Last updated on November 17th, 2022 at 02:25 pm
Recently, Jack Dorsey, the CEO of Square (NYSE: SQ) announced a new business that will focus on the growing Decentralized Finance (DeFi) network.
Square has always had an interest in cryptocurrency and it aims to build its DeFi protocols on the Bitcoin Blockchain.
Dorsey, in a tweet, says this new business segment will be called TBD.
While details are still short and sketchy, Square’s DeFi platform will be built on the Bitcoin blockchain — which doesn’t support smart contracts.
The DeFi space is a platform that uses smart contract technology to replace central authorities like banks, brokers, and other intermediaries. The platform lets users borrow funds, trade financial instruments like shares, bonds, and crypto-based assets, and also earn interest on savings.
It is estimated that over $11 billion worth of DeFi protocols is locked up in this space. Being an industry that has significantly grown over time, there are prospects for this technology to replace banks and exchanges.
It is obvious that Dorsey sees potential for Square’s growth with DeFi. In 2020, the company generated $4.5 billion as profit in Bitcoin on its Cash App.
Why Dorsey is ditching the Ethereum blockchain
Unlike the Ethereum blockchain, the Bitcoin blockchain does not support smart contracts. Note that smart contracts are lines of code built on the blockchain that automatically execute a contract when the required conditions are met. The Ethereum blockchain is a great platform for smart contracts which are the building blocks for Decentralized applications.
Square will have to build a second that can rest on the Bitcoin blockchain before it can execute its smart contract. Building the Bitcoin smart contract from scratch, no doubt will be daunting.
But an advantage Square has is that it has always been a Bitcoin community with a goal to drive the adoption of the blockchain.
Though Dorsey hasn’t given more detail about the second layer Square plans to build on the Bitcoin blockchain, he believes Bitcoin will be around for a long time. This is evident in the $220 million invested in the digital asset between 2020 and 2021.
