Bitcoin-friendly Ark Invest has sold off its PayPal holdings in favor of Cash App, and Bitcoin is behind the decision.
Ark CEO Cathie Wood told CNBC at the Bitcoin 2022 conference in Miami that the “singular focus of Bitcoin” by Cash App creator Block, “is critical here.”
“We owned PayPal, very focused on Venmo becoming the digital wallet,” she explained. “It will be in the running. But I think the way Cash App is growing organically, as opposed to more of a top-down, ‘Let’s get this thing moving,’ stretch-stretch-stretch.”
Payments company Block, owned by former Twitter CEO Jack Dorsey, was the first mainstream payments app to embrace crypto, back in November 2017 when the company was still called Square. In June 2019, Cash App allowed users who had been able to buy, sell and trade bitcoin to transfer it to third-party wallets, and to “transfer profits from selling bitcoin to any bank account or debit card linked to your Cash App.”
See also: Square Cash App Mobile Users Can Now Deposit Bitcoin
That was a huge deal back when banks were still closing the accounts of retail customers who even sent money to or from a cryptocurrency exchange.
PayPal first opened its wallets to bitcoin and three other cryptocurrencies — ether, litecoin and bitcoin cash — in early 2021, with the move seen as an important step in mainstreaming bitcoin. It’s Venmo app followed in April 2021.
Read more: PayPal’s Scale Drives Crypto’s Utility
In March, PayPal allowed users to pay for goods with crypto at its 32 million-strong merchant network via Checkout With Crypto.
Greased Lightning
Wood said that a couple of key factors influenced her decision. One is that Cash App was first in on crypto. But organic growth and a Bitcoin-centric focus were key as well.
Dorsey is known to be a Bitcoin maximalist, meaning he thinks it will be the only crypto needed in payments. “This is how Bitcoin’s going to proliferate around the world,” Wood said.
So, when Ark consolidated its portfolios last year, it favored its “highest conviction names.” For Wood, that was Block.
Another big factor in Wood’s thinking is the Lightning Network, a Layer2 scaling solution that makes slow, expensive Bitcoin able to scale from its current 5 transactions per second (TPS) to 1,000 TPS.
Layer2 blockchains like Lightning are essentially an overlay on top of Bitcoin, taking all the actual transaction processing onto the much faster, smart-contract capable upper level, merely sending large bundles of completed transaction results down the Bitcoin to be written onto the blockchain.
Wood pointed to another Bitcoin 2022 announcement that day — Cash App’s announcement that it was able to accept payments over the Lightning Network, and that users of Cash App’s direct deposit feature can choose to be paid directly in bitcoin.
That was a huge deal, Wood said, arguing that it is “taking away a lot of the friction in the user interface.”
She added: “The second layer solution has become more robust now and is ready for prime time.”
On April 7, Bitcoin-Lightning payments processor Strike announced deals that will bring crypto payment capability to Shopify, prepaid payments provider Blackhawk Network, and top point-of-sale terminal maker NCR.
See more: Bringing Bitcoin Firmly into Payments, Strike Partners with NCR, Shopify, Blackhawk
That gave a Bitcoin a huge step forward as a realistic payments currency, relieving it of the need to account for 10-minute finalization time and fees of several dollars per transaction.
“You’re going to be able to walk into a grocery store, to Whole Foods, to a Chipotle, if you want to use a Lightning node [to pay], you do that,” Strike CEO Jack Mallers said. “You want to use the Cash App? You do that.”
Wood added that the Lightning Network’s channel tripled in the past year, due in fair part to “El Salvador and maybe some of the other trouble spots around the world.”
She sees even bigger things ahead in 2022.
I think the number of channels is going to explode,” she said. “And my guess is the number of developers developing to this platform is also going to explode.”
That growth, she said, “is going to bring the U.S.”
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