Jack Dorsey Triples Down On Bitcoin

Bitcoin has been good for Square. The company is worth nearly six times what it was in late 2017, when the company announced it would let Cash App users buy and send the cryptocurrency, triggering a run-up in the company’s shares.

With the crypto craze going mainstream and Cash App positioned as one of the easiest ways in, Square is cashing in. Bitcoin-related revenue jumped more than tenfold in the first quarter of this year, and now accounts for almost 70% of all of Square’s revenue.

No wonder Jack Dorsey feels emboldened to widen the company’s bets on crypto. At the Bitcoin Conference in Miami on Friday, Dorsey spoke at length about the company’s plans and his personal passion for Bitcoin.

  • Square, which has considerable expertise in hardware from developing credit-card readers and point-of-sale devices, is exploring building a hardware wallet, Dorsey said. Such devices securely store the private cryptologic keys used to swap bitcoin.
  • Blockstream, a bitcoin mining company, announced Square would invest $5 million in a solar-powered mining operation.
  • Square has also started an industry group to defend crypto patents against trolls.

Does Square need to do this? There’s an argument that bitcoin is a distraction from the company’s core payments business.

  • The corporate line here is that bitcoin fits into Square’s mission of “economic empowerment.”
  • The Motley Fool’s Daniel Sparks pointed out that if you take out bitcoin, Square’s core business is supercharged. The retail business is recovering from the pandemic, Cash App’s non-bitcoin transaction volumes are leaping and overall non-bitcoin revenue rose 44%.
  • There are also accounting questions around Square’s bitcoin revenue. When you buy or sell bitcoin on Cash App, Square isn’t finding a transaction partner for you like a broker would; instead, it’s acting like a market maker. That means it’s recording the full value of the bitcoin transaction on its books, rather than its relatively small 2% take. Take the eye-popping bitcoin revenue numbers with a grain of salt, in other words.
  • Finally: a hardware wallet? While arguably more secure than online wallets, there are many offerings already on the market, and they mostly appeal to hardcore crypto enthusiasts, not the new users Cash App has been so effective in bringing into the Bitcoin world.

There’s a simple explanation for this, and like many things in Silicon Valley, it comes down to recruitment. To win over the best and brightest, you have to be the coolest. And in the payments world, right now, that means being a player in cryptocurrency. (See also: Facebook’s Diem.)

  • That may start with keeping the services of Square’s part-time CEO. “If I were not at Square or Twitter I’d be working on Bitcoin,” Dorsey said at the Miami conference. “If it needed more help than Square and Twitter, I would leave them for Bitcoin. But I think both companies have a role to play.”
  • Of note: Cash App is hiring engineers to build “powerful new product experiences for person to person payments.” The job description doesn’t say “Bitcoin,” but…

The only thing you shouldn’t expect to change, at least in the short term: Square’s corporate bitcoin balance, which at one point had grown to $220 million, or 5% of its cash and cash equivalents. CFO Amrita Ahuja recently said the company didn’t plan to add to its holdings.

Source: Protocol

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