![Jack Dorsey Hints at Lightning Network Integration on Twitter Jack Dorsey Hints at Lightning Network Integration on Twitter](https://static.news.bitcoin.com/wp-content/uploads/2021/06/shutterstock_1425729506-768x432.jpg)
Earlier this month, Dorsey revealed that Square intends to develop an open-source non-custodial Bitcoin hardware wallet.
Jack Dorsey, the co-founder of social media network Twitter and financial services company Square, has confirmed he is planning to integrate Bitcoin’s Lightning Network sidechain with at least one of his businesses.
On June 11, Dorsey responded to a question from Twitter user “deyonté,” who had requested that Dorsey integrate the Lightning Network into Twitter or BlueSky — the decentralized social network Twitter has devoted manpower to developing since 2019.
In response, Dorsey responded, “Only a matter of time.”
Only a matter of time
— jack (@jack) June 11, 2021
Dorsey's comment appears intentionally vague, with the remark appearing open to be interpreted as confirming that either BlueSky or Twitter, or even both companies, could be eying a Lightning integration.
Twitter user “mklad” also suggested Dorsey’s pro-Lightning remarks could relate to Square’s recent acquisition of Jay-Z’s failed music streaming platform, Tidal.
Dorsey’s tweet comes amid recent moves from Square to expand its digital asset operations.
Earlier this month, Dorsey revealed that Square intends to develop an open-source non-custodial Bitcoin hardware wallet. The following day, Cointelegraph reported that Square revealed a partnership with blockchain infrastructure firm Blockstream, with Square planning to invest $5 million into a solar-powered Bitcoin mining facility.
Related: Green Bitcoin: The impact and importance of energy use for PoW
Dorsey has long argued that Bitcoin mining incentivizes adoption and innovation in renewable energy, with Square committing $10 million toward its Bitcoin Clean Energy Investment Initiative in December.
Blockstream is a leading blockchain development company founded by Adam Back in 2014.
Square Inc., a crypto-friendly mobile payments company, is planning to invest $5 million in a solar-powered Bitcoin (BTC) mining facility for Blockstream Mining, offering further insight into Jack Dorsey’s continued support for blockchain infrastructure.
Chris Cook, Blockstream’s chief information officer, announced the collaborative partnership on Saturday, where he outlined plans to build the open-sourced mining facility at one of Blockstream’s United States operations.
"Together, we plan to provide public transparency by sharing the project economics and knowledge we’ve gained from building a Bitcoin mine powered by renewable energy,” he said, adding:
“Ultimately, we hope to demonstrate how bitcoin mining in conjunction with renewable energy can help drive the clean energy transition.”
In addition to providing regular reports on the status of the project, the new initiative will also feature a so-called public performance dashboard, where anyone can pull real-time metrics of the mining facility.
Bitcoin mining has been the subject of extreme media scrutiny after Tesla CEO Elon Musk decided to stop accepting BTC payments for Tesla cars, citing grave environmental concerns.
MicroStrategy’s Michael Saylor brokered a truce between Musk and the Bitcoin mining community last month by bringing both sides to the table for high-level talks. The industry-led Bitcoin Mining Council emerged out of the meeting, with miners vowing to accelerate sustainability initiatives.
As for Square Inc. the Jack Dorsey-led company has been ramping up efforts to boost adoption of Bitcoin and cryptocurrencies. Cointelegraph reported Friday that Dorsey is strongly considering developing a Bitcoin hardware wallet in an effort to bring self-custody and financial inclusion to the masses.
"If we do it, we would build it entirely in the open, from software to hardware design, and in collaboration with the community,” he said in a Twitter post.
“Bitcoin is for everyone. It’s important to us to build an inclusive product that brings a non-custodial solution to the global market,” the CEO said.
Square Inc., the mobile payments company behind the popular Cash App, is strongly considering developing an open-source Bitcoin (BTC) wallet, signaling continued conviction in the future of digital currency payments.
“Square is considering making a hardware wallet for Bitcoin,” CEO and co-founder Jack Dorsey tweeted Friday. “If we do it, we would build it entirely in the open, from software to hardware design, and in collaboration with the community.”
Square is considering making a hardware wallet for #bitcoin. If we do it, we would build it entirely in the open, from software to hardware design, and in collaboration with the community. We want to kick off this thinking the right way: by sharing some of our guiding principles.
— jack (@jack) June 4, 2021
Dorsey outlined his rationale for a new Bitcoin hardware wallet in a series of posts, where he reiterated the importance of self-custody and the need to create a seamless mobile experience for crypto users. In Dorsey’s view, “assisted self-custody” can greatly simplify the experience of managing one’s own crypto wallet:
“Custody doesn’t have to be all-or-nothing. We can probably simplify custody through “assisted self-custody.” Assisted requires great product design: minimal setup time, relying on existing devices, and end-to-end reliability.”
While self-custody is important, Dorsey said a confluence of forces are needed to attract new users to Bitcoin. “Layer 2 is essential for growth,” he said, adding:
“The orders-of-magnitude growth we imagine requires a mix of custodial, off-chain, and second layer solutions that allow people to ‘get off of 0.’ What tech investments can enable seamless, scalable, L2 native support for a hardware wallet?”
Square is one of the largest corporate holders of BItcoin, with 8,027 BTC on its balance sheet. Its holdings are currently worth $297 million based on current prices. Square’s Cash App is generating the bulk of its revenue from Bitcoin sales, highlighting growing retail interest in the digital asset class.
Firms with iconoclastic leaders, like Musk and Dorsey, “would be the most likely to take the plunge” and commit sizable cash balances to crypto.
As corporate finance leaders prepare to set sail into the post-COVID-19 world amid inflation storm warnings, an increasing number of corporations are taking stock of their treasury reserve holdings. If the worst happens, and the dollar and other reserve currencies weaken, are they sure that all their balance-sheet cash is lashed down securely?
It surely hasn’t escaped their notice, after all, that a number of public companies that “joined” Bitcoin (BTC) in a big way over the past year recently broadcast strong Q1 2021 earnings. Square, which holds $472 million worth of BTC, for instance, reported a quarterly gross profit increase of 79% year-over-year, doubling analysts’ expectations. While Tesla, which plunked down $1.5 billion — 8% of its cash — into BTC in February, posted record earnings with revenues surging 74%. MicroStrategy, which made Bitcoin its primary corporate reserve in 2020, notched a 10% gain in Q1 revenues.
“If inflation picks up, or even if it doesn’t, and more companies decide to diversify some small portion of their cash balances into bitcoin instead of cash, then the current relative trickle into bitcoin would become a torrent,” wrote storied investor Bill Miller in a market letter earlier this year. Already, “companies such as Square, MassMutual, and MicroStrategy have moved cash into bitcoin rather than have guaranteed losses on cash held on their balance sheet,” he added.
Elsewhere, Ark Investments commented in a company newsletter: “Microstrategy, Square, and now Tesla are showing public companies the way to add bitcoin as a legitimate alternative to cash on their balance sheets.”
But Bitcoin remains a volatile asset — as the most recent BTC price drop to $46,000 reminded users again — so maybe its embrace by corporate treasurers is really just a short-term happenstance? On the other hand, if the trend does have legs, is it really appropriate for all companies? If so, at what level of allocation is appropriate?
Overall, what does this say about the global economy if public firms now look to a 12-year-old digital currency to keep its cash stockpiles liquid and secure?
“I do not view this as a fad,” Paul Cappelli, a portfolio manager at Galaxy Fund Management, told Cointelegraph. Bitcoin’s “inelastic supply curve and deflationary issuance schedule” make it a “compelling hedge against inflation and poor monetary policies that could lead to cash positions becoming devalued over time,” he told Cointelegraph, predicting:
“Corporations will continue to use Bitcoin as one of the tools available to preserve the value of their balance sheets.”
David Grider, lead digital asset strategist at Fundstrat, informed Cointelegraph that as crypto becomes more mainstream, he expects to see “more corporates holding crypto for legitimate business purposes.” Exchanges could hold it as inventory, tech companies might use it to stake tokens and participate in networks, while multinational corporations could accept it for payments.
“I expect two types of companies to consider early adoption of crypto — ones led by leaders who are strong believers in crypto, as well as companies that may have unique cross-border needs that are a good fit for Bitcoin transfers,” Gil Luria, director of research at D.A. Davidson & Co., told Cointelegraph.
If so, doesn’t this represent a sea change for corporate finance officers? “When I did my treasury exams, the thing we were told as number one objective is to guarantee security and liquidity of the balance sheet,” Graham Robinson, a partner in international tax and treasury at PricewaterhouseCoopers and adviser to the United Kingdom’s Association for Corporate Treasurers, told Reuters. BTC with its volatility might simply not fit the bill.
If Bitcoin were to be used as a corporate treasury reserve, and its price plunged, that company might not be able to meet its working capital requirements, noted Robert Willens, adjunct professor of Columbia Business School, in January, when he described it as “a high-risk, high-reward strategy.”
Has Willens changed his views? “I still believe it is a high risk/high reward strategy,” he told Cointelegraph, acknowledging that “lately, the rewards have far outweighed the risks.” He does see more firms following the lead of Tesla and Square, “as crypto investments become more ‘respectable’ and emerge as a viable outlet for corporate cash balances.” Asked who might lead the way, Willens answered:
“I think companies with iconoclastic leaders — not necessarily confined to a particular industry — would be the most likely to take the plunge and commit a decent amount of the corporation’s cash balances in crypto.”
Fundstrat’s Grider, citing the OTC trading firm Genesis’ Capital trading data, told Cointelegraph that more corporations may be buying crypto than has been reported in earnings statements. The Genesis Q1 2021 “Market Observations Report,” for example, reported a striking jump in “corporates’” share of crypto trading volume to ~27% from ~0% in the quarters prior. “As corporate clients began buying bitcoin for their treasuries in Q1, our ratios shifted,” noted Genesis.
Assuming that a company believes that crypto should be part of its treasury reserves, how much should it actually allocate? Last year, Cappelli told Cointelegraph that an investment of 50 basis points to 2% of reserves was about right, given crypto’s volatility. But since then, crypto prices have skyrocketed, and Tesla allocated a whopping 8% — or $1.5 billion — to its corporate cash reserves. Is the recommended allocation growing?
“I don’t think there’s a bright-line rule that we can apply here across the board,” Willens told Cointelegraph, “but I think something well north of 2% would be appropriate — perhaps as much as 8%–10% might even be acceptable.”
“It will all depend on the company,” Cappelli said this past week. “Corporations manage their balance sheets to fund operations and maintain a certain amount of liquidity.” Bitcoin is still a very volatile asset, “so while it does provide a hedge against inflation, it does come with a certain amount of market risk. I’d be very surprised to see a company allocation much more than a ballpark of 5% currently, but that may change over time.”
Still, what about Robinson’s contention that a corporate treasurer’s job is to guarantee liquidity and security of the balance sheet — and could Bitcoin not do that?
“If you think about crypto purely as cash, it is still very volatile relative to the dollar,” Grider told Cointelegraph. “But some assets like Bitcoin are becoming less volatile lately, and we are seeing strong liquidity emerge in crypto, which is encouraging.”
One way a firm could think about holding crypto is as an alternative to cash, continued Grider, “but you can also think about it like inventory or a marketable securities investment or an intangible long-term asset. That means even if not an ideal treasury asset in all respects, corporates could still hold crypto for other reasons,” such as:
“Certain incumbent businesses could buy crypto as a hedge against tech disruption, just like doing M&A of a competing startup.”
“I think the liquidity concern is a valid one,” responded Willens, “but limiting the investment to 8%–10% of the investible funds ought to insulate treasurers from criticism since the balance of the funds would be deployed in cash and cash equivalents with a readily realizable value.”
There is a sizing exercise that occurs for every investment, added Capelli, and “taking all balance sheet investments into account” is part of any corporate treasurer’s or chief investment officer’s job. Meanwhile, Luria declared that “crypto assets are liquid enough that this should not be a constraint.”
A more significant disincentive to using crypto as a corporate treasury reserve, in Willens’ view, may be the accounting treatment to which it is subjected at present — i.e., “the odd way investments in crypto are accounted for — they are treated as ‘indefinite-lived intangible assets,’ and thus any declines in the value of the asset must be reflected in income from continuing operations, whereas price increases cannot be so reflected.” He described this “unfavorable accounting treatment [...] as the most unattractive aspect of an investment therein.”
All in all, the current monetary environment has raised serious corporate concerns about inflation and the continued strength of the United States dollar. It should not be surprising, as Grider said, “that corporations would become more open to alternatives like crypto.”
But something even larger may be going on. As Perianne Boring noted recently in the New York Times, a “tectonic shift” may be underway in global finance thanks to cryptocurrency. “Digital assets have brought forth a new paradigm in global finance,” concurred Cappelli, though we are still in the very early stages:
“With every cycle, there are always pockets of froth, but structurally, what we have seen built over the last few years certainly provides a strong foundation for this new asset class.”
Square appears content with its Bitcoin holdings for now.
Over the course of 2020 and 2021, Square bought over $200 million worth of Bitcoin. At present, the payments company does not anticipate picking up more of the asset, according to its chief financial officer, Amrita Ahuja.
In an interview with Financial News, reported on Friday, Ahuja said: “We don’t have any plans at this point to make further purchases.” She added: “There’s no plans at this point to re-evaluate where we are from a treasury standpoint."
Cointelegraph reached out to Square for additional comments, but did not receive a response in time for publication.
In October 2020, Square announced buying $50 million worth of Bitcoin (BTC), which equated to 4,709 BTC, given the asset’s prices back then. In February 2021, the company announced picking up $170 million worth of additional Bitcoin, which paid for roughly 3,318 coins.
May has hosted sideways and downward price action from Bitcoin, although Square has still seen some significant profit from its BTC holdings. “In Square’s most recent quarterly earnings, published on 6 May, the company said it had lost $20m on its bitcoin investment despite its fair value rising to $472m based on market prices,” Financial News detailed.
Square’s Bitcoin involvement does not stop at its purchasing of the asset, however. The company’s Cash App facilitates free Bitcoin transactions, unveiled in March, as per Square’s May 6 earnings document. Square’s Cash App also hosts Bitcoin trading.
"Lots of other opportunities for [Square] to learn with bitcoin” exist, Ahuja told Financial News following her comments on the company’s stance on its Bitcoin holdings.
She also said in the interview:
“We’re always evaluating and as ever, I think we’d be customer-led [...] As we see the evolution of the bitcoin product or crypto products in general, I think we’ll make further assessments at that point.”
Square’s CEO, Jack Dorsey, has spoken positively of Bitcoin on a number of occasions.