Did Jack Dorsey outsmart our Outrageous Predictions? Did Jack Dorsey outsmart our Outrageous Predictions? Did Jack Dorsey outsmart our Outrageous Predictions?

Did Jack Dorsey outsmart our Outrageous Predictions?

Mads Eberhardt

Cryptocurrency Analyst

Summary:  The day before releasing our Outrageous Predictions 2022, Jack Dorsey’s Square announced that its parent company will be renamed Block to arguably highlight its commitment to Bitcoin. The renaming aligns with our Outrageous Prediction on music streaming platforms and record labels which are disrupted due to non-fungible token (NFT) technology. However, there are multiple challenges ahead for Block’s Tidal to pursue this strategy.


All ten Outrageous Predictions for 2022 may be found here.

Jack Dorsey, co-founder and recently CEO of Twitter, has for years been an advocate for particularly Bitcoin (BTCUSD). In 2009, Dorsey founded the payment company Square, which bought Bitcoins for its balance sheet in 2021, while having offered brokerage of Bitcoin through its consumer-oriented app known as Cash App for several years. Likewise, NYSE-listed Square has announced its intention to develop a Bitcoin hardware wallet.

On December 1st, Square arguably doubled down on its commitment to Bitcoin by announcing that its parent company is changing its name from Square Inc to Block Inc (SQ:NYSE) similar to Google’s Alphabet and Facebook’s Meta. According to the company, the name has many associated meanings: “building blocks, neighborhood blocks and their local businesses, communities coming together at block parties full of music, a blockchain, a section of code, and obstacles to overcome”. While changing its corporate entity, Block renamed its fully Bitcoin-focused entity from Square Crypto to Spiral, which develops the companies’ Bitcoin products. The renaming from Square to Block looks from the outside like a tribute to Bitcoin and an in-depth focus on the latter going forward, without the company explicitly having said this.

Some days prior to the renaming announcement on December 1st, Twitter announced on November 29th that Jack Dorsey was stepping down as CEO, which ultimately frees up more of his time to fully focus on his role as CEO of Block.

Block owns music streaming platform Tidal

In May 2021, Block acquired a majority stake in music streaming platform Tidal, formerly majority-owned by famous artist Jay-Z, for around $300mn. Tidal is a minor company in the music streaming industry compared to the titans of particular Spotify (SPOT:NYSE) and Apple Music (AAPL:NASDAQ), which the company has historically had trouble competing against.

In terms of our Outrageous Predictions 2022, it is quite so respecting Tidal that the renaming of Square becomes interesting. On December 2nd, we published our 10 Outrageous Predictions of 2022 with one about the music streaming industry. In brief, it revolves around artists in the future distributing music directly to listeners through non-fungible tokens (NFTs) technology without intermediaries such as record labels and Spotify or Apple Music taking a cut. As the artists receive a 5% - 25% stake of the revenue from music streaming, the present industry model seemingly favors the intermediaries more than the ones composing the content, why the industry may be ready for a transformation towards a fairer revenue distribution.

Will Tidal adopt decentralization?

With a parent company deeply focused on Bitcoin, the question is whether Block eventually wants Tidal to adapt a more decentralized framework, something in line with our Outrageous Prediction, where it settles artists directly in real-time on-chain without the need of other intermediaries such as labels. While this is purely speculation, though, there are some factors speaking for decentralizing Tidal.

Tidal has for years struggled to compete against Spotify and Apple Music. While Spotify and Apple Music continue to grow, Tidal seems to stagnate. However, some of the largest artists have publicly expressed their dissatisfaction with the revenue distribution of music streaming. For instance, most of Taylor Swift’s music was not to be found on Spotify between 2014 to 2017 due to her dissatisfaction with her earnings from Spotify.

By leveraging NFT technology to pay significantly more to artists, Tidal might be able to create renewed dissatisfaction with the legacy music streaming platforms to an extent, where well-known artists pull their music off the other platforms, demanding to be paid more fairly. This will arguably put the other streaming platforms under severe pressure, since consumers will move to the platform having the best music library. As Tidal is still minority-owned by great names such as Beyoncé, Calvin Harris, Kanye West, Rihanna, and JAY-Z, Tidal might have the required support from well-known artists to follow such as plan.

Although Tidal might have the support of great artists, the latter is presumably tied up in record labels contracts in many years to come, meaning they cannot release music on-chain directly to a streaming platform without the contracts expiring first, which will make the transformation significantly more protracted.

Bitcoin is questionable

It is not only the contracts, which are a drawback for Tidal to perchance embrace decentralization. The next drawback relates to Jack Dorsey’s belief. Dorsey is an extreme Bitcoin advocate to the degree, that some would reasonably call him a Bitcoin maximalist. Primarily because of Dorsey, Block focuses on no other cryptocurrency including Ethereum (ETHUSD) than Bitcoin.

The challenge with the strict focus on Bitcoin is that Bitcoin lacks the option for developers to make tokens and smart contracts on its network, such as Ethereum, used in decentralized applications and NFTs. Hence, with Bitcoin’s current technological capacity, it is not possible to make the aforesaid decentralized framework for music streaming. If Tidal de facto wants to execute on decentralization, they either need to embrace another cryptocurrency such as Ethereum or wait until Bitcoin perchance broadly supports tokens and smart contracts on its network. Although Jack Dorsey has released a white paper for a decentralized exchange on Bitcoin, it will presumably take numerous years before Bitcoin supports a proper technological framework for music NFTs to materialize on Bitcoin, if at all. Meantime, Ethereum and other cryptocurrencies are enhancing their lead in smart contracts, NFTs, and scalability, effectively making it tougher for Bitcoin to possibly catch up. As it is extremely unlikely for Tidal to embrace a distinct cryptocurrency such as Ethereum, it is questionable for the foreseeable future whether Tidal is to adapt a decentralized framework, but it is interesting to keep an eye on it.

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.