Financial company Square, which owns one of the most popular Bitcoin buying apps in the US called Cash App, is looking to expand its presence in the cryptocurrency market.
Earlier, its CEO Jack Dorsey, known for his dedication to the digital asset industry, revealed more details about a new initiative called TBD. It will eventually end with the creation of a kind of decentralized exchange.
Recall that decentralized exchanges are significantly different from what happens on conventional centralized platforms like Binance, Kucoin and the like. The main difference is that users do not deposit their funds on the platform, but interact with the trading platform directly from their address. Accordingly, the risks of hacking the exchange – as well as blocking a particular wallet – are reduced to nothing.
Decentralized exchanges are in serious demand. For example, in August 2021, the trading volume for them is already equivalent to $ 71.2 billion. The record of the indicator was fixed in May at the level of 162 billion.
Trading volumes on decentralized exchanges
What will happen to Bitcoin
Recall that most of the most famous decentralized exchanges (DEX) are built on the basis of Ethereum, Binance Smart Chain, Solana, Avalanche and other popular blockchains. These are Uniswap, Sushiswap, PancakeSwap and other similar projects. However, TBD is preparing to introduce something new to cryptocurrency lovers – the DEX, which is focused exclusively on Bitcoin. Here’s what Dorsey tweeted about the matter.
We have decided on the direction of development for TBD: it will be an open platform with a decentralized exchange for Bitcoin.
That is, Jack even made it clear in his statement that he does not intend to get involved with other cryptocurrencies. And that matches his reputation. Recall that Dorsey is an open Bitcoin maximalist, that is, a person who considers BTC to be the main digital asset. Most importantly, such people do not see the point in the existence of other cryptocurrencies and call them the offensive word «shitcoin».
Square and Twitter CEO Jack Dorsey
Dorsey seeks to solve one of the main disadvantages of DEX – the lack of convenient ways to directly exchange national currencies for cryptocurrencies. To trade on most DEXs, you need Ethereum or other altcoins, but users still have to resort to centralized exchanges and exchanges to withdraw profits from trades. With the advent of TBD, this need will disappear, write in Decrypt.
Top 5 decentralized exchanges
In addition to the announcement itself, the Square boss also shared an explanation of how TBD works from Project Development Lead Mike Brock. Here is a quote from him.
We believe that Bitcoin will become the main currency of the Internet. And while there are now many projects that seek to make the Internet decentralized, we are fully focused on creating a global monetary system for everyone. But this initiative still requires us to solve some problems.
Brock noted that the ultimate goal of TBD will be to develop a mechanism that would allow anyone who wants to quickly transfer regular currency to any cryptocurrency wallet. All this without the help of any centralized service and in the most understandable form. Note that now there are quite a few ways to buy crypt for currency, which we talked about earlier. But the TBD initiative will create another bridge between traditional finance and the cryptocurrency market, which will only contribute to an increase in the influx of new investors.
True, the demand for TBD services may not be that great. At least, such a conclusion can be drawn from a recently announced quote by Daniel Strahman, managing partner of the financial company AC Advisors LLC.
We are in the top half of the second inning [baseball period – editor’s note] of cryptocurrencies and right now it looks like Bitcoin will stay on top forever. However, even the Red Sox baseball team was defeated this year, so nothing is 100% certain. It all depends on the reaction of the market and the appetite of investors. There is a lot of talk about the superiority of Ethereum over Bitcoin, but in reality it will take more time for the situation to clear up completely.
In other words, the fact that Bitcoin dominates the market is still debatable. In the future, BTC may be displaced from its position by a more promising project – Ethereum or another currently popular coin. Nevertheless, Bitcoin has a huge reputation, faith and history of the development of the crypto community, so it is unlikely that its ecosystem will be hit hard.
It is important to note that it was the decentralized exchanges that were responsible for the load on the Ethereum network and the incredible growth in commissions. And since the Bitcoin network can only handle 7 transactions per second (instead of 15 in Ethereum), we predict a similar situation if the popular trading platform is launched.
Most likely, the matter will end with an unprecedented increase in commissions above the all-time high. It is now at $ 62 recorded on April 21, 2021. Naturally, in such conditions, it will be easier for users to resort to the services of conventional centralized exchanges.
Bitcoin Network Fee Chart
Funnily enough, Ethereum fans can already use Bitcoin to trade on decentralized exchanges. True, here we will talk about the equivalent of BTC on the Eth network called Wrapped Bitcoin or WBTC. Its value is equal to the corresponding indicator of Bitcoin in its blockchain.
We believe that Jack Dorsey is a hostage to his own views and reputation. It is obvious that there is not much point in a separate decentralized exchange for Bitcoin, given its low bandwidth, since such an initiative can lead to serious network congestion and an increase in fees. In addition, similar platforms have been successfully operating on the Ethereum network for a long time, and it is essentially possible to trade bitcoins there. Perhaps Jack should have focused on creating something more innovative. But due to his maximalism in relation to cryptocurrencies, this is unlikely to happen.
