tbDEX protocol: the bridge between the traditional economy and the bitcoin economy

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 in a decentralized way using digital identities and free market mechanisms, and mutually determine what the costs are and how much information and trust is required for a transaction.

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 fiat money and need it to pay the bills. How do we make the transition 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 whitepaper.

?«£When the Bitcoin whitepaper was published thirteen years ago, it outlined a vision of a world where individuals no longer depend on trusted third parties to facilitate trade between two benevolent parties. It changed everything. The idea, forged with math and game theory , created a universal ledger and a new currency native to the internet, accessible to all and secured by a competitive marketplace. We believe the economy should be inclusive. We need to create on-ramps to this future, where everyone can access and participate in the economy.” -tbDEX announcement


tbDEX is essentially a protocol for trading assets between two or more parties. For example, euros for bitcoin or vice versa, but it could actually be anything: goods, collectibles, stocks, houses and so on. Buyers and sellers can find each other and conclude digital contracts with each other via the tbDEX protocol.

tbDEX is therefore not a trading platform or exchange, but a protocol on the basis of which a network is created. Various providers can use that and compete with each other through 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. A bit like the bitcoin protocol and network is too.

Free market

With tbDEX, users and service providers themselves 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 in accordance with local legislation. Compliance with the rules is therefore not enforced at the protocol level, but arranged through mutual agreements between participating parties.

That should make all kinds of trade possible. For example, when trading euros for bitcoins, a service provider may require extensive Know-Your-Customer information due to legal obligations, but a seller of digital collectibles may need much less information. Conversely, users are given a choice: do I want to disclose this information, or do I prefer to look for another provider?

The protocol will also provide opportunities to provide partial information or have it confirmed by other parties. After all, not everyone needs to know everything about you. A wine seller doesn’t need all the information on your passport and doesn’t need to know exactly how old you are – as long as you’re over 18. A trusted service provider, such as your bank, could simply confirm that without disclosing any additional information. This prevents your data from lying around everywhere.

“We propose a solution that does not rely on a federation managing permissions and access; nor one that dictates the level of trust between counterparties. There is no governance token. Instead, the tbDEX protocol allows participants to coordinate the level of trust – or jointly and voluntarily relying on trusted third parties to confirm the counterparty.” -tbDEX announcement

Digital identity

To achieve this, tbDEX uses Decentralized Identifiers (DID) , which enable digital identities. This can be done via a token on the Bitcoin blockchain, which only the owner has access to via a private key . Microsoft recently launched such a system, called ION.

It would allow users to prove ownership of the digital identification token through a verification procedure with a trusted party, such as a government agency or bank, linking the digital identity to a 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.

Not only people, but also things can have a digital identity. For example, a soda machine, a self-driving taxi or a virtual application can also have a digital identity – and a bitcoin wallet. That could be an important puzzle piece for the future vision of the Internet of Things (IOT) .


For the time being, tbDEX is 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 refined. The technical elaboration will therefore probably take some time.

When we can expect tbDEX is therefore still to be determined; to be determined , or 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 .

Want to read more about digital identities? Microsoft recently launched the ION network, which uses the Bitcoin blockchain for it.

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