The co-founder and CEO of Square, Jack Dorsey, has announced that they are developing a platform for decentralized finance (DeFi) on Bitcoin.
Square is creating a new business (joining Seller, Cash App, & Tidal) focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services. Our primary focus is #Bitcoin. Its name is TBD.
— jack (@jack) July 15, 2021
Dorsey is also the co-founder and CEO of Twitter, so he has a lot of communication power, hence this initiative should be followed with particular attention.
He is known to be a Bitcoin supporter, perhaps even a maximalist, and thanks to the recent success of the Lightning Network it is possible to imagine the development of new platforms based on the Bitcoin blockchain, but which do not require transactions to be registered on it, and are therefore very fast and cheap.
Transactions on LN are almost instantaneous, with negligible commission costs.
Dorsey announced that Square is creating a new business, together with Seller, Cash App and Tidal. It is a business focused on creating an open development platform to simplify the creation of decentralized, i.e. non-custodial and permissionless, financial services.
He added:
“Our primary focus is Bitcoin”.
Square’s new bitcoin business
Therefore, it might not be a platform exclusively focused on Bitcoin, but it will certainly be based on Bitcoin. On the other hand, second layers such as the Lightning Network make it possible to develop platforms based on the Bitcoin blockchain, without the need to use it to record transactions.
Previously, Dorsey had revealed that Square is also working on the development of a hardware wallet, so it is possible that they intend to develop a complete solution for both those who want to create DeFi protocols and end-users.
DeFi started to become popular about a year ago, with a real boom at the beginning of this year thanks to the new protocols on Binance Smart Chain.
The advantage of using LN is that it offers fast and cheap transactions, unlike Ethereum, although second-layer solutions capable of guaranteeing similar performance are also becoming popular on Ethereum. The Binance Smart Chain, on the other hand, already offers similar performance due to the fact that it is based on proof-of-stake instead of proof-of-work.
However, Bitcoin offers an additional advantage: legal recognition.
From September, for instance, it will be legal tender in El Salvador, and may be legal tender in other countries in the future.
Imagining decentralized finance services based on a legal tender like Bitcoin, in some states, is something unique, since to date no DeFi protocol is based on legal tender currencies: at most they use stablecoins, which despite having the same value as fiat currencies are not legal tender.
In other words, this could be a quantum leap for decentralized finance, because thanks to Bitcoin, in theory even regulated financial institutions will be able to enter this sector, provided they are regulated by the rules of states in which Bitcoin is recognized as legal tender.
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