trust in the potential of blockchain based innovation from the markets.
The overstock CEO believes that they might be able to raise as much as $500 million from what they’ve heard from their calls, emails and texts from potential investors.
So what’s the deal with tZERO?
Well, tZERO is bringing regulation into the ICO market, something that solves the need of being able to provide more protection to investors, yet does it have any drawbacks? In a decentralized world, centralization and regulation play a role but what to what extent?
How is tZERO hoping to do this?
tZERO has joined forces with two more companies to bring to the world the first regulated U.S trading platform for ICO tokens. They are able to this because the parent company, Overstock, has obtained a license in the past to be able to operate an (ATS) alternative trading system. The exchange will have the ability to list tokens that fall under the umbrella of federal securities regulations.
Their ICO would be primarily to build the the tZERO regulated trading platform. An interesting tidbit is that they are structuring the ICO’s like it is a security.
For the tZERO ICO they are seeking to raise the money through a private placement catered to accredited investors (hearkening to the old ways of doing things and a stark difference from the current ways ICO’s are doing things). The token that is distributed will be trading on it’s own platform. The holders of the distributed tokens will receive a percentage of tZERO’s eventual profits. The distribution of profits will take place on a quarterly basis. What does this sound like? To me, it sounds like a traditional dividend. Maybe this plus the overall excitement in the space is why many seem interested to partake in the ICO.
The Overstock CEO is studying and looking tokens differently and imagines that all securities of stock will be distributed as tokens and believes that he’s going to be one of the pioneers in doing so. Stock securities will become tokens that trade on a distributed-ledger blockchain platform built on fundamental crypto assets. The reason why it will gravitate to being this way? It brings back a reccuring theme in this space, the capacity for drastically reducing transaction costs, except this time, in trading.
The Overstock CEO believes that there are frictions across the board for all parties who are seeking to raise funding from the markets for small and large businesses, even the banks themselves are seeking more incentives to cater the needs of some.
Paving the way to a better solution for capital raises in a more seamless manner for many businesses will be something that can be embraced by many.
tZERO is working within the boundaries of the law with a trading platform that has been approved by the US securities and exchange commission and has done the work to have their legal framework in place.
This is an interesting case due to the fact that it means there will be more regulation and more structure within the US markets after tZERO and possibly others who may jump into the market establish their exchanges. The tZERO Simple Agreement for Future Tokens (SAFT) is the core and is what they are planning on building on for the exchange.
The ICO is set to take place in 6 days at the time of this writing and will be on 11/15/17.
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