Jack Dorsey is the co-founder and CEO of Square and Twitter. He released a whitepaper Friday that detailed Square’s plans for its decentralized Bitcoin exchange, tbDEX. tbDEX, unlike most other decentralized exchanges or DEXs will not use a trustless model and will therefore not have its own governance token. It is a message protocol that facilitates trust relationships and does not rely on access control from a federation.
The tbDEX will also include features that make it less decentralized than a DEX. To comply with applicable regulations based on the user’s location, background know-your customer (or KYC) checks must be passed by all participants. Only then can users connect their wallets with the exchange to swap coins.
The white paper also called for the deployment, through either the DEX or a third-party, of blockchain analytic tools to track transactions on the platform. This class of blockchain forensic solutions could be controversial. This system would allow authorities to cross-reference public wallet addresses and payment IDs with KYC information in order to reveal personal identities behind transacting party. Supporters argue that such monitoring is necessary to stop illicit activity.
Crypto enthusiasts could support centralized features of tbDEX, however. The white paper discusses the unique feature of chargebacks. This is something that doesn’t exist for most DEXs. Square’s ability to reverse transactions on the tbDEX would allow investors to avoid irreversible losses during decentralized finance rug pulls. Square welcomes feedback on the whitepaper via a newly created Twitter account.
We created a white paper. https://t.co/ffvYGjQQ7T
TBD (@TBD54566975 November 19, 2021