A bitcoin mining operation
Photo: Mark Felix / AFP via Getty Images

Jack Dorsey goes mining, but bitcoin’s troubles are mounting

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Tuesday: Jack goes mining, FTX raises a mega venture fund, and Lukka is valued at $1.3 billion.

Jack takes on crypto mining

The debate over how decentralized crypto really is has focused on issues like the roles of financiers in key companies and the governance and development of protocols. But it’s easy to forget another chokepoint for the most famous cryptocurrency of all: bitcoin mining.

Block CEO Jack Dorsey wants to make bitcoin mining better. His company, which began life as Square, is good at building hardware. So it’s putting that expertise to work on mining rigs, one of its many crypto initiatives. Block hardware guru Thomas Templeton, whom we profiled in August, is leading the charge.

Bitcoin mining is highly concentrated. That’s a problem for many reasons, since mining allows transactions to happen.

  • The top 11 pools control the vast majority of global mining. Last year the centralization of mining became clear when a coal mine in Xinjiang flooded and bitcoin’s hashrate dropped about 35%. A lower hashrate weakens the network: Transactions take longer and cost more.
  • After China clamped down on bitcoin mining, many moved elsewhere, such as the U.S., which is now the top mining country, and Kazakhstan, which became No. 2. But Kazakhstan has been wracked by protests which have turned into an uprising, and the government shut down internet access. That sent the bitcoin hashrate down about 14%.

Dorsey and his team have their work cut out for them. Bitcoin mining rigs are expensive and use a lot of energy, which leads to concentration as miners seek out cheap electricity and economies of scale in purchasing hardware.

  • Dorsey has said mining should be more distributed to ensure that no small number of entities can control transactions on the network. “The core job of a miner is to securely settle transactions without the need for trusted 3rd parties,” he tweeted in October when he first said Block was exploring the issue.
  • Now Block is going to tackle those challenges, which include silicon design, software and integration. Templeton said his team will work on everything from making mining rigs easier to find — the chip shortage is affecting bitcoin — to addressing problems like heat and noise generation.
  • Bitcoin’s environmental impact is a big issue. More efficient mining hardware could ameliorate this, though some say the problem is fundamental to the way bitcoin operates. Ethereum is moving to a proof-of-stake model, which uses less energy than bitcoin’s proof-of-work model.

There’s a problem that Dorsey can’t design around, however. Bitcoin mining happens in physical space, and China’s crackdown and Kazakhstan’s blackout show the geopolitical risks to miners. In the U.S., where miners have found a temporarily friendly home, Congress is taking notice. The House is holding a committee hearing on “Cleaning up Cryptocurrency: The Energy Impacts of Blockchains” this Thursday.

— Tomio Geron (email | twitter)


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“While Bukele’s move to adopt bitcoin as an alternative to the U.S. dollar in El Salvador has great potential for freeing the developing world from the yoke of the global financial establishment, his authoritarian behavior here is anathema to the cyber-libertarian ideals that underpin cryptocurrency.” CoinDesk columnist David Morris on El Salvadoran President Nayib Bukele.

“Don’t worry about titles. Focus on what you do.”Binance CEO Changpeng Zhao, who was recently named the world’s richest crypto billionaire, in a tweet.

3 questions with Tomás Campos, CEO of Spinwheel

What fintech trend are you most excited about?

DeFi and blockchain. It’s exciting to see how quickly anyone can innovate in fintech using blockchain technology. The ecosystem is growing rapidly, and the composability being built into these ecosystems is making it easier for us to create compelling solutions. Innovation is taking place at a faster clip thanks to this technology, and it’s bringing in more talent and participation to the financial ecosystem than ever before.

What fintech trend is most troubling for you?

The metaverse. Don’t get me wrong, I have a strong affinity for gaming and I like what NFTs can do for art and digital goods, but being in the metaverse is still a privilege that many cannot afford to participate in today. Like the early space programs in the ’60s, which gave us things like Velcro, let’s make the metaverse be the creative space that introduces new solutions that benefit us in the real world rather than being a distraction from it.

What's your advice to younger technologists who want to build a career in this field?

It’s always great when your career presents you with the opportunity to learn and build in the fintech space, but don’t wait for it. Create the opportunities for yourself to learn and become valuable. Dive in, play around, find some like-minded friends and create. Whether your creation becomes the next big thing or a great item for your resume, it's the best way I know to build your understanding and career in this space.

Need to know

NCR acquired LibertyX. The payments processing tech company said buying the cryptocurrency software company would boost its ability to offer crypto services and tools to clients.

FTX launched a $2 billion venture fund. FTX Ventures plans to invest in crypto startups at all stages with investments ranging from as little as $100,000 to hundreds of millions of dollars.

Making moves

Amy Wu joined FTX. Speaking of that big new fund, a former Lightspeed executive was tapped to lead it. She’s also overseeing FTX’s gaming, M&A and commercial initiatives.

Madhu Muthukumar left Robinhood. Muthukumar, the online broker’s vice president of Product Management, was named chief product officer at workplace software company Notion.

Mark Schulze joined TSX Entertainment. The payments technology veteran and Clover co-founder was named chief strategy officer of the entertainment company.

Brendan Lewis has left Klarna. The “buy now, pay later” company’s former U.S. head of Communications is now a “temporary woodworking student,” according to his LinkedIn profile.

Deal flow

Crypto data startup Lukka is valued at $1.3 billion. Marshall Wace led the $110 million round.

Azibo raised $19 million. The rental property financial services software company’s series A round was led by SVB Capital.

Gr4vy raised $15 million. The payments software company’s series A extension round was led by March Capital.


That’s how much dogecoin’s price jumped Friday after Elon Musk announced that the electric car company had begun accepting the crypto coin as payment for some merchandise.

Thanks for reading — see you Friday.

Correction: Friday's newsletter quoted Klaros Group partner Jonah Crane unclearly on stablecoins. We wanted to clarify that he meant that a stablecoin backed by reserves held at the central bank is a possible solution, not a currently implemented one.

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