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What Is tZERO? (And Why It Could Be a Big Deal)

what-is-tzero

tZERO offers a number of blockchain-enabled solutions including a distributed ledger technology enabled an alternative trading system (ATS) through. tZERO’s wholly-owned broker-dealer, PRO Securities or tZERO’s JV partnership with BOX Digital Markets, which is creating the first national securities exchange for the trading of security tokens.  

tZERO’s developers hope to create an alternative to the existing stock market. The company’s aim is to revolutionize Wall Street through the integration of new market structures.

tZERO isn’t just some startup trying to find its way in the market; the company is a subsidiary of Overstock.com (NASDAQ:OSTK). tZERO, through its BOX JV, is also on its way to becoming the first SEC regulated Security Token issuance and trading exchanges in the US. The company filed an SEC form D at the beginning of the year. Form D filings permit companies to sell securities. In August, the company updated the Reg D filing to include security token protocols.

tZERO via Homepage

Platform information via tZERO homepage

tZERO integrates regulations directly in the token creation protocol. They offer enterprise-level blockchain solutions including token issuance, management, and trading. This strategy saves businesses seeking to integrate blockchain technology huge amounts on research, development, and regulatory costs.

Speaking on the concept, Overstock’s founder, Patrick Byrne called security tokens an “innovation of historic proportions.” Byrne isn’t the only executive excited about this platform. The company already announced a $270 million letter of intent from Hong Kong-based GSR Capital this year. What made the deal even more lucrative for the firm was the intention by GSR Capital to spend an additional $104.55 million for around 3.1 million shares in Overstock, plus, another $30 million on tZERO’s STO. In total, tZERO STO raised $134 million.

How Does tZERO Work?

The tZERO platform utilizes cryptographically secure distributed ledgers to streamline existing market systems. The integration of blockchain technology creates increased auditability, transparency, and efficiency in traditional market processes. Additionally, blockchain integration reduces costs and transaction times. Once tZERO’s platform is live, businesses can issue security tokens for fundraising purposes through the exchange.

A Brief History

tZero was founded on October 2014 to utilize blockchain technology as a vehicle to revolutionize Wall Street. Developers noticed that financial processes on the platform are less beholden to traditional institutional market structures and the mischief and financial instability that occasionally occurs.

tZERO is a portfolio company of Medici Ventures, Overstock.com’s blockchain subsidiary. Medici Ventures has a growing portfolio of blockchain-focused investments.

In 2012, when no firm of $1 million in revenue yet accepted bitcoin as a payment method, Patrick Byrne’s pro-freedom political orientation led him to decide that Overstock.com, a popular eCommerce retail giant with $1.4 billion in annual revenue, should accept the digital currency. As a longtime supporter of Bitcoin and cryptocurrencies, Byrne gained a familiarity with blockchain. This led him to create Medici Ventures, an Overstock subsidiary that focuses on managing the company’s investments in blockchain-based and related projects. 

In 2015, Byrne used Medici Venture’s tZERO securities trading platform to become the first person to purchase a digital bond entirely on the bitcoin blockchain.

In December 2016 Overstock was the first company ever to issue shares of a public company using blockchain technology.

On December 18th, 2017, tZERO launched its ICO and was met with high levels of interest and raised upwards of $250 millionin an ongoing ICO.

Meet Patrick Bryne

Patrick Byrne is the executive chairman of tZERO. This inventive entrepreneur successfully built Overstock into a $1.8 billion dollar global marketplace.

Byrne is a long time crypto and blockchain advocate. In 2012, he pushed for Overstock to become the first online retailer to accept Bitcoin payments. In 2015, Byrne again made crypto headlines after he became the first person to purchase a digital bond with blockchain technology using the Medici platform.

Overstock.com CEO Patrick Byrne via The Business Journals

Overstock CEO Patrick Byrne via The Business Journals

Breaking the Trade Barrier

In 2016, tZERO launched the world’s first public digital security called OSTKP. Speaking on the achievement, tZERO’s executive chairman called the product the company’s Chuck Yeager moment. Considering that this was the global introduction to real-time trade settlement, it’s fitting to compare the moment to when Chuck Yeager first broke the sound barrier.

SAFEs

In December 2017, tZERO started selling simple agreements for future equities (SAFEs). SAFEs provide companies with an alternative means to raise capital outside the securities market. Digital assets companies use SAFEs often. tZERO only sold this product to accredited investors.

The difference between accredited and non-accredited investors is that the later doesn’t meet the SEC’s minimum net worth requirements of $1 million or other tests. It was reported that investment interests were so high at the time that company succeeded in getting $100 million in financial commitments in the first 12 hours.

STO

On October 6, 2018, tZERO concluded their security token offering. The company raised $134 million from over 1,000 global investors. tZERO had hoped to raise $250 million at the event. Despite the shortcomings of the event, tZERO’s CEO, Saum Noursalehi, called the moment an “exciting milestone for tZERO.” On October 16, investors received their tZERO security tokens in their wallets.

Although investors had already received their tokens, all TZRO remain locked up until January 10, 2019. This 90-day period is in accordance with federal securities law and regulations. They can trade, sell, or transfer their TZRO to a secondary platform only after the 90-day waiting period expires. tZERO is not seeking additional investments.

tZERO also plans to develop an SEC-approved trading platform by August 6, 2019, according to a company press release. The goal of the platform is to add liquidity to the market. To accomplish this task tZERO enables participants to sell their tokens to non-accredited investors.

Where Can I Buy tZERO?

Unfortunately, you need to wait until the January 10, 2019 deadline to get your hands on some tZERO tokens in secondary transactions if you missed their STO event.

Where Can I Store tZERO?

tZERO is an ERC-20 compliant token. At this moment, all TZRO sits in custodial wallets per securities regulations. Users can store their tZERO in any ERC-20 compliant wallet after the designated 90-day waiting period expires.

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David Hamilton aka DavidtheWriter has published thousands of cryptocurrency related articles. Currently, he resides in the epicenter of the cryptomarket – Puerto Rico. David is a strong advocate for blockchain technologies and financial sovereignty.