On Twitter CEO Jack Dorsey’s Plans To Launch a DEX for Bitcoin
Twitter CEO Jack Dorsey has been vague about his Bitcoin plans until recently when he confirmed through Twitter that he wanted to build a decentralized exchange for Bitcoin (DEX). As we all know, the CEO of Twitter and Square, Jack Dorsey, is well known as a loyal Bitcoin fan. In July of this year, Square announced that it would create a decentralized encryption business unit centered on Bitcoin. Although there are few details, it still triggered heated discussions in the wider cryptocurrency community. Since the exact nature of the proposed DEX was still ‘to be decided’, appropriately enough Square named the department “TBD”.
On August 24, Mike Brock, general manager of Square’s TBD department, tweeted: “There are a lot of speculations about what TBD is and what it is not.” He continued, “This is what we are going to solve. The problem is, through a platform, to easily provide funds for non-custodial wallets anywhere in the world to build the entrance and exit of Bitcoin. You can think of this as a decentralized fiat currency trading platform.” A few minutes later, Jack Dorsey stated in the tweet comments that he would post a tweet to his 5.6 million followers to confirm the authenticity of this; and announced that the aim was to, “establish an open platform for the creation of a decentralized exchange for Bitcoin”.
A decentralized exchange (DEX) is a cryptocurrency exchange that can conduct peer-to-peer transactions, such as lending and trading, without a loan officer or broker. DEXs are run through computer code called “smart contracts.” These automatic smart contracts will run on a transparent and tamper-proof blockchain, which can effectively eliminate financial fraud. The challenge is that the Bitcoin blockchain network cannot scale to handle thousands of transactions per second. It is mainly designed for peer-to-peer payments. These programming limitations have reduced Bitcoin as the preferred method of value storage and inflation hedging, as it cannot handle a high volume of transactions. This is reflected in the current market distribution with more than 90% of DeFi projects run on the Ethereum blockchain network, while only 10% on the Bitcoin network.
DEXs and DeFi require similar speed and scalability, which Bitcoin lacked until now. “Decentralized exchanges based on other blockchains are well established, such as Ethereum’s Uniswap and SushiSwap and Binance Smart Chain’s PancakeSwap. TBD intends to make a fully permissionless and decentralized exchange built around Bitcoin, however, to provide users a wide array of on-ramps for exchanging fiat currency for BTC,” explained Decrypt, reviewing the proposal. If Bitcoin gains the support of Square developers and Twitter users, it potentially could be able to shift this balance to Bitcoin. However, it should be noted that these are all assumptions at present. The TBD team itself admits that there are still many problems to be solved. As for when it can be launched, there is still no definite date.
Mike Brock confirmed on Twitter, “Some of the gaps we are currently seeing are related to cost and scalability. The Lightning Network is solving this problem through payment. We need to solve the exchange infrastructure between digital assets, such as stable coins. These are the problems and challenges currently faced by TBD: What projects are there today that can help us solve these problems in Bitcoin’s native way? Now that we have determined the direction, as we progress, you will hear more from us. But for now, all we can say is thank you!”
What does a Bitcoin DEX mean to the cryptocurrency industry?
Jack Dorsey’s involvement in Bitcoin DEX research and development marks the first time a large company outside the cryptocurrency field has entered decentralized finance in this way. As for whether Square, as a result, can achieve an advantage over rival payment companies such as PayPal and Stripe, is still unclear. Many skeptics are wondering what the real purpose of Jack Dorsey’s move is. If and when the product is successfully launched, to complement its previously announced Bitcoin hardware wallet, what will it mean for the wider cryptocurrency industry?
Although other payment service providers such as PayPal have been involved in the buying and selling of cryptocurrencies, Square’s entry into DeFi means that its commitment to the bundling of blockchain and cryptocurrencies has risen to a new level. DEXs rely on blockchain technology, and users can use smart contracts for peer-to-peer encrypted transactions. Most of Square’s current revenue comes from processing payments for businesses and consumers, and the company has always been very optimistic about Bitcoin. Consumers can already buy Bitcoin through its Cash app and Square itself purchased $220 million in cryptocurrency as an investment last year. The company’s early embrace of cryptocurrency is consistent with the position held by its co-founder and CEO, Jack Dorsey, on Bitcoin. Bitcoin ‘maximalist’ Jack Dorsey once stated that cryptocurrency would eventually unify the world. And now Square’s latest move to build a DEX will enable more people to get involved in Bitcoin.
Although Square announced few other details, other of its executives have already hinted at the structure of the new business. Although it is unclear which blockchain network its DEX will be built on, the Bitcoin blockchain may be one of its competitors. Mike Brock, tweeted: “We hope that DEX will be in the form of Bitcoin from beginning to end.” Bitcoin DEX is unusual because most DEXs are built on the Ethereum blockchain. Above all, it has a more robust smart contract system. However, Jack Dorsey stated that he prefers Bitcoin to Ethereum’s cryptocurrency Ether. So if Square follows its leader’s preference, it could eventually disrupt both the mainstream payment market as well as how DEXs operate in the future.