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Jack Dorsey’s financial services company, Block (previously Square), said it would undergo a far-reaching restructuring, shifting its attention to Bitcoin mining and self-custody wallet solutions. At the same time, the company will pull back on investment in the decentralized internet project “Web5” and be less involved in the music streaming service Tidal.
Increased Focus on Bitcoin Mining Amid Industry Challenges
It is against this backdrop that Block is shifting its stance to support Bitcoin Mining. Bitcoin mining had become increasingly unprofitable after the latest “halving” event this year when the remuneration for mining was reduced by half. Block is looking to build a more prominent position in the mining supply chain to cope with this reduction. While Block mines no Bitcoins, the company has developed and sold mining hardware to firms engaged in the business.
Earliest in the year, Block completed the development of a cutting-edge 3-nanometer mining chip. Among its first users was Core Scientific, or CORZ, one of the biggest Bitcoin mining companies. The new development showcases Block’s commitment to introducing extremely advanced technology that could help miners extract the crypto resource more efficiently as competition and volatility rise in profitability.
Shutting Down Web5 and Scaling Back Tidal Investment
Block’s decision to drop the Web5 project and reduce investment in Tidal is, of course, part of its core prioritization toward projects with clearer paths toward profitability. Web5, launched in June 2022, is an ambitious undertaking to add a layer to the Internet focused on secure data exchange, identity verification, and personal data storage. The technology and financial undertakings involved in such an ambitious project led Block to redirect resources toward the most immediate returns-generating initiatives.
Similarly, Block bought Tidal’s music streaming service in 2021 for about $300 million in the hopes of blurring its digital payment solutions with the entertainment industry. In the restructuring this week, though, the company trimmed investment in that segment and is doubling down on products with higher demand within the blockchain and financial services space.
Aside from its mining initiative, Block is doubling down on Bitkey, its self-custody wallet for Bitcoin. The wallet shipped its first lots in March and enables users to store Bitcoin securely without needing recourse to external custodians. Bitkey is expected to work with Block’s Cash App and popular crypto exchange Coinbase, allowing users to buy and sell Bitcoin directly from their wallets. The Company Behind Bitkey There is a growing concern about central exchanges, and thus, the awareness of self-custody solutions increases; therefore, Bitkey is an essential product for the company.
Donald Trump’s Victory and Pro-Crypto Policies
Block’s strategic realignment aligns with a political shift in the United States, where Donald Trump recently won the presidential election. Trump campaigned as a leader who could create a more enabling environment for the crypto industry. This prospect looks appealing to Bitcoin miners who are experiencing increasing operational costs and regulatory pressures. Trump’s pro-crypto orientation has buoyed optimism in the industry to the potential benefit of Block’s endeavours to provide mining hardware.
He would have articulated support for blockchain technology and Bitcoin mining while canvassing, which would raise business for Block’s mining equipment. These, combined with renewed attention by Block, position this company well to reap from the desired policy changes. Strategic restructuring also supports Block’s efforts to streamline operations and reduce costs.
The company also disclosed in March it will shed up to 10% of its workers by the end of 2024. “The growth of our platform has outpaced business revenue growth,” it said. Workforce cuts are an open sign that the company means to direct the available resources toward its most yielding activities, namely mining and self-custody solutions.
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