Jack Dorsey’s payment company Block plans to shift its focus towards developing equipment for bitcoin (BTC) miners and its self-custody cryptocurrency wallet. This strategic change is partly funded by scaling back efforts to create a new decentralized internet called “Web5” and reducing investment in the music streaming platform Tidal.
This announcement comes in the same week that Donald Trump secured victory in the U.S. presidential election, pledging to create a more favorable environment for cryptocurrency within the largest global economy. Bitcoin mining was one of the industries he promised to support during his campaign — a positive development for a sector grappling with significantly reduced profitability following the recent halving event this year, which halved mining rewards.
“We are scaling back our investment in TIDAL and winding down TBD [the business developing Web5]. This gives us room to invest in our bitcoin mining initiative, which has strong product market fit and a healthy pipeline of demand, and Bitkey, our self-custody wallet for bitcoin,” the company stated in its third-quarter letter to shareholders.
The recent restructuring comes as no shock since Block indicated earlier this year its intention to reduce its workforce by as much as 10% by the end of 2024. The company clarified that “the growth of our company has far outpaced the growth of our business and revenue.”
In conjunction with the shareholder letter, Block unveiled its financial performance for the third quarter on Thursday. Its revenue reached $5.98 billion, falling short of the average Wall Street analyst estimate of $6.24 billion, according to data from FactSet. Following this announcement, the company’s stock price dropped by as much as 10%.
Although Block does not engage in bitcoin mining, it sells equipment to companies that do. One of its projects includes creating its own mining computer. Back in April, the payments firm announced that it had finished developing a 3-nanometer mining chip, a project it began in April 2023. In July, Core Scientific (CORZ), one of the major players in bitcoin mining, confirmed it would utilize Block’s mining rigs for its business operations.
Square is also placing greater emphasis on its Bitkey self-custody wallet, which the firm began shipping in March. At that time, the company announced that Bitkey would not only offer standard wallet features but also integrate with Block’s payment platform Cash App and the crypto exchange Coinbase (COIN), enabling users to buy and sell BTC.
TBD was initiated by Block in June 2022 to develop Web5 (distinct from the more recognized concept of Web3) as “a set of technologies that augment the Web through decentralized identity, personal data storage, and verifiable data exchange functionalities.” In addition, the company acquired Tidal, a music and entertainment service, in 2021 for almost $300 million.
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