Do you know what you have when you have a "permissioned blockchain"? You basically have something that doesn't exist. You have a "permissioned" system that is anything but related to the blockchain and not necessarily anything based on blockchain technology.

It's like saying something silly like you're running things on your companies "internal Internet". That network is called an intranet, which is an internally used system on a network segregated from the rest of the world with access to the Internet as required or allowed.

Overstock isn't trying to play with words or sugar-coat an existing database design with blockchain-like qualities in an attempt to pass it off as blockchain technology and they're not even calling anything they built a blockchain at all. They're calling their platform T0 and calling the blockchain the blockchain. Pretty much how its always been until a few started calling anything and everything a "blockchain" to confuse many, annoy most, and dupe others.

They're not gathering together 40 online retailers for a startup called S5 to build a super-secret-private-permissioned-system they plan to call a something-chain either.

Overstock is doing what they are doing in impressive ways. In ways that blockchain technology and the blockchain itself is applicable to the real world.

In the real world even with bitcoin becoming increasingly usable as a payment method its real value is beyond its use as currency. It doesn't really matter if bitcoin ever establishes itself as a major player in the payments market as some sort of currency because bitcoin is already a commodity.

T0 (T-Zero)

The T0 platform is one of these "permissioned systems" per say, but it's more like a sidechain. Overstock is simply calling it an internally supported and managed platform to trade its stock. That and T0 (pronounced T-Zero) of course. 

Where it get's blockchain-like is where it actually becomes more of a sidechain in that links to [the] blockchain using colored coins for recording the asset. This is not a pipe dream. This has been approved by the SEC and it was outlined in the SEC filings specifically stating "the bitcoin's blockchain" unless otherwise specified. 

Colored Coins

Colored coins are basically other asset types on the blockchain. Bitcoin is used to pay for transactions costs, but the unit is that of of the colored coins asset.

Figure1 - Simple Colored Coin Transaction

For a basic example (see figure1):
  1. Grantor holds 100 Units of AssetA in AddressA (Wallet Address)
  2. Beneficiary holds AddressB (Wallet Address)
  3. 1 XBT can equate to 100 Shares of Asset  (AssetA)1:100
  4. 1 XBT + 0.0001 transaction fee can move or transact 100 Units of Asset A
  5. (AssetA)1:100 transfers or transacts from AddressA to AddressB on behalf of Grantor

AssetA data sent from AddressA to AddressB is now present as a transaction involving AssetA from AddressA to AddressB.

This transaction could be a verification, ownership, escrow, an operation, or a variety of other things as designated by the colored coin and/or sidechain workflow.

Figure2 - Overstock T0 transaction

In the case of T0, we do not have the full technical specifications of how it works exactly but in theory you would have a transaction the takes place on T0 that subsequently is recorded and tracked on the blockchain. Let's say 0.01 XBT represented 1 share of Overstock. The result would look something like above (see figure2).

Overstock explains this process in detail on page 36 of its SEC filing:

"...the tØ software will electronically publish the proprietary ledger and commence the process of embedding in the Bitcoin blockchain information necessary to mathematically prove the validity of available copies of the proprietary ledger. Specifically, after a set of transactions in our digital securities have been executed and recorded to the proprietary ledger", states the filing and goes on to say "...As a result, once the Bitcoin transaction is immutably embedded into the Bitcoin blockchain, an immutable record of the digital securities transactions reflected on the proprietary ledger is also recorded within the Bitcoin blockchain...

In this case the transaction took place on T0 and a share was purchased. The record of the ownership and issuance is recorded on the blockchain which provides the most secure and reliable system of record on earth.

It is innovation like the T0 platform that will revolutionize the way we do many things now and this is the kind of innovation in which blockchain technology and the blockchain will be unsurpassed.

There is certainly going to be more details on T0 and how it works more specifically in the upcoming months but so far from what we can see, Overstock is doing things right. They have taken the utility, security, and reliability that the blockchain offers and used it to the advantage of the T0 platform rather than trying to duplicate what is already there.

The invention of cryptographically-protected, distributed ledgers ushered in a true Cryptorevolution. tØ applies the security and efficiency of this new technology to the world of finance, making transactions more equitable, transparent and accessible to all market participants.

Where others seem to be struggling is not attempting to build their own "T0", but trying to do that and also build their own global "blockchain" with the expectation they will succeed with a comparable network to the blockchain as a result.

This is not surprising, countless companies tried to do this in the 90's to create their own proprietary "Internets". Remember America Online? We all know how that ended up because it didn't take to long for people to figure out they were getting duped into paying for something they could get for free and the "free version" was better and more powerful.

Some companies (Amazon, eBay, Google, etc...) didn't go that route, instead they built their applications directly on the pubic internet providing service and utility that the internet didn't provide all by itself.

The rest is history. Today however, Overtsock is giving us a glimpse of the future.

Story by dinbits
image by dinbits staff

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