July 16, 1.45AM UTC: Updated with additional details
Square CEO Jack Dorsey has revealed that the firm is building a new division that will focus on building decentralized finance services that utilize Bitcoin.
Dorsey made the announcement via Twitter earlier today and revealed that Square’s new division will be building an “open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services. Our primary focus is Bitcoin.”
Dorsey named engineer Mike Brock as the head of the division, who previously led a development team that was working on integrating Bitcoin features for the Cash App back in 2018. Brock has experience with open source projects through his work with enterprise open source solutions provider, Red Hat Inc.
A firm of Square’s stature working to make easy-to-use DeFi services on Bitcoin could potentially ramp up adoption and provide greater competition to Ethereum-based DeFi.
The Bitcoin network currently does not have smart contract capability which makes it difficult to compete with Ethereum-based DeFi and its interoperable ‘Money Legos’. Decentralized finance on Bitcoin relies on additional infrastructure such as bridges and sidechains to initiate smart contracts.
According to data from Defi Llama, Ethereum dominates top 100 DeFi platforms in terms of locked value (TVL), with AAVE topping the list with $9.09 billion TVL. Binance also provides competition with platforms such as the eighth ranked Pancake Swap which has $3.76 billion TVL.
In comparison, the highest ranked Bitcoin-based project on DeFi LLama is the Lightning Network, which ranks at 103 with TVL of $58.7 million. However TVL may not be the best way to measure the utility of the Lightning Network.
DeFi on Ethereum has exploded in 2021 and according to Data from Dune Analytics, the total DeFi user base (as measured in terms of unique addresses) has grown from 1.1 million at the start of January to around 3 million in July.
Along with Square’s latest project, another factor that could aid the adoption of BTC-based DeFi is the Taproot upgrade slated for mid-November.
Cointelegraph reported on June 26 that the upgrade will reportedly open the door to BTC smart contracts.
Square’s new division adds to its business lines that include Cash App, Square Seller, and the Tidal streaming service — which Dorsey also recently teased that would have potential blockchain tech integrations such as smart contacts and NFTs.
The Bitcoin DeFi announcement follows up from earlier this month when Dorsey took to Twitter to announce that Square will be launching its own Bitcoin hardware wallet to provide assisted custody to make the process easier for mainstream users.