Jack Dorsey Thursday placed his mobile payment company Square at the center of one of the most talked-about areas of innovation in finance, announcing that it would be launching a platform for developers to create “decentralized finance” projects built on bitcoin.
In a Twitter thread, Dorsey said Square was planning to create a “new venture” with “the goal of making it easy to create non-custodial, permissionless, and decentralized financial services,” in what was one of the first major projects of its kind in the emerging market.
Decentralized finance, or DeFi, is the name given to the growing number of cryptocurrency projects attempting to build an interlocking financial system denominated in cryptocurrencies that eliminates traditional intermediaries.
Proponents say it will provide a new way to access financial services ranging from lending and trading to insurance and savings products.
Dorsey, who is CEO of Square and Twitter, said Square had “some ideas about the first platform primitives we want to build.”
However, it is unclear what exactly the company has to offer to potential developers or how to monetize it. It should be called TBD until a name is chosen.
“We are going to do this completely in the open air. Open roadmap, open development and open source,” Dorsey said, adding that Mike Brock, an executive who has worked on Square’s push into cryptocurrency, would lead the platform.
Private investors have backed more than 70 DeFi companies this year and while the area remains small, its value has exploded along with the cryptocurrency bull market. Assets in DeFi products have grown from about $2 billion a year ago to more than $55 billion today, according to data from DeFi Pulse.
The clearance has also attracted the attention of regulators, who have expressed concerns about project safety and liability, as well as the potential for fraud. Dan Berkovitz, a commissioner at the U.S. Commodity Futures Trading Commission, has argued that many DeFi apps may be illegal.
Many DeFi projects are built on the ethereal blockchain because it can be used to easily create smart contracts — essentially computer code that fires automatically when certain conditions are met. However, Dorsey said the platform’s “primary focus” would be bitcoin, the oldest and most popular blockchain.
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The bitcoin blockchain has traditionally been considered slower and less efficient than its ethereal counterpart. However, in November it will get its first major upgrade in several years, known as Taproot, which will make it easier to create smart contracts on the protocol.
Founded in 2009, Square started out as a digital payments company, but Dorsey has signaled broad ambitions for the group. Earlier this year, it acquired a majority stake in Tidal, Jay-Z’s struggling streaming platform, for $297 million, making an unexpected entrance into the music industry and putting the rapper on the Square board.
TBD is said to be the latest in a number of bets on cryptocurrencies made by Dorsey, a fierce proponent of bitcoin. Revenues at Square more than doubled in 2020, due in part to a surge in bitcoin-related transactions through the Cash app, the peer-to-peer mobile payment facility.