tZERO Ramps up After Reaching Historic Milestones

KEY TAKEAWAYS

  • Overstock’s share price gained by more than 19 in four months, partially owing to the rapid growth of its cryptocurrency platform tZERO
  • tZERO, Overstocks’ solution to asset tokenization, underlies the first regulated security token in the U.S., which could open the door for future tokenization of commercial properties, an expected trillion dollar industry
  • This landmark moment highlights that even single hotels and resorts can now be tokenized and traded on the secondary market, which enhances investment democratization,  liquidity and can greatly increases the property’s valuation
  • Tezos platform has been chosen by the French government to run its CBDC trial

The market witnessed an exponential surge of Overstock’s share price towards the end of August, which jumped by more than 18x within four short months. It’s safe to assume that the company’s meteoric rise is linked to the progress of its security token exchange, tZERO, which it launched in early 2019. 

Source: Overstock Investor Presentation

Overstock’s most recent Investor Day presentation highlights how the tZERO platform has gone from strength to strength. It outlined how the tZERO Alternative Trading System (ATS) hit a new trading record of 816,000 transactions in July, almost double its May record of 423,000. However, the figure is overshadowed by its growth in August, where the company announced an improved 2.3 million transactions, a 21x YoY increase. 

Source: Overstock 20Q2 financial report

As a result, it’s irrefutable that tZERO has been making considerable headway in its own right recently. The company’s expanding user base and transaction volume might have contributed to the recent rebound of tZERO’s own security token, TZROP. The company also offers OSTKO (its preferred dividend token), and as of Aug. 24, 2020, began trading the Aspen Regis security token, known as ASPD or ASPEN. This makes it the first regulated security token traded in the U.S., and also the first third-party token on tZERO’s platform. 

The ASPEN tokens, from Aspen Digital Inc., owner of the 179-room St. Regis Aspen Resort in Aspen, Colorado, represents $18 million of indirect ownership in the five-star luxury hotel resort. It is well situated in a prime location and boasts an upscale restaurant, indoor and outdoor conference and banqueting suites, multiple meeting spaces, the largest ballroom in Aspen, a designated fitness center, luxury private spa and heated outdoor pool with panoramic views of the Aspen mountainside. The resort also features on-site ski and snowboard rentals, as well as a ski valet service that removes the hassle from transporting equipment to and from the four nearby ski mountains each day.

In 2019, the resort recorded $50.4 million in revenue and a net loss of $263,000. The primary sale occurred in 2018 when 19% of equity was sold to accredited investors for $18 million, in compliance with RegD 506(c). The company then had to wait for a 12-month lock-up period before token trading could commence to non-accredited investors through any licensed broker-dealers. This is where tZERO has been able to provide real value. 

Source: ASPD token disclosure agreement

Ever since secondary trading opened, the ASPD token has appreciated by 29% compared to its valuation in 2018, which isn’t bad for a REITS type asset. In fact, it could even increase the level of interest for other REITS type asset owners.  

Interestingly enough, the ASPD token is on the Tezos blockchain, which was recently selected by Societe Generale-Forge, a tech start-up by French investment bank Societe Generale as the blockchain for its CBDC experiments. 

Source: tZERO

According to Lasalle, the subsidiary of JLL Inc., the investible global institutional real estate market totalled $9.6 trillion as of 2016. Of that sum, 53% is recorded as privately held. Depending on the success of ASPD on the Tezos blockchain, could be future targets of tokenization. The majority owner of the Aspen Regis Resort (which still holds 81%) has already expressed interest to tokenize more of its assets in the future, until it reaches the magic number $1 billion figure. 

As displayed in the chart below, global real estate returns exceed global stocks and bonds from 2000 to 2015. This makes it (at least in theory) a very stable return source in the zero-rate era. Previously, this type of stable return could only be enjoyed by high-net worth individuals and institutions. However, as a result of the legal tokenization process, this can now be accessed by non-accredited investors, which provides an excellent example of investment democratization. The tokenization of a single commercial property can provide more liquidity and can increase the property’s valuation dramatically. Not only does this benefit the owner(s), but it also relays one of the original core values of blockchain technology, which was to minimize the profits of intermediaries.   

This is a bold move by tZERO and, what makes it more interesting, this looks to be only the start. We’re sure that there will be considerable future developments, as tokenization itself brings a fresh perspective and injects new enthusiasm into the world of blockchain. Without this fresh take, the crypto industry, at least as we know it, would most likely rely on playing the “pump and dump game”. 

As a community of crypto enthusiasts, we have to remind ourselves just how far we’ve excelled in recent years. It was only two decades ago that many corporations were looking into building internet sites, which then paved the way to the development of new network and tech infrastructure required for the future of the internet. Now, in 2020, it might just be time for more physical assets to be on chain, and tZERO has just moved its rook into position to ensure that it can take more steps in the right direction. 

We are firm believers that blockchain has the potential to change the world and democratize capital access. We hope tZERO is successful in the future and appreciate Overstock’s commitment to implement blockchain technology in real-life scenarios.