Dorsey's Block partners with Core Scientific for bitcoin mining chip project

Block, Inc. (SQ) and Core Scientific (CORZ) announced an agreement to supply Core Scientific with Block’s new 3-nanometer mining ASICs, built by Block's Proto team, representing approximately 15 EH/s (exahashes per second) of hashrate.

The agreement provides the option for additional volume and is one of the industry’s largest bitcoin mining ASIC agreements announced in terms of hashrate, according to the joint press release.

"The primary purpose of Proto’s mining initiative is to increase the decentralization, transparency, and resiliency of the bitcoin network," the release said. "This is accomplished through building mining chips, systems, and software solutions, including the Mining Development Kit (MDK), currently in beta, in an open and transparent manner in partnership with the mining community."

Block announced in April it finished developing a 3nm Bitcoin BTC +1.34% mining chip and was engaging with a leading global semiconductor foundry to complete its design.

“This agreement is a good example of how we envision our mining products pushing forward the advancement and decentralization of the mining industry,” said Thomas Templeton, lead of the Proto team at Block. “Core Scientific is known for its high standards of operational excellence, advanced infrastructure, and deep expertise in mining. We are excited to break new ground by teaming with a leading mining operator to build a unique, tailor-made mining solution leveraging our ASICs.”

Jack Dorsey co-founded the mobile payments company Square in 2009, which rebranded to Block in December 2021, stemming from a commitment toward decentralized technology and cryptocurrency.

In May, Block announced it would begin adding more bitcoin to its balance sheet and is open-sourcing its treasury blueprint so others can follow suit. The company said it will invest 10% of its gross profit from bitcoin products into monthly bitcoin purchases. As of the end of the first quarter, its original bitcoin investment of $220 million has grown by approximately 160% to $573 million.

Core Scientific's deal-making

Since April’s Bitcoin halving  reduced miner rewards by 50%, Bitcoin miners have been looking for ways to expand revenues. In June, Core Scientific signed a series of 12-year contracts with AI Hyperscaler CoreWeave. The company expects the agreement to generate approximately $290 million worth of average annual revenue.

"We have worked closely with the team at Block to develop the next generation of mining technology that not only helps support our significant hashrate growth plans within our existing infrastructure, but also provides all mining companies with more miner options," Russell Cann, Core Scientific's chief development officer, said in Wednesday's release. "Together, Block and Core Scientific are working to define a new paradigm for scaled bitcoin mining, one designed to deliver important operational benefits while contributing to the longevity and vitality of the Bitcoin Network."

Late Tuesday, analysts at research and brokerage firm Bernstein initiated coverage on Core Scientific with an outperform rating, citing the firms’ hybrid bitcoin mining and AI data center strategies.

“Bitcoin miners are emerging as attractive partners to build out AI data centers with ‘ready power interconnect’ and data center operating capabilities,” Bernstein analysts wrote in a note to clients.