FLO — The tZERO Connection
You likely haven’t heard of FLO, but there is a good chance you have heard of tZERO, which has been generating massive interest from institutional investors. tZERO is the blockchain focused subsidiary of Overstock.com, launched by its CEO and early cryptocurrency adopter, Patrick Byrne. Overstock originally became involved in cryptocurrency when it became the first major retailer to accept Bitcoin back in 2014. Overstock’s involvement in the blockchain space only continued to grow after that, leading to the formation of tZERO as a distinct subsidiary of the company. In this article, I will present a brief background of tZERO and FLO, explain the critical role FLO will play in the tZERO platform, and why I believe it may be massively undervalued.
TL;DR, tZERO is using FLO, a very low marketcap blockchain, for a critical aspect of its infrastructure, and tZERO is a big deal. I highly suggest reading the article though, as I source everything.
The tZERO Objective
tZERO aims to provide the first platform in the world which allows for the trading of blockchain backed securities. Issuing traditional securities on the blockchain is one of the most promising new applications of blockchain technology, and Wall Street is positioned to be heavily disrupted by it. To put things into perspective, the U.S. stock market alone is worth over $30 trillion, and tZERO aims to capture as much of that value as it can. Institutional and accredited investors recognize the massive potential that tZERO has, as evidenced by the fact that it is now worth more than its parent company. Unfortunately, the average crypto enthusiast did not have an opportunity to partake in the tZERO token sale, which raised $134M, as it was limited to accredited and institutional investors, but all is not lost. This is where FLO comes into the picture, and how it enables you to gain exposure to tZERO.
What is FLO?
FLO is a relatively unknown cryptocurrency that was launched on June 17th, 2013. FLO was previously known as FLO, and it completed its rebrand on August 13, 2018. FLO had no premine, or ICO, and at the time of writing, has a marketcap of only $5,062,035. It features a 40 second block time, and roughly 145,647,505 FLO of the 160,000,000 max supply is currently in circulation. FLO’s standout feature is its ability to store meta-data, allowing it to serve as a worldwide public record for storing information. In order for a user to store information on the FLO blockchain, FLO coins are used to pay a storage capacity fee, after which a transaction comment is published to a subsequent block. This meta-data storage feature is also integrated with what is known as the Open Index Protocol, or OIP, a protocol designed for decentralized publishing, distribution and payments of any digital media, and also supports IPFS for file storage/distribution. By utilizing the meta-data storage feature of the FLO blockchain, dApps can be built with the OIP. It is the meta-data storage feature and the OIP which connect FLO to tZERO, and what may give it the potential for a valuation that is far, far higher than where it currently stands.
In the next section I will cover just how FLO integrates into the tZERO platform.
Security Transaction Records in a Blockchain World
tZERO uses software known as Digital Locate Receipts, or DLR, in order to store a record of every single transaction that occurs on the platform. This transaction history is stored on the FLO blockchain, and it is able to do this through the OIP integration with the DLR software. For every single transaction on tZERO, FLO is spent in order to store a transaction comment on the blockchain. It is in this way that FLO plays an integral role within the tZERO platform.
Given the important function of FLO in the tZERO platform, and the incredibly high profile nature of tZERO itself, you would think more people would be aware of this, but that could not be further from the truth. A Google search of “tZERO Florincoin” really only turns up two results that are specifically on the connection between the two, and even then, you wouldn’t find these results unless you already knew what you were looking for.
So how is it possible that this knowledge is so hidden from public view? Well, there are a few factors producing the obscurity. FLO is quite old in the grand scheme of blockchain. It also only has a marketcap of $5,062,035, and a rank of 514 on Coinmarketcap. To the vast majority of people in the blockchain space, if it isn’t in the top 100, maybe top 200 at most, then it effectively doesn’t exist. Couple that with its age, and you’re really only going to remember this thing if you were around in 2013–2014 or so.
The second reason for the obscurity is the fact that tZERO itself makes no direct mention to FLO anywhere that you would readily find it. As a matter of fact, finding out about the role of FLO in tZERO effectively boils down to luck, and having sharp eyes. In the next section I will take you down the same path I did in discovering this partnership, and provide all of the sources used to confirm it.
A Trail of Breadcrumbs
My journey began with the simple question, “What blockchain platform does tZERO run on?” It’s important to first note that there are effectively two components at work here; the native tZERO token for which an ICO was done, and the blockchain on which security trade history is stored upon (FLO). The tZERO token itself is a simple ERC-20 token, that has nothing to do with the process of transaction record storage. The tZERO token is of no concern to us right now. That said, the first place I looked to try and discover the platform was the tZERO website.
If you scroll down on the tZERO website you will see a Demo Videos section. The video of interest to us is the one on DLR. This video can only be directly found on the tZERO website, as it is unlisted on YouTube. At exactly 01:28 into the video, the speaker begins going into detail on how trade history and details are stored on the blockchain, and you will soon see this:
If you look at the top left of the image, you will see none other than FLO. The speaker of the video then pulls up the FLO block explorer and directly shows the transaction. If you did not catch the FLO detail in this video with your own eyes, then you would have completely missed it, as FLO is not directly mentioned by name anywhere in the video, or in text anywhere on the website.
Upon discovering FLO, more research was required, and I made my way to the FLO website. Once there, if you go to the dApps page and scroll down, you will be presented with none other than this:
That’s confirmation number two on the FLO and tZERO connection, but that’s not the only relevant piece of information on this page. If you look at the dApp directly to the right of tZERO, you will see this:
That name sounded familiar, and I quickly remembered why. If you go to the tZERO telegram page and scroll up to the announcement made on August 1 of this year, you will see an announcement specifically about Medici Ventures. Turns out that Medici Ventures is yet another blockchain related subsidiary of Overstock. Medici Ventures aims to build a property rights registry on the blockchain, and what blockchain are they using? None other than FLO. Additionally, remember that announcement that was on the telegram page? It turns out that Medici Ventures just signed a partnership agreement with World Bank.
Lastly, there are two sources from the Overstock CEO, Patrick Byrne himself. The first comes from an interview that Patrick Byrne had with BlockchainNewsKorea on 04/23/18, in which he explicitly states that tZERO is using FLO.
There it is, the first official confirmation from an Overstock/tZERO employee, and from none other than the CEO himself. Funny enough, in the video format of the interview, the entire question involving FLO has been edited out. Hmm, I wonder why that could be? It’s almost as if FLO is deliberately being kept obscure…
Finally, we have the public audio recording from the Overstock Q2 Earnings Call, which took place on August 9, 2018. Remember that OIP thing that was discussed earlier? Listen closely to what Patrick Byrne states, beginning at 59:10. Here is a transcription of the recording:
So, a real business model has emerged, including — I’m very excited about a revenue model that’s buried in here, but for competitive reasons [chuckling] I don’t want want to mention it, but it’s very — this whole new approach is — actually, why not give them some credit. There’s uh, there— I don’t know why we aren’t giving them credit. We’re building a bunch of the technology in OIP, and OIP, uh, is a open source technology that lets sort of an alternative to patents. It lets you create technology, and as people use it, it generates revenue for the person who created it.
There you have it. By this point it should be readily apparent that tZERO will be utilizing FLO to enable a critical function of its infrastructure. In the final section of this article, I will elaborate on how tZERO successfully disrupting Wall Street will affect FLO, as well as my personal opinion on what kind of valuation FLO can achieve.
The Bottom Line
tZERO will be using FLO to store the record of every single trade that occurs on its platform. In order to store information on the FLO blockchain, FLO must be spent, and that is for each and every transaction. tZERO aims to disrupt Wall Street by offering a trading platform for blockchain backed securities. Institutional and accredited investors recognize the immense upside potential that tZERO has if it achieves its objective, as evidenced by Overstock shares jumping over 20 percent in a matter of hours, shortly after their Q2 earnings call. During that same earnings call, it was announced that the private-equity firm GSR Capital will invest up to $270M into tZERO, at a valuation of $1.5B. This was the same earnings call mentioned previously, where CEO Patrick Byrne describes FLO while carefully avoiding use of its name.
To put the disruption potential into perspective, roughly 2–6 billion shares are traded on the NYSE each day. Using August 10, 2018 as an example, approximately 3,185,152,141 trades occurred. Can you imagine how much FLO it would take per day to store the trade history on the blockchain, if tZERO were to capture even 5% of that daily trade volume? That is exclusively using the NYSE as an example. If we combine the number of shares traded per day on both the NYSE and Nasdaq, the number of FLO needed is even higher, and that’s still not taking into account other global markets. Unlike traditional securities markets, trading on tZERO may potentially be 24/7 365, and will feature the ability to buy partial shares. Those two factors alone are revolutionary, and have the potential to massively increase the trade volume. Furthermore, it’s important to remember that tZERO is not the only dApp running on the FLO blockchain, which only increases the daily number of FLO spent on storage space.
All that said, here’s a reminder that FLO currently has a marketcap of only $5,062,035 and 514 on Coinmarketcap. When you consider the valuation of tZERO, as well as the integral role that FLO functions in the tZERO system, I can’t help but feel that FLO may be massively undervalued.
The conclusion I came to after doing all of the research I have shown here, is that FLO may have massive untapped potential, and is the equivalent of a diamond among coal. The best comparison in blockchain that I can think of, in terms of situation, not function, is AntShares (now NEO). After AntShares launched in late 2016, it quickly fell off the map, and effectively became a hidden gem, just like FLO. For most of 2017, AntShares had a marketcap between 5 to 6 million dollars, until it came to exist in the public eye once more. Once AntShares was discovered, and then shortly after it rebranded to NEO, it rose ~170,000% in one year from its low to the ATH. This is just my personal opinion, but based on all the information provided, I believe FLO may be positioned for exponential growth, especially considering that it is currently the only way for the average crypto speculator to gain exposure to tZERO, besides buying shares in Overstock itself.
I’ve provided the facts, I’ve stated my opinion, and now it’s time for you to form your own. FLO can be purchased on Bittrex, and for more information I advise visiting the FLO website and its page on Coinmarketcap.
*The information presented here does not constitute financial advice and is merely my personal opinion. In the spirit of full disclosure, I do currently have FLO in my portfolio, which was a decision made after doing the research described here.
*This article was amended after the completion of the Florincoin rebrand to FLO