Square CEO Jack Dorsey said that the platform’s latest project for Bitcoin would be to develop a decentralized exchange (DEX).
Jack Dorsey posted Friday via Twitter that TBD would focus on building a decentralized exchange exclusively for Bitcoin. The abbreviations TBD keep reference to the name of the project in progress.
According to the project leader, Mike Brock of Square, TBD aims to “facilitate the financing of an unguarded portfolio anywhere in the world through a platform to build pathways to and from Bitcoin.” Likewise, Square expressed its wish that the decentralized exchange be native to Bitcoin in its entirety. As well as open source and without special access permissions.
“Our idea for decentralized Exchange is something that the end user should not even notice, any portfolio or service will be able to integrate with it.” Mike Brock commented, adding that the DEX will comply with anti-money laundering laws.
Centralized or decentralized exchanges. Which one to choose?
For most users of the crypto world, the Centralized Exchange (CEX) is the most important tool for making purchases and sales of cryptocurrencies. But as the globalization of cryptocurrencies advances, alternatives such as Decentralized Exchanges (DEX) are created.
CEX centralized exchanges are backed by a company, the user must create an account, provide personal data and invest funds to start operating. The value of digital assets is defined when two parties agree on the sale and purchase value of the digital asset. Once the exchange is closed, the price agreed between the two will be the one reflected for the value of the digital asset. This type of Exchange is reached by AML, KYC regulations.
On the contrary, Decentralized Exchanges (DEX) are open to the public and are not covered or regulated by KYC or AML. In the decentralized Exchange (DEX) the user does not need to create an account or deposit funds, he can operate directly from his Wallet.
In DEX, the price of cryptocurrencies is defined by a mathematical algorithm called “Automated Market Maker” or AMM. The algorithm defines the price based on the amount of assets that consumer wants to acquire and not based on the amount of assets that other consumers want to acquire.
Finally, both types of exchange structures have their advantages and disadvantages. DEXs are based on Satoshi Nakamoto’s basic ideas of Bitcoin development. For many investors the performance, affordability and market volume of the centralized structure clearly advocates its use. However, many CEXs have recognized the advantages of DEXs and are working on their own variants or by integrating some DEX features into their platforms. Therefore, it is possible that in the future we will observe a mixture of both interfaces.