Among Block’s initiatives to further the Bitcoin ecosystem shared in its 2022 Investor Day is the development of an open-source bitcoin mining ASIC chip.
Block’s overarching purpose is to drive economic empowerment in the world and Bitcoin plays a central role in that mission, its chief executives said during the firm’s first Investor Day since 2017 on Wednesday.
“We believe Bitcoin is going to have a profound impact on financial services, particularly as a tool for economic empowerment and as a global currency for the internet,” Block’s finance lead Amrita Ahuja said during the online event following a statement that the company has “just scratched the surface” for driving further adoption of bitcoin in the U.S. and globally.
Ahuja shared her thoughts after Block chief Jack Dorsey opened the event with an introductory panel explaining the broader goal of the company and how it plans to achieve it.
Dorsey, a long-time Bitcoin proponent, said that Block’s approach is to create “an ecosystem of ecosystems” – with each business sector being dedicated to building an ecosystem on itself that can not only scale but feed back into other ecosystems across the organization.
CASH APP AND SPIRAL – A CASE STUDY
Cash App’s recent integration of the Lightning Network, Bitcoin’s overlay protocol for faster and cheaper payments, is an example of how Block seeks to have different business units producing products that can feed back on each other.
The money transmitting app added support for Lightning payments through the Lightning Development Kit (LDK), software developed by Spiral, an independent subsidiary of Block focused on developing and funding open-source Bitcoin projects.
“Bitcoin is the best version of money,” said Spiral lead Steve Lee.
“With our help, we believe it can become the world's preferred currency.”
Cash App was one of the first business units of the company that was then Square to integrate Bitcoin. The application added bitcoin buying and selling capabilities along with a custody solution for customer funds back in 2018, its lead Brian Grassadonia said in the event.
Since launching the feature, Cash App has had more than 10 million monthly active users buying bitcoin in the app and the spread fees charged by Block on such purchases have become one of the main revenue drivers for Block. Cash App’s gross profit has grown by 44x since 2017, Ahuja showed in the event.
The integration of Bitcoin into Block’s business model has become more widespread since Dorsey left his post as Twitter CEO – and now goes beyond a bitcoin exchange in-app.
THE BITCOIN ECOSYSTEM
A core aspect of Block’s business is what it calls the Bitcoin ecosystem, which falls under the “emerging initiatives” of the company that are not as established as Square or Cash App – which have both found product-market fit and managed to scale their business model, according to Ahuja.
In addition to previously-mentioned Spiral, Block’s Bitcoin ecosystem is composed of an open-source business called TBD, and the company’s Bitcoin wallet and mining initiatives.
Block seeks to create a Bitcoin wallet for the masses, uniting security and ease of use to make self-custody accessible to those new to Bitcoin.
The product aims to encourage regular folks to hold the keys to their bitcoin funds as opposed to resorting to custodians amidst more complicated self-custody setups that are popular today. In the same way that Spiral’s LDK helps developers and businesses more easily integrate Lightning to their applications, Block wants to facilitate self-custody for end users, explained Block’s Bitcoin hardware wallet lead Jesse Dorogusker.
“If you don’t have the key, you don’t have the money,” said Dorogusker.
“We want to build a safe and easy way for people to custody their own bitcoin. Our wallet breaks up the secret key into three pieces: mobile app, hardware device and a self-service recovery tool.”
The company seeks to avoid single points of failure with this approach, which it claims could improve the user experience around bitcoin self-custody – which currently revolves around 12 or 24 seed words.
BITCOIN MINING ASIC
Block’s Bitcoin ventures also extend to the mining industry.
The company said it is focused on creating an open system that would cut back on the concentration around Chinese manufacturers of bitcoin mining ASIC chips. The approach – an open-source setup – has the potential to reduce risks and increase competition, Dorogusker said.
“We want to build our own bitcoin ASIC,” Dorogusker, who also leads the mining initiative, explained.
“Our ASICs will be available for sale and will all be open source.”
The company had previously stated that it would develop an open bitcoin mining system, and a job post by Block was spotted in January seeking a team to produce a “next-generation” bitcoin mining ASIC. However, this was the first time that the company shared that it would be producing an actual bitcoin ASIC which would be open source.
DECENTRALIZED BITCOIN EXCHANGE
In addition to a bitcoin wallet and a bitcoin miner, Block is also tip-toeing into bridging the traditional finance world with the burgeoning system through the cryptic TBD unit.
“TBD’s mission is to bridge the old to the new,” TBD lead Mike Brock said.
“We are building a new open-source company from the ground up focused on open protocols and open standards that all participants in the economy can benefit from. What Red Hat did for Linux, TBD can do for money, payments and identity.”
Brock went on to explain that under the “old” model as he calls it, which relies on centralized entities, 1.1 billion people are unable to prove their identities. TBD wants to bring a secure, decentralized identity standard to enable not only such customers to benefit from a more accessible and fair protocol but also for businesses to lower their costs.
“Under the new financial system, you can create your own digital identity and use all of those services that require identity verification,” Brock said.
“You can also create a digital wallet to hold bitcoin or stablecoins, and you can convert stablecoins into bitcoin directly without leaving the app because it is integrated to tbDEX.”
“If we're going to have an internet-native currency, we need trust, and trust comes from time, openness and transparency which are principles that are embodied in the Bitcoin system,” Brock said when asked by Dorsey why he believed in Bitcoin in the first place.
“We are building a network that provides better experiences for financial access around the world,” Brock said in closing thoughts.
FROM BUSINESSES TO CONSUMERS
Just as Square caters to businesses and Cash App targets consumers, so Block’s Bitcoin ventures seek to provide a round-up of solutions that collectively empower retail and institutional investors in the decentralized and digital economy.
Amidst a sea of early-stage Bitcoin initiatives, most of the details remain unknown as the company takes steps toward building its products by iterating between ideation and feedback-gathering from the community. It remains to be seen whether Dorsey will be able to stir the corporate ship to enhance economic empowerment with open Bitcoin systems beyond the independent work of Spiral.