Bitcoin Forum

When I read the news that Twitter CEO has been planning to build a decentralized bitcoin exchange, I was thinking it would be like those that utilized trustless service. The white paper (https://tbdex.io/whitepaper.pdf) for the decentralized exchange (tbDEX) was released on the 19th of this month, yesterday. The far more decentralized bitcoin exchange known is Bisq while thinking tbDEX will be the second, but when I glanced through the white paper yesterday, it was completely otherwise.

On the fourth page of the white paper is verifiable credentials (https://www.w3.org/TR/vc-data-model/), which means anyone or any organization that will make use of the exchange service will have to go through verification and most likely identity verification. Which means the credential verification will consists of name, address, photo, identity cards like drivers license, nation ID card and international passport, or more.

Users that want to make use of tbDEX service would be able to connect their noncustododial wallet after passing KYC and be able to exchange one coin for the other with bitcoin, but only after KYC credentials have been submitted by users before they can be able to make use of the service. I do not see this other than what was proposed some months back in US, for US citizens that is making use of an exchange (centralized exchanges) to register their noncustododial wallet address.

Although, the advantage is that many people can use this means to exchange bitcoin to another altcoin, or exchange altcoin to bitcoin. And just after exchanging, the coin will be on trader's noncustodial wallet address on blockchain which still means, it is still someones keys and it is still the person's coins, but no privacy. Anyone that wants privacy will never make use of this exchange (tbDEX) for his privacy aspect.

But while making use of this type of KYC DEX exchanges like tbDEX, aside that having privacy is not possible, also very likely and possible that coins can be seized during trading just like on instant exchanges.

This is my first time learning about this exchange but a quick read on the WP's abstract and you'll get the idea that they will require some verification. Did they really advertise/propose privacy and anonymity to US citizens? If so, that was a bold but a dangerous move because it's the US and every legal crypto exchange there is regulated. I guess what they're offering now is still better than Coinbase, Binance US, and Bittrex US.

On a side note, we should probably start normalizing the use of the term non-custodial exchange instead of DEX but I can't think of a good abbreviation. NCEX?

Honestly I do believe it is more or less a PR stunt. But I won't be surprised considering many 'dex' already start doing this KYC stuff albeit not explicitly, such as banning people from US (from the IP address). DYDX and others might be doing it to prevent any legal problems, not to mention if their business is based in the US.

NDEX maybe? Or you can put them in a big umbrella such as Semi-DEX.

If Jack Dorsey is serious about making a DEX project for his future investment, I still think will this be his private business or under his company?  Indeed, there is no clear connection between Twitter and the DEX project, but here it seems that Jack Dorsey as Twitter's CEO and his CFO have significant differences of opinion and views.  The CFO said it was impossible to invest in crypto while the CEO opened a DEX project instead.  Regarding KYC, I as a person who is not bothered by identity then this is not a problem but they will lose the anonymous user segment.  Although this problem is related to government regulations, there is no solution if they want to comply with the law.

Though I've never used Bisq in general, I've been a regular user of LocalBitcoins back in 2018-2020 for various reasons. I was generally in need of fiat-btc bridge only for withdrawing small amounts as I hardly invest nor had withdrawn more as I like to keep my savings in Bitcoin alone rather than fiat. LBC was good enough during the crypto winter days and hardly the transaction volumes were less too. But with the recent upwards movement of Bitcoin and cryptocurrencies in general, majority of the exchanges had started placing mandatory KYC rules on their customers to prevent various illegal activities. I would say it is quite necessary if Bitcoin needs to go in a better way rather than being a currency used for illegal activities.

Conversion of fiat -> bitcoin is a crucial gateway which could pave way for various crimes if they aren't monitored. Similarly, monitoring of cex exchanges by the governments and banks just to know the people involved in bitcoin and issuing them legal notice aren't good too. This has happened in some parts of the world and few governments are trying to extract as much information as possible about crypto users in general for taxation purposes  ;D In such a case, Bisq comes into play where users can transact however they want and can fund illegal activities using bitcoin in general. Dorsey being the founder and CEO of a famous social media would never be able to create an exchange similar to Bisq as it can pose various legal restrictions to the company behind tbDEX (Square).

If anyone who is gonna use Bitcoin for paying goods, will undergo KYC of tbDEX as that has been the common practice of many IMO but OTOH if anyone really concerned about privacy would be using coinmixers or atomic swaps of XMR or would stay with Bisq. Either way, here is a point which needs to be considered :


I would indeed wait for the exchange to launch before any wild speculation guesses about anonymity and privacy!

Then this is not a decentralized exchange at all. These days, we are not going to see a full decentralized exchange that would really pass on the real definition as even before when Binance launch their own DEX, we thought it's decentralized but we were just disappointed.

Jack Dorsey the CEO of Twitter is a very influential man, he won't risk his reputation by running a full DEX without following the government regulatory requirements, so this is just to hype his new project and to mislead people, the word DEX should never exist when there are some restrictions and rules to follow.

tbDEX may be custodial DEX (CDEX) while those like Bisq are noncustodial DEX (NDEX) and are the real DEX. But in my opinion, exchanges like tbDEX that requires for KYC are regulated, there would actually be ways to seize bitcoin or altcoins from users that re making use of the centralized service, so no full control while making use of the service, which makes it not decentralized. It is just a way to make cryptocurrencies more regulated.

Hodlhold have it in their ToS of not allowing US citizens to perform trading on their platform, but people will likely use VPN to bypass it, but yet can still be said to be DEX to some extent. Unlike instant exchanges like ChangeNow and Changelley that are just instant exchanges but not decentralized at all but looking like they are decentralized while forcing some people to pass KYC after their coins have been seized.

But we should never that relaxed thinking KYC can be very useful and also it has downsides too. I still wonder why fiat with stringent KYC policies are still most used for illegal activities. I had a topic regarding how KYC can be deceitful if ignorant of the bad side (https://bitcointalk.org/index.php?topic=5366614.msg58222340#msg58222340), the ignorant people will only pass KYC but yet can be used against them if an exchange database was hacked and users data were stolen by hackers. And, yet, some malacious people are still passing KYC which can be used on some exchanges but too late after they successfully use it to scam some people or used for illegal activities.

Welcome to the world of crypto hyperbole. Here's the rule of thumb. If it's a word that never once appeared in the Bitcoin white paper, then it's probably no more than a buzzword used by hundreds of crypto projects to lend false credibility to and prop up what's otherwise a plain old moneygrab in another costume.

I like the idea of normalising the word custodial and non-custodial exchange, as that's what I've always said these are, really. Only that CEX and DEX have been so successfully promoted.

A decentralized exchange with owners and core members are well known by the community, governments are never truly decentralized.

With regulations and law enforcement from governments, they can be shut down any time. We never know what government will do with crypto exchanges.

I meant a decentralized exchange only really decentralized if it is decentralized technically and their team members are anonymous like satoshi.

Even truly decentralized exchanges like Bisq don't guarantee you against all the third party risks, because you're still dealing with centralized system that are banks. If you try to buy or sell a large amount of coins on DEX, bank will likely block such transaction and start asking questions. Some banks will close your account, because they view everything crypto-related as too risky.

DEX's are good for trading small amounts, but Bitcoin market just can't exist without centralized exchanges, DEXs can't support such large volumes.

The silly thing is, people are primarily interested in the so-called decentralized exchange model to get away from the very idea of KYC. There are dozens of large scale and reasonably trusted exchanges out there to use already. It's almost solving a problem that doesn't really exist, but then he would never be able to make such a model without KYC because it would likely break financial laws and make him liable to all sorts of financial regulatory action. It almost feels like he is trying to do this because he can, rather than a large need by the general public. He has so much to lose if he takes the wrong steps so he is less lightly to make any revolutionary moves in this field.

That exchange was made only to make new/existing projects to migrate on Binance chain, nothing else. I don't know if there are still using the exchange aside from a binance fan.

Calling it DEX because it has one of the same feature like DEX?

If this tbDEX is requiring KYC then why people should use it if the exchange(s) they're currently using (/trusting) has almost the same features anyway?
The unique linking of the non-custodial wallet on tbDEX is somewhat comparable of the trust to CEX.

Well, we can’t really tell why he decided that it was going to be like this. Twitter is a really huge platform, and the founder, Jack Dorsey is a very popular person . So imagine if he’s running a decentralized exchange, lately we have seen a few exchanges that are a bit decentralized having some kind of issues with the government.

And of course I’m referring to binance, and now they are switching to becoming a fully centralized exchange. So if Jack should create a platform that is decentralized, it is quite possible that in future he might happen to start having some kind of issues with the government if something should go wrong on the decentralized exchange. So whatever decision that they have made, I believe that it is for the best.

KYC and DEX in the same sentence don't make sense. It is either DeX or not and in this case since KYC is a must, that is not a dex. Why do they ask for KYC? Because they will terminate your account if they don't like you. If they can terminate any account they want, how is that decentralized?

J. Dorsey may want to call this exchange decentralized but it is not going to make is a decentralized exchange and if you believe him that means you don't understand what decentralized means.

To make this more accurate, governments are never decentralized at all, everything about governments are subjected to control.

Did you mean tbDEX? I don't think so. This is what many government officials have been looking for, a means to be able to link centralized users' accounts with their respective noncustodial wallets. This will make it more easy for them without passing it into law as it was difficult to pass such into law.

Did you mean preferring privacy is stupid when the so called KYC is not effective enough to eliminate criminal activities? If KYC can
not eliminatee fiat based criminal activities (I mean online fiat based criminals activities included) while having privacy have its own advantages, then how is having privacy silly?

It has been a trend. They think just because they call something "decentralized" that is enough. We have lots of cases like this, from centralized altcoins that call themselves decentralized to centralized market places making the same claim and to centralized exchanges!
The biggest lie of all DCEXes is Binance DEX in my opinion since it is fully centralized while claims otherwise!

How is it even a DEX if they are asking for KYC verification to use their so called DEX.
If they are storing KYC information and verifying it by themself then it is acting as a centralized entity for approval to a so called DEX.
Unless they change it to a no KYC platform or introduce some kind of verification method which doesn't require approval from a human we cannot call it a DEX.
This raises a question in my mind. Has there ever been a smart contract which does a KYC approval without the need of a human ?
I think if there is such kind of non-centralized verification method then it might help us achieve far more decentralization.

I still think will this be his private business or under his company?  Indeed, there is no clear connection between Twitter and the DEX project, but here it seems that Jack Dorsey as Twitter's CEO and his CFO have significant differences of opinion and views.

It is an interesting concept, the exchange does not hold any funds and does not do much between the users. But it does kind of verify who the buyer and seller are. So all the wallets are held by the users.

Sounds kind of like Visa / MC. They don't hold the funds the peoples banks do. All Visa/MC do is pass the data along. And takes their cut.

But unlike most other DEX they are holding a bit of data about the users. Which probably makes all the compliance people happy.
We can all think it sucks, but in the end it's a US based business who has to follow some rules. We also don't have to use it if there are other alternatives.

It might not be the best or even good but more options are always better.

-Dave

I read the news title about Launching DEX from Twitter, but didn't read in detail nor read the white paper. If OP is right and this is the way to trade in tbDEX then I will call it semi-decentralized exchange. A true decentralized shouldn't have an account nor should ask for the KYC or any other personal details including email but not limited to. There are more DEX to trade, so nothing helpful from Jack Dorsey at all. This is just a business idea, not to help Bitcoin users. What's the problem is I use centralized since here we have to provide KYC to DEX? They also could block funds and centralized also could block the funds. Why we should take more hassle?  Most likely it will be just useless as OP said.

Because they can't block FUNDS they can only block USERS. The funds never leave your wallet till the trade happens. So If you get blocked you still have your coins.
At lest that is the impression I got. Could be totally off. Either way good or bad for what we want as enthusiasts more competition is always better.

-Dave

The analogy is not bad, although some could argue this, because VISA/MC work with banks = custodians, which may "confuse" some.
Still, VISA/MC can trust the bank, while a DEX has to do all in its powers to fight the malicious wallets/parties in the transaction. (Of course, this doesn't necessarily mean the DEX has to ask for KYC)


I see it pretty much similar:
They can block users/wallets from transacting, but - most probably - cannot seize/lock user funds.
The KYC is necessary because US legislation won't allow them let in people from certain countries, for example. And they can also send all the information to IRS, obviously.

What about escrows, how do they work?
The problem is that this project has "traces of centralization" and that's enough to make it hard-to-trust. There is nothing stopping US government to order them to receive the funds but then block it. Pretty much the same thing they are doing with VISA for example, the trade takes place and buyer makes the payment but VISA takes and blocks the money and seller never keeps its end of the bargain since it never received the money.

You may have a point I didn't think of - I don't know how the exchange would work internally, I didn't use Bitcoin DEX yet and the confirmation times may indeed need an escrow that has the potential to "go rogue" and seize funds in the name of the authorities (or whatever reason actually).
While I hope that you agree that the chances for this are slim, I do agree that the possibility is indeed there.

I Iater had to include the last paragraph because we have not known how the exchange (tbDEX) will be operating, but KYC will be mandatory in a way there will not be any privacy. Let the exchange start operating, then we will know if throughly this is true. If no other addresses are involved as intermediary while making transaction, then it will be true of what you are implying. But, yet, no privacy. There can still be so called data breach which can indirectly lead to scam through phishing.

Last week, I made a transaction with a well-known DEX but after a few days without disconnecting from that DEX I suffered a loss because I lost all my BNB balance.  I suspect that someone has structurally taken the assets that I own.  Indeed, the value is not that big, but we understand how it feels if using DEX even threatens your own wallet.

However, since this bright future has not yet come, commerce taking place on tbDEX will be with the permission, participation, and benefit of Jack Dorsey.

The main reason for their financial exclusion is that they were born in "wrong" countries or they simply don't have the necessary ID to open a bank account. Correspondingly, they also won't be able to create an account on Jack Dorsey's DEX so it will have little to no impact on the problem of financial inclusion.

However, on tbDEX individuals will be completely powerless: they won't be able to engage in payments if they don't prove creditworthiness, they definitely will be censored by the owner of tbDEX if he doesn't like the KYC documents they sent to him.


"An open, decentralized financial system" cannot be built on closed centralized platforms that only give access to the elite from allowed countries. Naturally, there will be nothing "global" in such a payment system, it will be even more exclusive than it is today.


Apparently, it is so because there has always been a lack of decentralized exchanges that would require KYC to transact.

That's right! after we surpassed the $20,000 mark, every exchange is starting to change its definition of a decentralized exchange to something like the centralized exchange where you will no longer stay unanimous with the exchanges. Now they start to oblige the KYC on the exchanges we thought of not gonna ask it if we only make small transactions on their exchanges but guess what? right now it's mandatory for us to do so if we still wanted to use their service just like what happened to Binance.

It's still early stages for this tbDEX exchange but when you have Jack Dorsey investing in this than you know it's going to be something serious.
They posted whitepaper on guthub page and it's open for any suggestions and changes, but I would like for them to keep verifications levels like in centralized exchanges, enabling people to trade even without kyc with lower limits.
Jack also promised that Square will make hardware wallet before dex exchange, so let's wait and see if he is keeping his word.

After read this news, I know there is no clear correlation between the content with this thread. But I just wanna share something which is strange, Jack Dorsey has step down from CEO Twitter and this is the same strategy which is chosen by Jeff Bezos. I guess this happens because of his future plan who wanna start a new bussiness in crypto field. I dont surprise if in the future, he realize his plan.
https://www.coindesk.com/business/2021/11/29/jack-dorsey-expected-to-step-down-as-twitter-ceo-report/

I do think that the CEO did not know the meaning of the terms : Decentralized, Private. I do like the fact that you did read their terms and conditions since most of us usually do not go though that.

- There cannot be any decentralized exchange for sure which is more private than the already existing exchanges and them as well are being advised by the government to start taking the documents of the people using them and now to even go through a simple step, you might have to submit a lot of your documents, otherwise you won't be able to look at the rates as well.


I do not think any long term exchange would be working legally without them having verification now since the government takes these things very seriously and they are quite serious about being able to regulate the crypto market.

Therefore for once and for all we can understand that the regulations would always be there. We might have to submit the documents to make sure we are able to use it. Hopefully they are able to provide competitive rates.

Interesting insight... I wonder if this matter is what drove Jack Dorsey to resign from his CEO position???

For sure this is a matter that requires the minds of many to discuss and then agree...and given the subject of privacy it may well be that some people including Jack didn't sit right by those

Only moments ago, he became the former CEO of twitter. Source here: https://twitter.com/jack/status/1465347002426867720

Possibly. Jack can not build up a decentralized exchange or be part of core team and still want to keep centralized power in Twitter. People will look at his position in Twitter and are doubtful of his statement about new projects he is involving with.

This decision to departure from CEO position is smart and again shows that he has great minds and how he successfully built up a great Twitter. Jack does not restrict himself to Twitter only and he invested in other companies too. He is very ambitious and want to explorer new things technically.

Interesting thinking. I like it, it's a very good point.
Of course, it's risky too, since if Twitter will now be more restrictive against users/freedom of speech/hot topics, o will start getting less successful, it will also be seen as a problem of @jack, even if it's maybe indirectly so.


The new directions may also need closer attention and more of his time until they get on the right track, and that's not only from profit point of view, also their public image has to be good and this may mean good decisions and close look on the teams and their (general line of) work.

This problem has already been encountered elsewhere. Often, supposed problems suggested independence and then everything was different.  You just have to have confidence in this business. Basically, however, it is good, the more people are committed.

Did a quick reading of tbDEX whitepaper. It mentions KYC, but that is not part of the protocol. From my interpretation, the protocol merely defines identifiers, and allows 3rd party VC issuers to verify it, and give the DID credentials. The VC issuer can give it credential by KYC. But can just as well be credential via a reputation system without linking the DID with any real world entities.

PFIs on the other hand can set their own rules of engagement. Some might only want to work with DIDs that have real world KYC credentials. But it seems to me that the protocol does not preclude, and I assume will not have backdoors, to prevent PFIs that does not require KYC credentials. In the latter case, then it'll be basically like Bisq, where the counterparty that accepts fiat does not require KYC, but relies on the Bisq based reputation system instead.