Square unveils white paper for decentralized protocol that lets you trade bitcoin, fiat and more

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Square’s secret TBD project, which earlier this year was touted by founder Jack Dorsey as “a decentralized exchange for Bitcoin,” has launched a new white paper.

The 18-page document outlines the design principles and ambitions of the project, which it describes as “a protocol for discovering liquidity and trading assets (such as bitcoin, fiat currency, or real-world goods) when l he existence of social trust is an intractable element of transaction risk management.

Dubbed the tbDEX protocol, the proposed protocol “facilitates decentralized exchange networks between assets by providing a framework for establishing social trust, using Decentralized Identity (DID) and Verifiable Credentials (VC) to establish the provenance of identity in the real world “.

Additionally, the protocol aims to create “ubiquitous entry and exit ramps directly between fiat and crypto financial systems without the need for centralized intermediaries and trusted brokers.” Notably, the document suggests that stablecoins could serve as replacements for fiat money.

“This makes crypto assets and decentralized financial services more accessible to everyone,” write the authors of the article.

Source: white paper on the protocol to be determined, Square

At the heart of the proposed system are efforts to create the ideal balance between trust and digital identity, the authors noting:

“The tbDEX protocol approaches trust differently from other decentralized exchange protocols in that it does not use a trustless model, such as atomic exchanges. At first glance, this is not optimal, especially when you consider the end goal of providing access to an asset like bitcoin. However, the reality is that no interface with the fiat money system can be without trust; endpoints on the fiduciary rails will always be subject to regulation, and there will be the potential for counterparty misbehavior. This means that any exchange of value must be fundamentally based on other means of governing trust, including reputation. “

Going forward, the TBD team hopes that the publication of Friday’s white paper will prompt feedback from the wider community of those interested in the project.

“This first draft of the white paper is intended to establish a conceptual understanding of the high-level design of the proposed tbDEX protocol. It should not be taken as complete or final. It represents a design proposed for public comment,” wrote authors. “Future revisions of the white paper will address incomplete elements and currently unanticipated issues or challenges.”

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