Block’s overall goal is to drive economic empowerment around the world, and Bitcoin plays a central role in that mission, their CEO said during the firm’s first Investor Day since 2017 on Wednesday.
“We believe Bitcoin will have a profound impact on financial services, particularly as a tool for economic empowerment and a global currency for the internet,” said Amrita Ahuja, Block’s finance lead, after the company said in a statement during the online event. I just scratched the surface to drive greater adoption of bitcoin in the US and globally.
Ahuja shared her thoughts after Block chief Jack Dorsey opened the event with a promotional panel explaining the company’s broader goal and how it plans to achieve it.
Dorsey, a longtime Bitcoin advocate, said that Block’s approach is to create “an ecosystem of ecosystems” – every business sector is committed to creating an ecosystem that is not only scalable but feeds back into other ecosystems in the enterprise.
Cash App and Spiral – A Case Study
The recent integration of Cash App into Bitcoin’s Lightning Network, the overlay protocol for faster and cheaper payments, is an example of how Block is trying to have different business units producing products that can feed back from each other.
The money transfer application has added support for Lightning payments through the Lightning Development Kit (LDK), software developed by Spiral, an independent subsidiary of Block focused on developing and financing open-source Bitcoin projects.
“Bitcoin is the best version of money,” said Spiral leader Steve Lee. “We believe that with our help, it can become the world’s preferred currency.”
Cash App was one of the first business units of the company, which later became Square, which integrated Bitcoin. The app’s leader, Brian Grassadonia, said at the event that in 2018 it added capabilities to buy and sell bitcoin along with a custody solution for client funds.
Since the launch of this feature, Cash App has had more than 10 million monthly active users purchasing bitcoin on the app, and the margin fees charged by Block on such purchases have become one of the main revenue drivers for Block. Ahuja showed at the event that Cash App’s gross profit has increased 44 times since 2017.
The integration of bitcoin into Block’s business model has become more common since Dorsey stepped down as Twitter CEO and now goes beyond an in-app bitcoin exchange.
A key aspect of Block’s business is what the company calls the Bitcoin ecosystem, which isn’t as established as Square or Cash App – encompassing “emerging startups” that both find the product market viable and manage to scale their business. Model according to Ahuja.
In addition to the previously mentioned Spiral, Block’s Bitcoin ecosystem consists of an open-source business called TBD and the company’s Bitcoin wallet and mining ventures.
Block aims to create a Bitcoin wallet for the masses, combining security and ease of use, making self-storage accessible to Bitcoin beginners.
The product aims to encourage ordinary people to hold the keys to their bitcoin funds, rather than resorting to custodians amid the more complex self-custodial setups popular today. Block’s Bitcoin hardware wallet lead, Jesse Dorogusker, just as Spiral’s LDK helps developers and businesses more easily integrate Lightning into their applications, Block wants to make self-protection easier for end users.
“If you don’t have the key, you don’t have the money,” said Dorogusker. “We want to create a safe and easy way for people to store their bitcoins. Our wallet splits the secret key into three parts: mobile app, hardware device, and self-service recovery tool.”
The company aims to avoid single points of failure with this approach, which it claims can improve the user experience of bitcoin self-storage, 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 will reduce the concentration around Chinese bitcoin mining ASIC chips manufacturers. 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,” said Dorogusker, who also leads the mining initiative. “Our ASICs will be available and all open source.”
The company had previously stated that it would develop an open bitcoin mining system, and a job posting was seen by Block in January seeking a team to produce a “next generation” bitcoin mining ASIC. However, this is the first time the company has shared that it will produce a true bitcoin ASIC that will be open source.
Decentralized Bitcoin Exchange
In addition to a bitcoin wallet and a bitcoin miner, Block is also on his toes to connect the traditional financial world with the evolving system through the encrypted TBD unit.
“TBD’s mission is to bridge the old with the new,” said TBD leader Mike Brock. “We are building a new open source company from the ground up focused on open protocols and open standards that can benefit all participants in the economy. What Red Hat did for Linux, TBD can do for money, payments and identity.”
Brock went on to explain that 1.1 billion people were unable to prove their identities in what he called the “legacy” model, which relies on centralized assets. TBD wants to introduce a secure, decentralized identity standard, not only to enable such customers to enjoy a more accessible and fair protocol, but also to enable businesses to reduce their costs.
“Under the new financial system, you can create your own digital identity and use all these services that require authentication,” Brock said. “You can also create a digital wallet to hold bitcoin or stablecoins, and since it is integrated with tbDEX, you can directly convert stablecoins to bitcoin without leaving the app.”
When Dorsey asked why he believed in Bitcoin, Brock said, “If we are going to have a local currency on the Internet, we need trust, and trust comes from time, openness and transparency, which are the principles embodied in the Bitcoin system.” at first.
“We are building a network that provides better experiences for financial access around the world,” Brock said in his closing thought.
From Businesses to Consumers
Just as Square caters to businesses and Cash App targets consumers, Block’s Bitcoin initiatives seek to deliver a set of solutions that collectively empower retail and institutional investors in the decentralized and digital economy.
Amid a sea of early-stage Bitcoin startups, most of the details remain unknown as the company takes steps towards building its products, iterating between idea generation and community feedback. It remains to be seen if Dorsey can mobilize the institutional ship to increase economic empowerment with open Bitcoin systems beyond Spiral’s independent work.