Overstock wants to build decentralized stock exchange based on bitcoin protocol

The American web retailer Overstock has hired a number of developers to develop a virtual exchange on which shares can be traded locally. Parts of the bitcoin protocol should serve as a basis for trading in shares.

Overstock has hired two developers from Counterparty to set up a decentralized trading platform, Wired writes. Counterparty develops software for financial services that runs on machines that are also used for bitcoin traffic.

The web store chain eventually wants to issue shares via the exchange, which has been given the code name Medici. Counterparty’s technology, which runs as a platform on top of bitcoin’s blockchain mechanism, should allow buyers and sellers to trade Overstock shares. Other companies should also be able to offer their shares on Medici. The shares on the decentralized network will be able to be traded worldwide, just like bitcoins based on cryptographic algorithms, via the blockchain, the ledger that is used by bitcoin.

According to the makers, Medici should form an alternative to established stock exchanges such as Wall Street. The decentralized nature of the trading system, in which banks, for example, no longer play a facilitating role, could significantly reduce the costs for share transactions. It would also be easier and cheaper to issue shares, especially for smaller companies, while large banks as intermediaries can no longer benefit from exploiting loopholes in the current stock exchange system.

Despite the promises from the makers, Overstock still has to win the regulators to approve Medici. That’s why the company hired a law firm that would specialize in areas such as bitcoin and virtual currencies. If the plans for Medici are successful, Overstock wants to divest the exhibition part in order to allow the platform to continue to grow independently.