Haven't done a deep dive yet, mostly skimmed through the paper.
Context
Before starting, you have to understand that the philosophy of Square isn't to "win" but to "change" some of the things that were historically inequitable about the US and world financial system. In short, structural racism has a compounding effect on societies and decentralizing it is usually the way history goes. So keep this in mind when thinking about Square:
- Square cares about equity and offering services to people that are historically not welcomed. Tidal effects musicians and artists, Seller lets people find good loans and start businesses, Cash App grants you access to the stock market, discounts, and bitcoin. TBDex will allow other applications like Apple or financial institutions to start building consumer-grade bitcoin applications
- Square believes in trust first, verify later models. The inverse of the current model, verify first & trust later.
- Protocols over platforms. Square understands the value of interopability. What would the internet be like today if someone using GMAIL couldn't email someone using Outlook or Yahoo mail? That's essentially the state of the crypto market. Imagine having to write an email, convert it into a yahoo mail, and then be able to send it to a yahoo owner. It's nonsense from a consumer perspective. Now an interesting view here is the concept of social media, where a Reddit post belongs to Reddit, while a Twitter post belongs to Twitter. So keep this in mind when subjects of "decentralized social media" become active in the future with engagement-based payment models:
https://knightcolumbia.org/content/protocols-not-platforms-a-technological-approach-to-free-speech
Privacy
Privacy is usually a really confusing subject for consumers because it's usually an institutional problem. Saying "I have nothing to hide" is pretty natural when you can't see the inner workings of what happens to have your mail delivered to you privately. But the truth is, once you give a human privacy, it becomes really difficult to want them to give it away. Privacy is also important digitally because of the algorithms that govern the internet. With it, it's possible to prevent algorithms from creating the conditions to start a riot at a capitol like the Trump event for example.
That's a digression but it's important. The way the financial technology system works right now is by using a system that charges you for using your own money because the settlement layer of the financial architecture is built off of a credit model. During the time your money is credited, the system verifies that you're not some blacklisted criminal by verifying your name, address, SSN, and other important identifying information. Think about that, you belong to a system where you have to pay to use your money to prove that you're not a fucking criminal.
So given that the system is not very private and depends on sensitive information, the topic of privacy, risk, and cost becomes important. What if your system has 500 million social security numbers? Could you imagine the regulatory risk behind that bank vault of data?
The Protocol
The tbDEX protocol, at least from what I've gathered so far, is that it's an institutional protocol and its very similar to the process that went behind constructing and standardizing it between operating systems like macOS and windows.
What it seeks to essentially do is use Taproot which a recent bitcoin upgrade that improves speed and meters privacy vs. risk. vs. cost. What this allows is that institutions can start to build new risk and consumer models that allow customers to instantly settle and their current credit (fiat) to bitcoin and vice versa. As mentioned before, once privacy is authentically felt, it becomes difficult to undo it. Your digital cash is authentically digital are purchasing a product results in a real-time settlement. The vault of data mentioned earlier is abstracted into the protocols that govern bitcoin
Predictions
What I'm predicting right now is that it will likely be services like Apple that deal with consumer blockchain applications with Apple Pay since they are usually the leader in consumer privacy and Square tends to build around iOS products from a hardware perspective. Other institutions like Visa, Coinbase, Robinhood, Chase, Bank of america, or any Neobank (PFI) will likely use this protocol to use communicate between wallets and services.
Personally, as an investor, I will be happy to see FICO credit scoring and identity based models change to allow consumers with low credit to access more reasonable credit services outside of a week secured card. Some of these are already under process as offered by services like:
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