Square is working on new Decentralized Finance(DeFi) based App
Square is looking to create a new business dedicated to DeFi aka "decentralized finance" applications.
The projects will rely on smart contracts that are executed without the need for third parties like banks or other financial entities in order to conduct transactions of any kind, including lending and borrowing money from peers instead of traditional lenders such as credit card companies.
Square CEO Jack Dorsey is focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services.
One way that Square will be achieving this end would be through its newly created development unit which includes Seller (a peer-to-peer payment app) as well as Cash App - which recently acquired Tidal.
DeFi's Explained
To combat the high fees charged by centralized entities, a new wave of decentralized finance apps (or DeFi applications) are building off blockchain-based smart contracts. Most are being built on Ethereum’s platform in order to provide cheaper and more efficient transactions for its users.
DeFi applications have been a boon for the world's unbanked population and yield seekers alike. They make it easy to send or receive money from any person in the world, no matter their status as an individual with access to banks or not. The flexibility of DeFi has allowed those who can't obtain loans from traditional financial institutions like banks take part in fair lending practices that are both efficient and relatively low cost (between 15% - 30%).
John Todaro has a new report out about DeFi, or decentralized finance. He predicts that these platforms could pose the next disruptive force in banking. In fact, he believes they're already having an effect by offering higher yields than traditional financial products and satisfying demand from yield-starved investors today.
With that said, cryptocurrencies values can change rapidly depending on what happens with trading so an asset put up as collateral might quickly decline in value if things go south meaning positions may be liquidated to cover losses. Errors found by programmers during audits for smart contracts have been known to lead to users losing their money without recourse because they weren't expecting errors were possible at all when writing them initially
In a recent interview, Dorsey discussed the team's commitment to building an open-source platform that is transparent and inclusive of all.
According to DeFi Pulse, there are currently estimated funds locked into around $55 billion worth of deals made via decentralized financings (DeFi). In his latest Twitter thread discussing this data point with those interested in how it may impact global wealth distribution over time, Jack Dorsey said he wants everyone involved in building these systems for creating new economic opportunities on blockchains.
The team has committed itself towards being as transparent as possible through "an open roadmap" and participating openly in development while also making sure code remains free for anyone who wishes to use or build off from its work.
Mike Brock, who leads strategic initiatives for Square’s cash app and will now be in charge of the new business. He tweeted that technology has been a story about decentralization from printing presses to internet browsers to bitcoin- with the power of distributing information or resources more widely than ever before. This is what he said “the next step."
The comments from Jack Doresy proves that the DeFi will be game changer. What do you think about this? Let us know your thoughts in comments section below.