Jack Dorsey's Block Exits Web5, Focuses on Mining Hardware Development
by Oliver Dale · BlockonomiTLDR
- Block is shifting focus to Bitcoin mining hardware development, discontinuing Web5 and reducing Tidal investment
- Trump’s election win signals potential favorable environment for crypto mining sector
- Block completed development of 3nm mining chip and secured deal with Core Scientific
- Q3 2024 results showed 19% gross profit increase to $2.25 billion
- Block will reinvest 10% of Bitcoin profits into BTC purchases through 2024
Block, Inc., the financial technology company led by Jack Dorsey, announced a major strategic shift Thursday, focusing its resources on Bitcoin mining hardware development while scaling back other ventures.
The announcement comes in the wake of Donald Trump’s presidential election victory, which has created optimistic sentiment in the cryptocurrency sector.
The company, formerly known as Square, revealed its plans in a shareholder letter, detailing the reallocation of resources toward its mining equipment development initiative, Proto.
This strategic move coincides with Block’s decision to sunset its Web5 decentralized internet project and reduce investments in TIDAL, the music streaming platform it acquired in 2021 for approximately $300 million.
Block’s Proto team has completed development of a 3-nanometer mining chip, positioning the company to compete with industry leader Bitmain, whose Antpool mining pool currently controls 21.3% of the Bitcoin network’s hash rate.
The advancement in mining technology has already attracted major industry players, with Core Scientific committing to implement Block’s mining equipment in its operations.
The company’s financial performance shows mixed results amid these changes. Block reported Q3 2024 results with gross profit increasing 19% year-over-year to $2.25 billion. Cash App contributed $1.31 billion to this figure, while Square added $932 million.
Operating income reached $323 million, with a net income of $284 million. Core earnings showed strong growth, increasing 69% compared to the previous year to reach $807 million.
However, overall revenue fell short of analysts’ expectations at $5.98 billion, compared to projected figures of $6.24 billion according to FactSet.
The news of the restructuring and missed revenue targets initially impacted Block’s stock, causing a 10% decline in after-hours trading.
The company had previously announced plans to reduce its workforce by 10% by the end of the year, citing rapid growth that outpaced business expansion.
Block’s commitment to the cryptocurrency sector extends beyond mining hardware. The company implemented a Bitcoin dollar cost average purchase program in April, pledging to invest 10% of its gross profits from Bitcoin-related products into Bitcoin purchases through 2024.
The timing of Block’s strategic pivot aligns with challenges in the Bitcoin mining sector following the recent halving event, which reduced mining rewards to 3.125 BTC.
Trump’s campaign promises to support Bitcoin mining in the United States have created expectations of a more favorable regulatory environment for the industry.
Block’s development of proprietary hardware, particularly its 3-nanometer mining chip, represents a direct challenge to established players in the mining equipment market.
The deal with Core Scientific, one of the largest publicly traded Bitcoin mining firms, marks a notable achievement for Block’s mining initiative.
The company’s decision to wind down its Web5 project ends an ambitious attempt to develop a decentralized internet framework. The project, launched in 2022, aimed to create technologies supporting decentralized identity and personal data storage but failed to gain expected traction.
Similarly, the reduced investment in TIDAL reflects Block’s strategic prioritization of cryptocurrency-related ventures over digital entertainment.
The music streaming platform has undergone staff reductions in recent years and has not met expectations for user growth and revenue.
Block’s revenue from Bitcoin and Cash App operations reached $2.43 billion and $3.93 billion respectively, though both figures fell short of market projections. The company attributed these results partly to challenging market conditions in the digital asset sector.
The agreement with Core Scientific to provide 15 exahashes per second worth of chips represents one of the largest deals in the mining sector’s history.
This development would increase Core Scientific’s energized hash rate by 60%, marking a substantial expansion in mining capacity.
Block’s focus on mining hardware development comes as the industry faces increasing competition and evolving market dynamics. The company’s pivot demonstrates its commitment to establishing a stronger presence in the Bitcoin mining sector, leveraging its technological capabilities and market position.