TZero (t0) is an open ledger system and cryptocurrency created through the Internet retail business Overstock. It was created to provide more legitimacy and oversight to Initial coin offering (ICOs) and to enable companies to develop or issue tokenized securities to investors.
Contrary to other decentralized blockchain platforms, tZero is classified as an alternative trade system (ATS) and is controlled under the Securities and Exchange Commission (SEC) and FINRA.
t0 History
The rise of cryptocurrencies as well as trading platforms and blockchain technologies has been exploding in the years since Bitcoin’s introduction in 2009.4 The rise of cryptocurrency has brought together tech enthusiasts as well as libertarians, speculators and investors as the rate of technological advancement far surpassing the rate at which regulators are able to establish rules to ensure consumers are safeguarded.
New financial products , referred to as initial coin offerings (ICOs) and brand new methods of managing investments through digital wallets were used. These advances are changing the way people view money.
In some instances, companies are looking to provide not just the cryptocurrency token however, they also want to provide an application that utilizes blockchain technology to process transactions. t0 is one such company which offers the alternative trading system (ATS) as well as tokens.
The platform was created to permit both sellers and buyers to make trades via the shadow pool which means it is an intermediary, not the role of a broker. 5 transactions are handled by an open ledger. tZero is aiming to be the top platform on which businesses can provide an ICO. 6
The launch was announced by Overstock
t0 was born out of an earlier initiative by Overstock.com the online retail store, to create a blockchain-based technology known as Medici. Medici was created to permit Overstock and other companies who license the technology to to sell cryptocurrency. This initiative began in the year the year 2014. 7 As 2021 the venture capital company Pelion Venture Partners is managing Medici Ventures on behalf of Overstock.
Patrick Byrne, the founder Overstock, the company’s founder Patrick Byrne Overstock was identified as being one of tZero’s main executives on its 2017 Notification of Exempt Offer of Securities (Form D) filing with the Securities and Exchange Commission (SEC).
The company started offering Simple Agreements for Future Equity (SAFEs) which is an instrument that can be converted into a financial instrument for investors who are accredited investors at the end of December of 2017. SAFEs enable businesses to raise capital outside of traditional equity and debt markets, and offer investors with some of the features such as convertible bonds. They are most often utilized by cryptocurrency businesses. 10 According to the initial filing filed with the SEC, tZero is expected the company to collect $250 million.
Regulated by SEC
To regulators, tZero is one of the first attempts to manage cryptocurrency and other trading systems. It wasn’t until 2017, eight years after the creation of Bitcoin, that the SEC made a decision on tokens. 11 The uncertainty in regulation has left crypto owners far less secure than securities investors This has resulted in volatility in prices and also to the well-publicized hacks that have occurred on various exchanges. Overstock.com shares increased by over 20% in the following day, after FINRA approved the membership application of tZERO for 2020.
Being regulated places tZero in a position of advantage in the field of financial products based upon cryptocurrencies because it is able to provide solutions that the other platforms might not be in a position to offer. Since it’s required adhere to laws, t0 can position itself as a source of guidance as well as clearing and verification services to other businesses looking to launch tokens for raising funds.
If companies seeking to raise funds by selling tokens could develop their own platforms which would eliminate the middleman, this will require significant investments and experience. A company such as tZero might prove to be more economical, and could lead to tZero eventually being viewed as an alternative to Nasdaq.
