Jack Dorsey introduces tbDEX – decentralized Bitcoin exchange proposal

    23 Nov 2021

    US Payment giant Square released Friday the whitepaper of its decentralized Bitcoin exchange proposal (tbDEX). Jack Dorsey’s tbDEX is proposed to offer a direct way for people to convert their fiat into Bitcoin without having to go through multiple platforms.

    According to a statement posted on the website, Square’s Bitcoin business TBD released the whitepaper of its decentralized Bitcoin exchange proposal – tbDEX.

    “We believe that the economy should be inclusive. We need to build on-ramps to this future where everyone can access and participate in the economy,” read the statement.

    The tbDEX protocol aims to bridge the gap between the fiat and Bitcoin worlds, given that most people still receive their paychecks in fiat currency and pay taxes in fiat currency. Furthermore, the project aims to make it easier for those who want to convert their debasing fiat to appreciating Bitcoin in the purest free-market possible.

    “We propose a solution that does not rely on a federation to control permission or access to the network; nor does it dictate the level of trust required between counterparties,” per the statement. “There is no governance token. Instead, the tbDEX protocol allows participants to negotiate trust directly with each other — or mutually and voluntarily rely on trusted third parties to vouch for the counterparty.”

    The tbDEX also intends to include many features that make it far less decentralized than a DEX in the truest sense of the word. For starters, the protocol requires that all participants pass background know-your-customer (KYC) checks to comply with relevant regulations depending on a user’s region. Users can only then connect their wallets to the exchange and swap coins with one another.

    Moreover, the white paper called for the deployment of blockchain analytic solutions, either built-in to the DEX or through a third party, to track transactions on the platform. Such a class of blockchain forensic solutions is potentially a controversial topic. For example, such a system would likely enable authorities to cross-reference payment IDs and public wallet addresses with KYC information to unveil personal identities behind transacting parties. However, supporters claim that such means of monitoring are necessary to prevent illicit activities.

    But centralized features of the tbDEX could also win support from crypto enthusiasts. One distinguishing aspect discussed in the white paper is chargebacks, which don’t exist on most DEXs. If implemented, the ability for Square to reverse transactions on the tbDEX could potentially stop irreversible loss suffered by investors during decentralized finance rug pulls. Square is currently encouraging feedback on the white paper on a newly created Twitter account.

    “The tbDEX protocol also facilitates the secure exchange of the minimum necessary identity information acceptable to counterparties in order to satisfy requirements, be they legal, regulatory, or related to any other consideration of risk,” per Square’s statement. “The protocol itself neither collects nor records any personally identifiable information.”

    The tbDEX white paper has been released, containing more detailed information about the protocol’s inner workings and technicalities, and has also been published on GitHub, allowing interested developers to contribute.

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