Square’s new tbDEX platform will allow users to exchange Bitcoin for fiat currency or real-world assets, and vice versa, in a permissionless but supervised and KYC-enabled environment.
Square, the financial services and digital payments company led by Jack Dorsey, also CEO of Twitter, presented its future exchange platform cryptocurrencies, tbDEX to enter the world of Decentralized Finance (DeFi) in a particular way. Dorsey shared on his Twitter account the first draft of the tbDEX white paper, which is available on GitHub.
The document, called “tbDEX: Liquidity Protocol v0.1” explains that tbDEX will be a decentralized exchange platform that will allow its users to exchange cryptocurrencies such as Bitcoin for fiat money or real-world assets, and vice versa, in a permissionless and supervised environment. tbDEX will facilitate decentralized exchange networks between assets to establish a framework based on social trust, decentralized identity (DID) and verifiable credentials (VC), the document states, in order to establish the provenance of identity in the real world.
The exchange platform Square is designing will allow users to set the minimum necessary and acceptable information to exchange digital assets themselves, and will provide the infrastructure to create a direct, intermediary-free on-ramp and off-ramp between fiat financial systems and cryptocurrencies. With tbDEX, Square wants to bring the world of cryptocurrencies and crypto financial services closer to everyone, making them more accessible and easier to use.
Dorsey first revealed the creation of tbDEX in late August, noting that the construction of this decentralized exchange would be handled by the unit TBD by Square, created in July of this year to work on the development of new solutions for the market-leading cryptocurrency, Bitcoin.
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tbDEX, a unique model for DeFi in Bitcoin
Square is building its new decentralized exchange with a focus on trust and decentralized identity. Thus, despite being a type of DEX, Square does not rule out the need for oversight and compliance, so it is possible that tbDEX will integrate KYC requirements to ensure transparency in operations and reduce the risks of financial crimes.
Square explained that no platform that wants to provide transparent financial services can be completely devoid of trust. “Final criteria in fiduciary systems will always be subject to regulation, as there will be the possibility of illicit behavior by counterparties. This means that any exchange of value must fundamentally rely on other forms of governing trust, in particular reputation,” Square explained. Square's head of strategic development, Mike Brock, he pointed It will be the users who establish and apply the KYC requirements when making an exchange on the platform.
The financial services firm will also include features that are not available on other DEXs. As explained, tbDEX will be able to reverse transactions to ensure the security of users and investors, in the event of any type of exploit, hack or rollback in the protocol. However, it is worth remembering that the technical document recently presented by Square is only a first draft of what tbDEX will be; therefore, the functioning and operation of this DEX may change to adjust to the needs and demands of the community.
Square is looking forward to feedback from the crypto community and stakeholders in the coming days, in order to make further revisions, integrate new features and tools, and address current challenges.
Global financial inclusion
In its whitepaper, Square explains that decentralized exchanges can help solve the problems of financial exclusion that exist in the world. According to it, around 1.700 billion adults do not have access to the traditional financial system, but they do have a mobile phone and access to the Internet. Therefore, DEXs are presented as an innovative solution where these individuals can connect with a decentralized financial world, free of censorship.
Through tbDEX, Square wants to enable people to exchange value and transact with each other globally, safely and risk-free, and at a significantly lower cost than traditional finance. tbDEX will offer access to a more inclusive system, empowering people over their own finances, thanks to new technologies such as blockchain and smart contracts (smart contracts).
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