Block Shifts Focus to Bitcoin Mining, Discontinues Web5

Jack Dorsey's company Block (SQ) is shifting its focus towards enhancing equipment production for bitcoin miners and developing its self-custody crypto wallet. This change comes as the company decides to scale back its efforts on the decentralized internet project known as "Web5" and reduce its investment in the music streaming service Tidal.

The announcement coincides with Donald Trump's recent victory in the U.S. presidential election, which is expected to create a more favorable environment for cryptocurrency in the country. Trump had previously expressed support for the bitcoin mining sector, a welcome development for an industry facing significant profitability challenges due to the recent bitcoin halving, which halved mining rewards.

Strategic Shift in Investments

• Block has stated, "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 restructuring was anticipated, as Block had earlier announced plans to reduce its workforce by up to 10% by the end of 2024, citing that "the growth of our company has far outpaced the growth of our business and revenue."

Financial Performance

• In its third-quarter financial report, Block revealed a revenue of $5.98 billion, falling short of Wall Street analysts' expectations, which averaged $6.24 billion. Following this news, the company's stock price dropped by as much as 10%.

Focus on Bitcoin Mining and Wallet Development

• Although Block does not mine bitcoin directly, it sells mining equipment to other firms and is developing its own mining computer. In April, Block announced the completion of a 3-nanometer mining chip, a project that began in April 2023. Core Scientific, one of the largest bitcoin miners, announced in July that it would utilize Block's mining rigs.

• Additionally, Block is prioritizing its self-custody wallet, Bitkey, which began shipping in March. The company emphasized that Bitkey will offer standard wallet features while integrating with Block's Cash App and the crypto exchange Coinbase for seamless buying and selling of bitcoin.

Background on Web5 and Tidal

• The Web5 initiative was launched by Block in June 2022, aimed at creating a decentralized internet framework distinct from the more widely recognized Web3. This initiative was intended to provide technologies that enhance the web through decentralized identity and personal data management.

• Block acquired Tidal, a music and entertainment platform, in 2021 for nearly $300 million, but is now scaling back its involvement in the music streaming sector.