Jack Dorsey, after leaving his position as CEO at Twitter, is still at the helm of billion-dollar company – Block, the payments giant that is building much of its strategy around Bitcoin.
On Thursday, Block released its quarterly earnings, which mainly because of bitcoin, were less than last year.
The impact of bitcoin
Block reported a 6 percent drop in revenue from the second quarter of 2021. A decline that resulted from the loss of a large portion of sales in bitcoin. In fact, without the impact of bitcoin, Block’s revenue would have increased 34 percent from last year. This indicates that the rest of the company is currently performing more than well.
In total, the company managed to turn in $1.79 million in revenue through its bitcoin business in the second quarter of 2022. This marks a 34 percent decrease from the second quarter of 2021.
Gross profit on the company’s bitcoin branch was only $41 million, which represents a 24 percent drop from last year. Furthermore, Block had to write down $36 million in losses due to bitcoin reserves.
Bitcoin is volatile
During the quarterly earnings presentation, Block’s leadership emphasized that bitcoin’s decline is not representative of the entire company. Block further indicated that profits from bitcoin operations are likely to remain volatile.
That has everything to do with volatility in both the price and consumer demand. If the price falls, then consumer demand falls. Both of those forms of volatility are troublesome for Block.
When the market takes hits, as it is now, consumer demand for bitcoin and crypto in general is a lot lower. Once we’re around a new all-time high the demand goes through the roof and the hype is all over the place.
At the bottom of the market, however, things are different and most people forget about bitcoin again. Companies like Block see that immediately in their numbers.
New project from Block
We have heard little from Block and Jack Dorsey after the announcement of the Web5 project. Probably because he and his cronies are currently busy making Web5 a reality.
The idea with Web5 is to build a platform for digital applications that safeguards users’ privacy. “In the current Internet model, users do not own their data or identity. They get accounts from companies and their data is held in separate silos.
Web 5 should change that by enabling a new kind of “decentralized applications. The decentralized aspect is particularly in the account part. According to Block, it is important for users to have a digital identity that they can control themselves. To make that happen, Block obviously makes use of Bitcoin.
While Web3 is mainly focused on blockchain technology and tokens, Web5 only uses the Bitcoin blockchain. So basically not a project that you can invest in by means of a token. Except that it is built on Bitcoin and in the long run it might have a positive effect on the bitcoin exchange rate. This is a totally new way of building a relationship with the Internet, without having a direct revenue model.