Hybrid ICO? Overstock's tZERO to Build Services Into Security Token

Overstock subsidiary tZERO is adding several new business verticals as part of its forthcoming initial token offering (ICO).

Specifically, the tZERO token holders are now being offered the ability to buy blockchain-enabled digital locate receipts, along with newly revealed robo-advising services, online retail brokerage services, insurance products and education services dispersed in an app store-like environment.

"Crypto is very new, ICOs are new – at least let's provide an educational store if you want to go in and learn about these, and use your tZERO tokens to do that," said tZERO president Joseph Cammarata.

In addition to the newly revealed verticals the token will be able to be used for the company's traditional routing and execution services made available through a previously revealed alternative trading system (ATS).

While blockchain-based token offerings have largely been portrayed as either traditional tokens or so-called "utility tokens," tZERO's assets are being designed to function as a hybrid, giving investors elements of both functionalities.

Speaking to this new hybrid model, Cammarata told CoinDesk:

"We see ICOs as the new IPO – Wall Street 2.0. And we're looking to lead the charge in a regulated environment."

The platform is now scheduled to begin accepting accredited investors for its ICO on Dec. 18.

Investors and beyond

Since tZERO's launch in August 2015, the company has largely focused on building a regulated means for instantly buying and selling stock-like products on a blockchain. But since the company revealed its plans to host this ICO, Camarata said, the company has seen renewed interest.

For example, Overstock CEO Patrick Byrne revealed in an investor call earlier this month that tZERO has sold a warrant – a security that gives the owner the right to buy stock at the agreed price – to a fund affiliated with John Burbank's Passport Capital LLC for $2.6 million, and another to George Soros' Quantum Partners LP for $4 million.

Cammarata said those investors view the warrants as a proxy investment in tZERO, which is 81 percent owned by Overstock.com. He added, however, that they will not likely buy the tZERO token itself. He declined to comment further on details about that possible correlation.

In addition to investors contacting tZERO since news of the ICO emerged, other companies have reached out wondering how they might replicate the model for token issuance, Cammarata indicated.

He told CoinDesk:

"We have had thousands and thousands of inquiries related to not only investing in the ICO, but wanting to issue their own ICO, or they have an ICO they'd like to list on the tZERO ATS."

Swiss army knife image via Shutterstock