Overstock.com and its swashbuckling CEO, Patrick Byrne, are hoping to create a new kind of corporate stock based on the computer software that drives bitcoin, aiming to overhaul the stock market in much the same way that bitcoin overhauled how we store and exchange money.

On Tuesday afternoon, Overstock—one of the world's largest online retailers, with $1.3 billion a year in sales—unveiled a webpage that explores how a public company could issue a "cryptosecurity" to potential investors. In an echo of the bitcoin digital currency, this would be a stock that's controlled by cryptographic algorithms running across a network of computers owned by people and companies spread across the globe.

In other words, all stock trades would be governed by tools in the hands of the general public rather than by a traditional stock exchange, such as the NASDAQ or the New York Stock Exchange, and these trades would be mathematically verified and recorded in an online ledger that anyone can view at anytime—something that, Byrne believes, could eliminate some serious flaws in the world of high-stakes trading.

Overstock's new webpage amounts to little more than a rough outline for how all this would work, but the company has invited others to help flesh things out. "How a public company would issue a cryptosecurity has yet to be established," reads the webpage, a "wiki" that anyone can edit. "Because the methods of issuing and characteristics of a cryptosecurity may be novel, how such a security may be issued and traded, and the risks associated therewith, deserves careful thought."

>Byrne believes that a new system based on the mathematics of the blockchain can eliminate holes in the stock market.

Earlier this year, Overstock became the first major online retailer to accept payments in bitcoin, with Byrne painting the digital currency as a way of freeing our economy from big banks and big government. "We want a money that some government mandarin can’t just whisk into existence with a pen stroke," he said, in his typically colorful way. Then, in the wake of this announcement, he advocated using the software that underpins bitcoin to rebuild the stock market as well. An avowed libertarian with a PhD in philosophy, Byrne has long complained about investors using various loopholes in the financial markets to improperly boost profits at the expense of public companies and the overall economy—with Overstock even going so far as to sue some of the biggest names on Wall Street—and he believes that a new system based on the mathematics of bitcoin can eliminate these holes.

This spring, Byrne indicated he would let others build such a system, but the 51-year-old—a three-time cancer survivor—has a way of changing the course of his company as the mood strikes him. Asked if the new wiki showed that Overstock intended to issue a crytosecurity, he stopped short of saying so. "Before we decide if we want to issue a cryptosecurity, we want to figure out if it's possible," he tells us. But Overstock has already held extensive discussions with the founders of a project called Counterparty, which offers software that could help drive such a cryptosecurity, and if he decides this kind of thing is possible, he intends to "open source" a blueprint of his plan, so that any other company can make use of it.

Patrick Byrne. Joe Pugliese/WIRED

His efforts are part of a much larger movement that seeks to remake the stock market in the image of bitcoin. Several projects—including NXT, Mastercoin, and Bitshares—are working on software that's similar to the tools offered by Counterparty, and all are mentioned in the Overstock outline. What's more, others are looking to apply the bitcoin way to additional financial instruments, including derivatives, and some software developers are even using the idea of bitcoin's public ledger—known as the "blockchain"—to remake tasks beyond the financial world, including secure online messaging.

The overarching aim here is to put tasks in the hands of the people and remove the heavy-handed control of governments and corporations. "There is a lot of good the blockchain can do," says Robby Dermody, one of the founders of Counterparty.

But a cryptosecurity wouldn't be entirely free of the existing authorities. According to Keith Miller, a partner with the international law firm Perkins Cole and the chair of the firm's securities enforcement practice, it's likely that Overstock would have to seek SEC approval before issuing and trading its own cryptosecurity. "I find it very difficult to believe that they won't have to get some sort of registration statement on file that the SEC would have to approve—and I suspect there would be lots of comments back and forth," he says.

The SEC did not respond to a request for comment on the matter. But Byrne says that if he decides a cryptosecurity is feasible, he will solicit approval from the commission. The new wiki appears to be a way of gaining public support for a plan, before Overstock takes it to the SEC. "We're turning to the world to help us fill in the pieces," he says.

James Angel, a professor of finance at Georgetown University and a visiting professor at the Wharton School of Business who specializes in the nuts and bolts of the economic system, calls this a "really interesting idea." But he believes that the plan in unlikely to receive much support from the SEC and the Wall Street. "The biggest hurdle is institutional inertia," he says. "When you talk about the stock settlement system, you've got over 4,000 broker-dealers involved in the process, and it's not something that's easy change." That said, Byrne has never been one to shy away from long odds.

>'When you talk about the stock settlement system, you've got over 4,000 broker-dealers involved in the process, and it's not something that's easy change.'

In 2007, Overstock sued Goldman Sachs, Merrill Lynch, and several other big Wall Street names, accusing them intentionally driving down the price of shares in Overstock and other companies through a practice known as "naked short selling." The lawsuit is ongoing, and for years, it made Byrne a pariah among the Wall establishment.

Basically, naked shorting amounts to selling shares you don't really have. According to Angel and others, this was a large problem before the 2008 financial crash, but new rules laid down by the SEC in the wake of the crash has significantly curbed the problem. This is still an issue, however, with some securities—including what are called exchange traded funds—and Byrne sees cryptosecurties as a way of completely closing these loopholes and many others that plagued the economy in recent years. You'll hear much the same from Robby Dermody, of Counterparty. With the blockchain, ownership of stock is reduced to pure mathematics, he explains. "It would be impossible to naked short a stock," he says, though he does acknowledge the possibility of bugs in the software.

Angel agrees that a cryptosecurity could close certain market loopholes. But he also questions whether it would suit the high-speed world of Wall Street trading. "There's some latency in settling a bitcoin trade. It can take anywhere from several seconds to hours to get a transactions completed," he says. "In a world where people want to trade quickly, putting that kind of a delay into the system could make it a non-starter."

But Byrne says that one of the things he's trying to eliminate is high-speed trading that serves no real purpose—other than to generate profits for those doing the trading—and he's sees current blockchain software as just one step towards remaking the stock market. As the past several years have shown, he's determined to fight this battle indefinitely—and fight it in the most unusual of ways. "I wish to provide the world a way to give Wall Street some payback," he says, "in the form of a massive hot fudge high colonic that would be a cryptosecurity."