Block Sees Bitcoin Disrupting Payments Networks, Expects Self-Custody to Grow

CFO Amrita Ahuja said the crypto could become a "global currency for the internet."

AccessTimeIconMay 18, 2022 at 4:29 p.m. UTC
Updated May 18, 2022 at 8:46 p.m. UTC

Michael Bellusci is CoinDesk's crypto payments reporter.

Bitcoin has potential to disrupt existing traditional payment networks, especially with the growing adoption of the Lightning Network, executives from payments company Block (SQ) said during its virtual investor day Wednesday.

The Lightning Network provides a cheaper and faster way to process bitcoin transactions than directly on the Bitcoin blockchain.

“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 Chief Financial Officer Amrita Ahuja said during the presentation.

Block, which was formerly known as Square, is building integrated hardware and software to address self-custody with its wallet, along with a decentralized mining system. Jack Dorsey, its CEO, is a well-known proponent of Bitcoin.

“These initiatives are early in their development,” Ahuja said. “We intend to build out in the open.” She added that Block expects self-custody to be the “future of decentralized finance” as the process becomes easier for individuals.

With respect to mining, Ahuja said that bitcoin mining currently is “not conducive for consumers or small companies to participate” in, and Block wants to expand access to the field. Ahuja said Block’s mining initiative also seeks to add resilience and security to the bitcoin ecosystem.

Ahuja said that with its TBD initiative, Block wants to enhance and change how consumers and financial institutions interact, ranging from verifying indemnity to underwriting and transferring money globally. TBD is a decentralized exchange that Block is building.

Brian Grassadonia, Cash App's co-creator and lead, said that Bitcoin is a positive for Block as customers bring money into the overall ecosystem, with "multiple opportunities for monetization." In addition, given Block's network scale, Grassadonia believes Cash App can help bitcoin "evolve beyond an asset class," and offer more transactional utility for individuals. Since bitcoin was incorporated into Cash App in 2018, the company has seen mover 10 million monthly active bitcoin users within its app, according to Grassadonia.

In the first quarter, Cash App, Block’s peer-to-peer payments service that allows users to directly buy and sell bitcoin, generated $1.73 billion in bitcoin transactions and $43 million of gross profit. Block also holds a significant amount of bitcoin on its balance sheet.

Bitcoin mining

Block is also trying to build out a mining platform as the current barriers to enter mining remain high, said Jesse Dorogusker, who leads bitcoin hardware and Blocks's streaming music service Tidal. Dorogusker said he sees mining as a potentially "sizable" business opportunity for Block.

Bitcoin mining systems are tough and pricey to acquire, while the manufacturing and sales of bitcoin ASICs are concentrated amongst a small group of companies, he noted.

Block wants to build its own bitcoin ASIC that will be optimized for cost, performance and smart system integration. Dorogusker said the custom ASIC will be part of any system Block builds, and that the company plans to make it available for sale to other developers.

Miners will store mined rewards in a bitcoin wallet, creating new opportunities for distribution and integration with Block’s bitcoin wallet or Cash App, he said.

Current mining systems also lack optimal clean energy use, Dorogusker added. He said he sees an opportunity to create a distributed mining cloud service that relies exclusively on clean energy.

“Addressing all of these shortcomings will create a more durable and decentralized Bitcoin ecosystem,” he said.

UPDATE (May 18, 18:41 UTC): Updates to include comments from the lead of Cash App.

UPDATE (May 18, 20:46 UTC): Updates to include commentary on bitcoin mining.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Michael Bellusci is CoinDesk's crypto payments reporter.

CoinDesk - Unknown

Michael Bellusci is CoinDesk's crypto payments reporter.

Trending

1
CoinDesk - Unknown
Three Arrows Paper Trail Leads to Trading Desk Obscured Via Offshore Entities

As Three Arrows Capital collapsed under market pressure, its much-lesser known trading desk, TPS Capital, remained active, sources say. But a complex ownership structure might frustrate creditors' efforts to collect.

CoinDesk - Unknown
2
CoinDesk - Unknown
June Was Bitcoin’s Worst Month Ever

Plus, European crypto regulation comes into view.

CoinDesk - Unknown
3
CoinDesk - Unknown
What Traders Are Saying About Bitcoin's Biggest Monthly Loss in 11 Years

Poor macroeconomic sentiment, fears of inflation and systemic risks from the crypto market pushed the cryptocurrency below 2017’s highs.

CoinDesk - Unknown
4
CoinDesk - Unknown
Three Arrows Capital Files for Bankruptcy in New York Tied to British Virgin Islands Proceeding

A British Virgin Islands court ordered Three Arrows' BVI branch into liquidation earlier this week.

CoinDesk - Unknown