Block Inc. shifts focus to Bitcoin mining amid plans to sunset Web5-focused TBD

Jack Dorsey’s payments firm Block Inc. (formerly Square) is making a major pivot towards the cryptocurrency mining sector, signaling a strategic shift away from some of its other initiatives, including its music streaming service TIDAL and its decentralized web project TBD. In a letter to shareholders on November 7, Block announced plans to reallocate resources away from these areas to focus on expanding its operations in Bitcoin mining, a sector that’s recently seen a revival, particularly in the U.S.

Key Points

• TIDAL Struggles: Block acquired TIDAL in 2021 for around $300 million, but the platform has faced significant competition and hasn’t gained substantial traction. Reports indicate TIDAL has experienced layoffs and financial losses, including a $132.3 million impairment charge. Block’s decision to dial down resources for TIDAL reflects the ongoing challenges in the streaming market.
• Web5 and TBD: Block’s subsidiary TBD had ambitious plans to build a decentralized web, dubbed Web5, starting in 2022. However, Block has now decided to sunset TBD’s operations, though the reasons behind this shift remain unclear. The focus will instead be on Bitcoin mining.
• Bitcoin Mining Focus: Block is positioning itself to capitalize on renewed interest in U.S.-based Bitcoin mining. While Block does not mine Bitcoin directly, it has been developing mining equipment through its Proto initiative. Earlier this year, it introduced a 3-nanometer mining chip that prominent Bitcoin miner Core Scientific has integrated into its operations. This move reflects Block’s strategy to support and develop the infrastructure needed for Bitcoin mining rather than directly engage in the mining process itself.
• Bitkey Hardware Wallet: Block also announced a renewed focus on its self-custodial hardware wallet Bitkey, launched in March 2024. The wallet allows users to store Bitcoin while also enabling purchases through traditional channels via Block’s partnerships with exchanges and payment providers.
• Revenue Miss: Block reported weaker-than-expected earnings for Q3 2024, posting $5.98 billion in revenue, falling short of Wall Street’s estimate of $6.24 billion. This was a contributing factor to the company’s decision to shift focus.
• U.S. Bitcoin Mining Expansion: The timing of Block’s announcement coincides with a broader trend of growth in the U.S. Bitcoin mining industry. For example, CleanSpark acquired several mining facilities in September to ramp up its hashrate, while Marathon Digital Holdings raised $292.5 million in August to fund its expansion. The U.S. mining sector is benefiting from favorable policies and the backing of prominent figures, such as Donald Trump, who expressed a desire for more Bitcoin mining to occur in the U.S. in June 2024.

Block’s pivot towards Bitcoin mining reflects its belief in the sector’s potential for growth and profitability, especially as the U.S. is positioning itself to play a more prominent role in the global mining landscape.

Strategic Context

Block’s shift comes at a time when Bitcoin mining has faced challenges, including the impact of the 2024 Bitcoin halving that reduced mining rewards by 50%. However, the recent uptick in mining-related activities, both in terms of investments and hash rate growth, suggests that Block sees a window of opportunity to strengthen its position in the mining and crypto hardware space, as well as to integrate more deeply into the growing self-custody and Bitcoin payments ecosystems.

This move also comes amid a broader trend of tech companies, including Marathon Digital and CleanSpark, expanding their operations to meet the growing demand for mining power as the U.S. looks to consolidate its position as a global Bitcoin mining hub. Block appears to be positioning itself as a key player in this new wave of mining and hardware innovation, aligning with the rising interest in cryptocurrency and blockchain-based technologies.