US payment service Square publishes details of planned decentralized exchange

PayPal competitor Square has published the whitepaper for the decentralized exchange (DEX) it announced back in August. It is Square’s next foray into the cryptocurrency sector.

Square does not want to rest when it comes to cryptocurrencies. The payment service provider has published the whitepaper for the planned decentralized exchange, which describes how the platform will work. The whitepaper has been posted on the GitHub community for contributions. The protocol “facilitates decentralized networks of exchange between assets by providing a framework for building social trust, using decentralized identity (DID) and verifiable credentials (VCs) to establish identity provenance in the real world,” the whitepaper says.

Easier access to crypto services

The main goal of the proposed protocol is to simplify access to crypto services. A developer at TBD – the name of Square’s new division responsible for building decentralized services – wrote in a blog post: “The DEX protocol aims to create ubiquitous and accessible on-ramps and off-ramps that allow the average individual to benefit from crypto innovations.” The developer added that the protocol itself does not collect or record personally identifiable information. However, the platform will facilitate the exchange of “minimum necessary identity information acceptable to counterparties to meet requirements, whether legal, regulatory or related to other risk considerations”.

Decentralized exchanges vs. traditional crypto exchanges

The release of the white paper comes after Square and Twitter CEO Jack Dorsey tweeted in August that he was planning to build a decentralized Bitcoin exchange. Although Bitcoin and other digital assets are considered decentralized currencies, most of their trading takes place through centralized exchanges such as Binance, Coinbase and others, where a third party is contracted to execute transactions. However, according to a recent report by Chainalysis, decentralized exchanges are growing faster than centralized exchanges.

The decentralized exchange Uniswap is celebrating great success. A few months ago, however, reports emerged about a possible indictment by the US Securities and Exchange Commission (SEC). In general, the US Securities and Exchange Commission wants to regulate the entire sector around DeFi (Decentralized Finance) more strictly, but the SEC still emphasized the advantages of DeFi. Square is also aware that the authorities will be watching the decentralized exchange. Therefore, it is more important to take measures to identify users despite the decentralization.

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