Jack Dorsey’s Square to Invest More in Bitcoin Mining and Shut Decentralized ‘Web5’ Venture

In the very same week that Donald Trump clinched his victory in the U.S. presidential election, he announced a more favorable climate for cryptocurrency, particularly Bitcoin mining. During his campaign, he had expressed an intention to nurture this industry – undoubtedly good tidings for a sector grappling with significantly reduced profitability post the ‘halving’ earlier this year, which trimmed mining rewards by half. (As a researcher studying this field, I find it intriguing to observe how these developments impact the crypto landscape.)

As an analyst, I’m sharing this perspective: In our recent strategic moves, we’ve decided to reduce our investment in TIDAL and phase out our Web5 business (TBD). This step frees up resources that we will now channel into our promising Bitcoin mining operation, which shows a robust product-market fit and a flourishing demand pipeline. Additionally, we’re pouring investments into Bitkey, our self-custody wallet solution specifically designed for Bitcoin users.

It wasn’t entirely unexpected since Block had previously mentioned in early 2023 that they might reduce their workforce by up to 10% before the end of 2024. They stated that their company’s expansion surpassed the development of their business and income.

On Thursday, Block disclosed its third-quarter financial figures, which included a revenue of $5.98 billion. This figure fell short of the $6.24 billion predicted by analysts on Wall Street, based on FactSet data. As a result, the company’s stock price experienced a drop of up to 10%.

Rather than mine Bitcoin itself, this company specializes in selling mining equipment to firms that carry out such activities. Among their endeavors is the construction of their own high-performance mining computer. In April, the company announced the completion of a 3-nanometer mining chip, which they had been developing since April 2023. Then, in July, one of the largest Bitcoin miners, Core Scientific (CORZ), declared its intention to utilize this company’s mining rigs for their operations.

Square is placing greater emphasis on its digital wallet, Bitkey, which they began distributing in March. They mentioned at the time that Bitkey will offer standard wallet features, but also link to Block’s Cash App payment platform and crypto exchange Coinbase (COIN) for purchasing and selling Bitcoin.

TBD was initiated by Block in June 2022 with the aim of developing Web5 (distinct from the more familiar concept of Web3). Web5 is essentially a collection of technologies that empower the web with features such as decentralized identity, personal data storage, and secure data exchange. In addition, the company acquired Tidal, a popular music and entertainment platform, for approximately $300 million in 2021.