Sq. is constructing a decentralized finance enterprise utilizing bitcoin

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Jack Dorsey creator, co-founder and chairman of Twitter and co-founder and CEO of Square arrives on stage at the Bitcoin 2021 Convention, a cryptocurrency conference held at the Mana Convention Center in Wynwood, Miami on June 4, 2021. Florida.

Joe Raedle | Getty Images

Payment company Square is launching a business that focuses on “decentralized financial services” with Bitcoin.

Square CEO and Bitcoin cop Jack Dorsey said on Twitter late Thursday that the company is “focused on building an open developer platform with the sole goal of making it easier to create non-custodial, license-free and decentralized financial services.”

The new entity will include the Seller, Cash App and the recently acquired Tidal stores.

Decentralized financial applications or DeFi applications are those that do not rely on centralized authorities like banks, but instead use blockchain-based smart contracts to execute transactions. Most are built on the Ethereum blockchain.

DeFi applications enable financial transactions that are more accessible, efficient, and relatively inexpensive. They are also very attractive for those looking for returns, who can achieve returns of between 15 and 30% by participating in the DeFi ecosystem – by “tying up” capital in smart contracts.

“DeFi platforms operate in a similar way to traditional banks and financial services companies and could pose a risk of disruption in the years to come,” said Needham’s John Todaro in a recent report on the DeFi opportunity. “In the current profit-hungry environment, there is an increased demand for DeFi platforms that offer significantly higher returns than conventional financial products.”

But, like cryptocurrency activity in general, DeFi carries many different types of risk including regulation, asset volatility, and the technology itself. In the absence of banks or other third party companies to facilitate transactions, there is no insurance for funds that could potentially be lost. Cryptocurrencies are volatile, which means that assets held as collateral could quickly lose value in a downturn, which could lead to positions being liquidated. And there could be errors in the original smart contract code.

The current estimated value of funds currently tied up in DeFi-related contracts is $ 55.21 billion, according to DeFi Pulse.

Dorsey said the team strives to build in a transparent way that includes an “open roadmap, open development and open source”.

Mike Brock, who leads strategic initiatives within Square’s consumer product Cash App, will lead the new business.

“Technology has always been a story of decentralization,” he said in a follow-up tweet. “From the printing press to the internet to bitcoin – technology has the power to distribute power to the masses and unleash human potential for good, and I believe this is the next step.”

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