tbDEX Protocol: The Bridge Between the Traditional Economy and the Bitcoin Economy
By Space Coast Daily // March 24, 2022
Square, a sister company of Twitter, recently released a white paper for the tbDEX protocol. That should become a protocol to link the traditional economy to the bitcoin economy. Users and service providers find each other decentralized using digital identities and free-market mechanisms and mutually determine the costs and how much information and trust is needed for a transaction. Visit https://bitcoin-up.live/ for more information.
According to many people, Bitcoin is the future of money, but for now, we live in the present, and that means that you mainly receive and need fiat money to pay the bills. So how could we make the change to the future? Square hopes to provide an answer to this with the tbDEX protocol. A few days ago, they announced the initiative and released a white paper.
tbDEX is essentially a protocol for trading assets between two or more parties. For example, euros for bitcoin or vice versa, but it could be anything: goods, collectables, stocks, houses, and so on. Via the tbDEX protocol, buyers and sellers can find each other and conclude digital contracts with each other.
tbDEX is not a trading platform or exchange but a protocol based on which a network is created. Various providers can use this and compete via the network in a free market, where users can choose which provider suits them best. It must become an open and inclusive protocol, accessible to everyone, like the bitcoin protocol and network.
With tbDEX, users and service providers determine which conditions and transaction costs apply and how much information is required. This offers service providers the opportunity to fully organize their services according to their wishes and local legislation. Therefore, compliance with rules is not enforced at the protocol level but arranged through mutual agreements between the participating parties.
That should make all kinds of trade possible. For example, when trading euros for bitcoins, a service provider may ask for extensive Know-Your-Customer information due to legal obligations. Still, a seller of digital collectables may need much less information. But, conversely, users are given a choice: do I want to disclose this information, or do I prefer to look further for another provider?
The protocol will also provide partial information or have it confirmed by other parties. After all, not everyone needs to know everything about you. For example, a wine seller doesn’t need all the information on your passport, nor does it needs to know exactly how old you are – as long as you are over 18. Instead, a trusted service provider, such as your bank, could confirm this without revealing additional information. Again, this prevents your data from lying around everywhere.
To achieve this, tbDEX uses Decentralized Identifiers (DID), making digital identities possible. This can be done via a token on the Bitcoin blockchain, to which only the owner has access via a private key. Microsoft recently launched such a system, called ION.
It would allow users to demonstrate ownership of the digital identification token through a verification procedure with a trusted party, such as a government agency or bank, linking it to personal identity. Once that is done, the digital identity can then be used to prove your identity to other participants on the tbDEX network – after all, only the owner can sign, and the trusted intermediary can confirm the identity.
Apart from everyday human things, could we have a digital identity? For example, a soft drink machine, a self-driving taxi or a virtual application can also have a digital identity – and a bitcoin wallet. That could be an essential part of the future vision of the Internet of Things (IoT).
tbDEX is, for the time being, no more than a proposal in the form of a white paper. Square published it as an announcement and to start a discussion about it. Based on this, the plans can be fine-tuned. With the help of this, we can link the traditional economy to the bitcoin economy in the future. The technical details will probably have to wait a while.
When we can expect tbDEX is still to be determined, to be determined, aka TBD. That abbreviation is also where the name of the project comes from. CEO Jack Dorsey previously tweeted that the name was ‘TBD’ – so to be determined. As a result of the resulting jokes, the abbreviation has been incorporated into the name: tbDEX.