Can't believe no one's posted this Overstock.com conference call transcript from Oct. 23 (found here:
http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-calendar) :
Patrick Byrne - Overstock.com Inc. - CEOOkay, well, that's the background on the name Medici. What it is is a technology has emerged in the last few years called the Blockchain and the
Blockchain is liberation itself.
You can create a currency on the Blockchain and that is, but you can also use the Blockchain, this technology, augmented by some new stuff on
top of it called Counterparty to create a parallel world to the world of modern finance, where all these institutions we have in the modern financial
world that accomplish certain desired ends, institutions like having equities and bonds and derivatives, swaps, they can all be -- and centralized
stock exchanges and centralized clearing systems like the DTCC, my bete noire, are things that can be done within the Blockchain, can be done in
this parallel universe.
We looked at -- I made a mention in May in Amsterdam that we wanted to be the first company to issue a security in this new parallel universe.
And I did that somewhat strategically, assuming that there were people out there who were thinking about that and would get in touch. Well, it
turns out there were 13 different groups around the world thinking of that and trying to figure out how to do it.
We vetted -- Mark Griffin did yeoman's work vetting a bunch of these different companies -- and I don't mean to slag anybody, some just weren't
our cup of tea, but there was one group that really was our cup of tea. They are called Counterparty. They're not all -- they are not even a company.
It's an open-source movement that stays true to the bitcoin philosophy. It is transparent. It is built within bitcoin rather than being a proprietary
alternative to bitcoin. There's just all these aspects of it that made me think these were the right fellas to go with.
Three of the founders came out to Overstock and they seemed to have very similar backgrounds to me, which is maybe why I like them, but they
were just doing it for the right reasons. So we worked out a deal recently announced, two of them have joined our company, and we are building
what is basically the tollbooth between those two universes.
You've got the world of modern finance, people with dollars in it, and there is going to be this world of cryptofinance and we will have the tollbooth
for people who go back and forth. And that is Medici.
The timeframe; we actually think that in the absence of there being a government we could build this technology and have it live and working for
the public in about, say, three or four months. Now we have to get regulatory approval for this. How much time does that add? Your guess is as
good as mine. Mark Griffin, do you want to venture a guess on that?
Mark Griffin - Overstock.com Inc. - SVP & General CounselIt's hard. We haven't had the initial discussions. The framework is going to be difficult. It is a paradigm shift for these regulatory agencies, so it's
hard to predict.
Patrick Byrne - Overstock.com Inc. - CEOThat said, I have had, believe it or not, some quite positive conversations with some of the regulators involved. And I am at least told, and I actually
believe they are sincere, that they are not going to try and stop this. That they want to see it develop reasonably and to have a say and such, but
that they were going to act like adults.
And we are going to act like adults. I think as long as they understand this is coming -- they have a legitimate -- I think they have a legitimate interest
in making sure crooks can't use it to do bad things. So I actually am not expecting the massive regulatory opposition.
And there are already rules. We will be creating an ATS, an alternative trading system, and there are already rules that -- I think it's a 60-page
document that says this -- from the SEC -- this is what an alternative trading system has to do. This is how it has to handle record-keeping, how it
has to handle derivatives and things like that.
So there's already a roadmap out there. Nobody anticipated that we would use -- that someone would use the roadmap to build this thing that
we are talking about. But it is -- there is already a roadmap out there from the regulators of what our new system is going to have to do.
What value could it create for Overstock? Well, I have no way to estimate that. You know everything I know. I do know that we have stood -- that
I kick myself, because we have stood next to some extraordinary innovations that we just missed.
I thought of Overstock as a search company from the very beginning to go around to venture capitalists and on Wall Street trying to raise money
explaining it was a search company just that had these things wrapped up in it, warehouses and customer call centers and such. If I had been
smarter, I would have seen just doing pure search was probably the way to go.
We were early in the game in mobile, so early that around 2002 nobody adopted and we eventually discontinued it. We had a great social media
platform very early on. Again, the same story.
So I kick myself about some -- about having stood just a foot away from some of the great technological innovations of the last 15 years and not
really seized them correctly. That's not going to happen here. We, through some fluke, have ended up right in the crossroads of this emerging
technology.
It could disrupt the financial industry as we know it. I have no idea how to value that, but we seem to be -- through various flukes have found
ourselves right at the forefront of it. We've gotten very -- so we built a team to pursue this. We've gotten very good.
The team is going to cost in low single million dollars a year. It's not going to dramatically affect our earnings, but -- and we have really developed
great -- we have become a very agile company and we can develop software quickly and well and with good user experience and good design in
all kinds of ways and security and such.
So this team really has first call on the assets within Overstock to draw on all the people, all our people with all our experience to get this project
done quickly. And I couldn't even begin to estimate the value it could create for Overstock.
But a technology that disrupts an industry that is 40% of the profits of American corporations, and we could do the same thing that -- we could
build a system that can do many of the same things that industry does in essentially a tiny fraction of the cost would be a very valuable technology.
....
Buy.
JL
