You thought it was impossible for a DEX to bridge the worlds of fiat and crypto currencies? Jack Dorsey’s tbDEX protocol might change that.
Yesterday Twitter and Square’s CEO shared the whitepaper of a DEX (decentralized exchange) that ambitions to solve the ultimate DEX riddle: How to allow people exchange fiat to crypto currency without any middleman ?
The existing DEXs – the pillar of the DeFi – use blockchain’s trustless mechanism to arrange the buying and the selling of cryptoassets without intermediaries – but they can only do this with the assets that live on the blockchain. They use stablecoins as fiat’s representatives, but to buy these stablecoins people must most often pass by a CEX, or centralized exchange, requiring all sorts of KYC and operating only in the jurisdictions that allow them (think of 1.7Bn of unbanked: if they can’t provide a suitable KYC, the CEX are as off limits to them as banks are).
The tbDEX protocol tackles the trust issue differently, allowing people to establish their own trust criteria, enforced through disparate verifiers of trust. It aims at establishing social trust, using DID (decentralized Identity) and verifiable credentials, acting essentially as an “extensible messaging protocol with the ability to form distributed trust relationships as a core design facet”.
Heavily inspired by the well-established models of decentralizing trust, such as the public key infrastructure (PKI) that is used for securing the internet today, the tbDEX protocol itself
does not rely on a federation to control permission or access to the network, and it does not have any governance token.
As the whitepaper mentions, “The nature of this trust relationship will never be universal: different jurisdictions are subject to different laws and regulations; and different individuals and institutions will have varying levels of risk tolerance, influenced by price and other incentives”. tbDEX protocol explores the notion of trust, and we are impatient to see how exactly it could be implemented.
Is the 3rd generation of DEX coming ?