Jack Dorsey says Square will launch bitcoin DeFi platform

July 16, 2021

Jack Dorsey on Thursday put his mobile payments company Square at the centre of one the most talked-about areas of innovation in finance, announcing that it would launch a platform for developers to create “decentralised finance” projects built on bitcoin.

In a Twitter thread, Dorsey said that Square planned to create a “new business” with the “goal of making it easy to create non-custodial, permissionless, and decentralised financial services”, in what would mark one of the first big projects of its kind in the nascent market.

Decentralised finance, or DeFi, is the name given to the growing number of cryptocurrency projects that are trying to build an interlocking financial system denominated in cryptocurrencies that cuts out traditional middlemen.

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 chief executive of Square and Twitter, said that Square had “some ideas around the initial platform primitives we want to build”.

However, it is unclear what exactly the business would offer to prospective developers or how it might be monetised. It is to be called TBD, until a name is chosen.

“We’re going to do this completely in the open. Open road map, open development, and open source,” Dorsey said, adding that Mike Brock, an executive who has worked on Square’s push into cryptocurrency, would head up the platform. 

Private investors have backed more than 70 DeFi companies this year and although the area remains small, its value has ballooned in tandem with the cryptocurrency bull market. The assets in DeFi products have grown from about $2bn a year ago to more than $55bn today, according to data from DeFi Pulse.

The freewheeling space has also captured the attention of regulators, who have raised concerns about the security and accountability of projects, as well as the potential for fraud. Dan Berkovitz, commissioner at the US Commodity Futures Trading Commission, has asserted that many DeFi apps could be illegal. 

Many DeFi projects are built on the ethereum blockchain because it can be used to easily create smart contracts — essentially computer code that is automatically triggered when certain conditions are met. However, Dorsey said that the “primary focus” of the platform would be bitcoin, the oldest and most popular blockchain.

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The bitcoin blockchain has historically been considered slower and less efficient than its ethereum counterpart. However, in November it will receive its first big upgrade in several years, known as Taproot, which will make it easier for smart contracts to be created on the protocol. 

Founded in 2009, Square started life as a digital payments company but Dorsey has signalled wide-ranging ambitions for the group. Earlier this year, it acquired a majority stake in Tidal, the struggling streaming platform owned by Jay-Z, for $297m, making an unexpected entrance into the music industry and putting the rapper on the Square board.

TBD would be the latest in a number of bets on cryptocurrencies made by Dorsey, a fierce bitcoin advocate. Revenues at Square more than doubled in 2020 in part due to a rise in bitcoin-related transactions made on its Cash App, its peer-to-peer mobile payment facility.