2020 was unforgettable, especially for Bitcoin. To commemorate our readers this year, we asked our network of contributors to reflect on the pricing, technological development, community growth and more of Bitcoin in 2020, and to think about what all of this could mean in 2021. These authors responded with a collection of thoughtful and thought-provoking articles. Click here to read all the stories from our series at the end of 2020.
Bitcoin’s brief 12-year history is full of exciting times. From the flawless conception born by Satoshi Nakamoto to the extreme polarity between melting pumps, catastrophic fixes, notorious swap hacks, and internal Bitcoin civil wars; Not many years have been as exhilarating for bitcoiners as 2020.
With the infamous bitcoin crowd having “Paul Revere” for years, it seems that “the institutions” are finally coming. The new demand in the coming years will make Bitcoin the next world reserve currency.
The case for a modern store of value
Towards the end of 2020, more than 20 public and private companies will hold more than 5 percent of the total Bitcoin supply as treasury reserves on the balance sheet. This trend started this year.
Over the same period, the M1 dollar stock of USD – a metric used by economists to quantify the currency in circulation in a given country – increased by over 60 percent. The ruthless monetary and fiscal policies put in place by central banks and governments as a global response to COVID-19 catapulted Bitcoin into the spotlight as a potential new store of value.
This direct injection of USD liquidity into the US and the global economy is known as quantitative easing (QE), or “money printing”. The Fed’s commitment to increase the money supply at will distorts price signals, lowers real wages, increases inequality of wealth and ultimately destroys the free market. Savers will be punished when their time and wealth are plundered from among them by the cancer process Inflation. While the dollar’s global reserve currency status creates inherent demand, it does not appear that this trend of monetary devaluation can continue in the future. The case for a currency with a limited supply that governments and institutions cannot manipulate at will has never been stronger.
In steps of Bitcoin Bull Bull Bull, Gigachad Michael Saylor.
Saylor, one of the oldest CEOs of a publicly traded tech company, was named Bitcoin Rookie of the Year this year after buying nearly $ 1.3 billion (approx. 70,000) in Bitcoin on his company’s MicroStrategy balance sheet. He’s not the only one spotting this trend.
Paul Tudor Jones, Stanley Druckermiller, and Scott Minerd – names all associated with institutional hedge funds – have opened their minds and portfolios to an allocation of Bitcoin. Large private banks like CitiGroup have released price predictions for the next year in the range of $ 300,000 to $ 400,000. As we continue to destroy the USD’s purchasing power, this game theory trend of tight asset allocation will continue to increase in the future.
Last but not least, the beautiful NgU (Number Go Up) technology built into Bitcoin keeps taking us to new heights. On December 16, Bitcoin broke the all-time high of 2017, rising above $ 20,000 for the first time. The further appreciation of the Bitcoin price over the next decade will drive the general acceptance of Bitcoin as a reserve asset for corporate coffers. A higher price will attract new looks, resulting in more awareness and ultimately less volatility. Bitcoin remains a beacon of hope in a world that is based on money slavery.
Protocol improvements and ecosystem innovations
As a technologist, the improvements at the various levels in the Bitcoin protocol remain some of the most exciting advances of 2020. Schnorr Signatures / Taproot / Tapscript were incorporated into the core code base earlier this year through a multi-level Bitcoin Improvement Proposal (BIP). “Taproot,” as it is commonly known, dramatically improves the digital signature algorithm used by Bitcoin. The Taproot upgrade offers massive improvements in terms of data protection, scalability and transaction efficiency in the chain. This series of upgrades will further increase adoption of the Lightning Network, multi-signature transactions, and CoinJoins, and ultimately lead to a more secure and private Bitcoin experience.
Aside from the improvements to the core protocol, the ecosystem of innovation surrounding Bitcoin continues to enhance the tools available to Bitcoiners. I would like to say hello to some of my favorites:
- Swan Bitcoin: A new way to buy Bitcoin that forces you to think long-term by averaging the dollar cost.
- Specter: A desktop interface that can be integrated into hardware wallets and enables user-friendly multisig.
- Strike: A payment application that allows users to pay a bill in Bitcoin using USD.
- ColdCard: A secure way to store private keys on a device that is not connected to the Internet.
Outside of bitcoin tools, developer grants from corporations and nonprofits normalized over the course of 2020. Organizations like the Human Rights Foundation, Square, Kraken, and others have started sponsoring developers to encourage them to work full-time on improving Bitcoin. Sites like BitcoinDevList and BitcoinACKs have encouraged your average bitcoiner to contribute to the bitcoin circular economy by donating sats to developers.
Finally, thought leadership continues to enhance the bitcoin educational experience, which is colloquially known as “falling in the rabbit hole”. Podcasts, books, articles, conferences and personalities on Bitcoin Twitter continue to stifle the complexities of Bitcoin with digestible and entertaining content suitable for predecessors as well as Bitcoiners. As more people dedicate their lives to Bitcoin, the influx of intelligence and ingenuity will throw humanity into the stratosphere of innovation for decades to come. This synergy of thought guidance will improve those who seek it.
Looking ahead: the battle ahead
As we approach the New Year and envision the path ahead, some trends seem to be emerging. The first will be the introduction of central bank digital currencies (CBDCs), which will replace the private banking sector with a combination of central bank and fintech. New currencies like the digital dollar and the digital yuan aim to accelerate the future of Orwell we are heading towards through direct taxes, capital controls, financial oversight and a universal basic income.
I want to make it very clear: These currencies pose no greater threat to Bitcoin than any fiat currency today. Over 90 percent of US dollars are already digital, and most governments are looking to phase out the cash entirely in the next few years. The creation of a CBDC does not solve the problem of currency devaluation, nor the problems of financial surveillance and censorship. Bitcoin remains the only incorruptible money that exists today.
The second trend will try to regulate Bitcoin. We are already hearing rumors of self-custody restrictions. Complete self-custody bans are unlikely, but withdrawal restrictions and additional KYC regulations are almost certain. In the next few years, there will be direct attacks on anyone trying to use Bitcoin privately. We have to defend ourselves against it. Data protection in and of itself is not illegal and is the foundation of freedom. When bitcoiners give up the ability to self-custody their bitcoin by handing it over to institutions, it is one of the few real threats to bitcoin.
The Bitcoin protocol is based on the mandatory incentives of the social consensus. Anyone who chooses to use Bitcoin must agree to a set of rules that are validated by others on the network. If you hold Bitcoin yourself, you agree to these rules. By running a bitcoin node and reviewing your own transactions, you are agreeing to these rules. By mining Bitcoin and helping to secure the network through energy and labor, you are agreeing to these rules. The waiver of the possibility of keeping Bitcoin in custody and independently checking the offer invalidates the social consensus of the Bitcoin protocol and enables these rules to be changed. Individuals have to be willing to fight for what they believe in. I believe in Bitcoin and I am ready to fight for it.
After all attempts to counterfeit Bitcoin have failed, governments are left with no choice but to adopt it or risk becoming obsolete. This is the final stage on the way to a Bitcoin standard. Competing game theory will force the hands of governments to acquire Bitcoin by whatever means necessary, namely through mining. After all the instruments in the government arsenals have been exhausted, a new world reserve currency will emerge. It will be bitcoin.
This is a guest post by Kaz Bycko. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.