Jack Dorsey’s payment firm Block (SQ) plans a renewed focus on building equipment for bitcoin (BTC) miners and its self-custody crypto wallet, funded partly by giving up on creating a new decentralized internet dubbed “Web5” and investing less in music streaming app Tidal.
The decision was revealed the same week that Donald Trump won the U.S. presidential election, promising a far-friendlier environment in the world’s largest economy for crypto. Bitcoin mining was an industry he pledged while campaigning to foster — likely welcomed news to a business suffering from dramatically lower profitability following the so-called halving earlier this year, which cut mining rewards by 50%.
“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 said in its third-quarter shareholders letter.
The restructuring isn’t a complete surprise as Block said earlier this year that it plans to cut headcount by as much as 10% by the end of 2024, explaining that “the growth of our company has far outpaced the growth of our business and revenue.”
Alongside the shareholder letter, Block reported third-quarter financial results on Thursday. Its revenue of $5.98 billion, missed the average estimate from Wall Street analysts of $6.24 billion, according to FactSet data. The company’s stock price sank as much as 10% in the aftermath.
Block doesn’t mine bitcoin, but sells equipment to firms that do. Its initiatives include building its own mining computer. The payments firm said in April that it completed the development of a 3-nanometer mining chip, which it had been working on since April 2023. In July, one of the largest bitcoin miners, Core Scientific (CORZ), said it will use Block’s mining rigs for its operations.
Square is also focusing more on its self-custody wallet, Bitkey, which the company started shipping in March. At the time, the company said that Bitkey will not only provide standard wallet functionality, but also connect to Block’s payments platform Cash App and crypto exchange Coinbase (COIN) to allow buying and selling BTC.
TBD was started by Block in June 2022 to create Web5 (not to be confused with the better-known notion of Web3) as “a group of technologies that enhance the Web with decentralized identity, personal data storage and verifiable data exchange capabilities.” Meanwhile, the company bought Tidal, a music and entertainment platform, in 2021 for nearly $300 million.
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