Jack Dorsey’s payment firm Square is going to helm another Bitcoin initiative, just days after the company announced that it’s building a hardware wallet for the cryptocurrency. On July 15, Dorsey announced on Twitter that Square is building a new division that will develop decentralized finance(DeFi) services on Bitcoin.
The tech entrepreneur said that like Square’s hardware wallet, the development of the proposed division will be completely transparent. To ensure this, the project will have a public roadmap with open-source code and development.
Square’s new business will be headed by engineer Mike Brock, who led a developer team that helped integrate Bitcoin-related features into the Cash App in 2018. Brock is a seasoned developer who has extensive experience working in the open-source segment due to his previous engagement with software enterprise Red Hat.
Square’s initiative has the potential to turn Bitcoin-based DeFi services into a huge success with widespread adoption. It can also add to Bitcoin’s competitive edge against Ethereum, which is currently leading the DeFi sector.
As of now, Bitcoin has limited support for smart contracts, a shortcoming that makes it difficult for the network to rival Ethereum’s DeFi ecosystem. DeFi services on Bitcoin depend on bridges and side-chains to make smart contracts work.
Predictably, Ethereum controls the lion’s share of the top 100 DeFi platforms in terms of total locked value(TVL), with AAVE at the top spot given its $9.09 billion TVL.
Data from Dune Analytics indicates that DeFi has seen an explosion in its user base this year, which has risen from 1.1 million in January to 3 million in July.
Besides Square’s new division, Bitcoin-based DeFi will also receive a much-needed boost from the Taproot upgrade which will be activated in November 2021. The activation will address privacy issues and introduce smart contracts to Bitcoin.
Taproot is the first upgrade to the network in four years and has received approval from the majority of the stakeholders. Once it comes into effect, Bitcoin will run smart contracts cheaply and more efficiently that will allow the currency to integrate itself with mainstream finance.