Overstock CEO: Modern Financial System is a Ponzi Scheme, Collapse Will Bring Global Crypto Adoption

Patrick Byrne, the CEO of Overstock, stated in a recent interview that the entire modern financial system is a “big Keynesian magic money tree ponzi scheme”.

The statements were made during an interview with crypto YouTuber Naomi Brockwell on Monday, October 7.

The CEO of the tech-driven online retailer, which was one of the first major retailers to accept bitcoin, also believes that the modern financial system will eventually collapse, ushering in the global adoption of cryptocurrencies:

“People turn to it where they collapse, like Venezuela or Cyprus or Syria, something like that. When people start getting into it is when their own financial systems collapse.”

When asked about the role of governments in regulating cryptocurrencies, Patrick admitted being a national security libertarian. He believes that know-your-customer (KYC) and anti-money laundering (AML) requirements are important tools to keep criminal activity from thriving on the crypto sphere:

“I guess I must confess, as revolutionary as I am – I’m what you could call a national security libertarian. So I worry about threats to our country. And that means that KYC and AML are not just things to be scoffed at.“

Patrick believes that it is possible to take blockchain to the point where it becomes completely anonymous. On the one hand he loves the idea of becoming truly free and anonymous, but on the other he acknowledges that there will be some bad actors that will take advantage of the situation to hurt others.

Patrick is of the opinion that there is a right balance between freedom and security but “the more the world gets digitized, the more there will be government surveillance.” He trusts that distributed ledger technology can remake society and hopes that authoritarian states are unable to exert control and own the technology. Specifically referring to China, he also expressed his concerns on the country’s plans to rank all its citizens based on a "social score" by 2020.

Patrick thinks that social barriers and stigma and the idea that Bitcoin is mainly used for illegal drug trades and money laundering, are what’s holding back crypto adoption. When asked if Bitcoin will become a worldwide currency or if it will always have specific use cases he replied:

“Now, whether Bitcoin is the one, whether Bitcoin has solved its speed problems or it’s another cryptocurrency, only time will tell.”

The Week: Facebook Drops the Hottest Whitepaper since Satoshi and Bitcoin Breaks $10k

Over the past week, Facebook revealed long-anticipated plans for its Libra stablecoin, popular Bitcoin sceptic Nouriel Roubini aligned with crypto purists on whether Libra is actually a cryptocurrency, Bitcoin maintained its bullish momentum to reach a new yearly high, and an auditor’s report found QuadrigaCX now-deceased CEO lost as much as 21,000 BTC of user funds in speculative trading.

Facebook releases the Libra whitepaper

There’s a new (albeit familiar) player in the crypto space. After more than a year of speculation, Facebook has releasedthe whitepaper for its much-anticipated move into blockchain: The ‘Libra’ project.

Regulators voice concerns on Libra

Regulators in several major jurisdictions have wasted little time in voicing their concerns around Facebook’s crypto plans. Most notably, law-makers in US and France have said the proposal should be shut down.

Algorand completes $60 million private sale 

Algorand, the brainchild of respected cryptographer Silvio Micali, completed its token sale. Using a Dutch Auction bidding mechanism, the tokens were sold at $2.40, giving the project an implied market cap of $24 billion – nearly on a par with Ethereum.

The long take 

The world of crypto and blockchain has had what could well be written in the history books as its “Netscape Moment”. Often dismissed by the mainstream as a speculative bubble with little evidence of real utility for regular Internet users, the “normies” are paying attention again. The release of the Libra whitepaper has initiated debate around the purpose and vision of cryptocurrencies, and whether Facebook’s venture can take the space further along the path towards a truly global and open financial system.

In its whitepaper, the company – through its newly created Libra Association - outlines the various aspects of the network, including the native currency, its consensus mechanism for agreeing on the state of the ledger and ongoing plans for governance. Set to launch in 2020, the goal for Libra, according to the paper, is to create ‘A stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association’.

There’s a lot to unpack in that sentence, so let’s go through the various elements:

  1. ‘A stable currency’; The currency will be pegged to a basket of low-volatility assets. This means it won’t be pegged to any one asset (e.g. the US dollar) but should achieve rough parity with the world’s major currencies by using a blend of assets including bank deposits and short-term government securities to avoid the risk of price spiking up or down.
  2. ‘Built on a secure and stable open-source blockchain’; The blockchain will use a consensus protocol called LibraBFT, whereby transactions will be validated by a network of 100 participating nodes. Those nodes will be run by organisations typically trusted by the general public, including payments networks like Mastercard, Visa and PayPal, tech companies like eBay, Uber and Spotify, and telecoms companies like Vodafone. Facebook will also be a validator with no greater privileges than the other members.
  3. ‘Backed by a reserve of real assets’; The currency will be backed by LibraReserve – a reserve of real assets, so that each Libra coin that’s minted is backed by its equivalent value in the reserve. The funds for this reserve will come from the participating members, who’ve each contributed $10 million towards the reserve. The interest from the assets will be used to pay rewards for validating transactions.
  4. ‘Governed by an independent association’; While Facebook will play a leading role in the initial stages, the goal is for the blockchain to be governed by an independent foundation run out of Switzerland (similar to how the Ethereum network functions). The members of the Libra Association will be those running the validator nodes. They will each have equal power and any motion to change or upgrade the protocol must be endorsed by two-thirds (a ‘supermajority’) of the members.

The announcement included the launch of Calibra, a digital assets wallet enabling Facebook user to access and manage funds. Calibra will be integrated across Facebook’s suite of applications, including WhatsApp, Instagram and Messenger, allowing users to transfer funds and pay for products and services.

In addition, Facebook is developing its own blockchain scripting language called Move, which developers can use to program smart contracts (similar to Solidity in Ethereum). While these capabilities won’t be available at launch, it opens the door for a range of applications to be built on top of Libra in the future.

The venture will no doubt attract critics from both the traditional finance side (note that no banking institutions are participating) as well as from the crypto purists. Already, regulators in the US and France have voiced their opposition to the proposed venture. Expect central banks and other financial institutions to have their say on the matter soon.

Regardless, it’s clearly a clever move from Facebook and is aligned to the company’s modus operandi of continually seeking to disrupt its own business model as well as those of industry incumbents. In this instance they’ve cherry picked desirable attributes of Bitcoin and Ethereum, added a stablecoin to combat the volatility that’s associated with existing cryptocurrencies, and have used a consensus framework based on trusted nodes in order to achieve the sort of scalability you’d need for 2.4bn+ monthly active users.

Whether Libra will become a social-good venture helping to bank the unbanked in developing nations or a blatant data grab by a company with an already disproportionate global influence remains to be seen. In any case, if anything is going to take crypto to the mainstream (at least in the shorter term), this could well be it.

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