2020 was unforgettable, especially for Bitcoin. To commemorate this year for our readers, we asked our network of contributors to think about Bitcoin’s price action, tech development, community growth, and more in 2020, and what all of this could mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. click here to read all the stories from our End Of Year 2020 series.
Bitcoin’s short, 12-year history is filled with exciting times. From the impeccable conception born by Satoshi Nakamoto to the extreme polarity between facial melting pumps, catastrophic fixes, infamous exchange hacks and internal Bitcoin civil wars; not many years have been as exciting for Bitcoiners as 2020 was.
Since the infamous Bitcoin crowd has been “Paul Revere’d” for years, it looks like “the institutions” are finally coming. The new demand in the coming years will drive Bitcoin to become the next reserve currency in the world.
The case for a modern store with value
As we approach the end of 2020, more than 5 percent of bitcoin’s total supply is held as a treasury reserve on the balance sheet of more than 20 public and private companies, a trend that started to materialize this year.
Over the same period, the USD M1 money supply – a measure used by economists to quantify the amount of money in circulation in a given country – has increased by more than 60 percent. The reckless monetary and fiscal policies instituted by central banks and governments as a global response to COVID-19 have put bitcoin in the spotlight as a potential new store of value.
This direct liquidity injection of USD into the United States and the broader global economy is known as quantitative easing (QE) or ‘printing money’. The Fed’s commitment to increasing the money supply at will disrupts price signals, lowers real wages, increases wealth inequality and ultimately destroys the free market. Savers are punished when their time and wealth is plundered from under them by the cancer process inflation. While the dollar’s global reserve currency status creates an inherent demand, it does not appear that this trend of monetary cutbacks could last long into the future. The advocacy of a hard-capped supply currency that cannot be manipulated at will by governments and institutions has never been stronger.
In steps the Bitcoin Bull Bull Bull, Gigachad Michael Saylor.
Saylor, one of the longest-standing CEOs of a publicly traded technology company, became Bitcoin rookie of the year this year after purchasing nearly $ 1.3 billion worth of Bitcoin (about 70,000) with the balance sheet of his company, MicroStrategy. He is not alone in noticing this trend.
Paul Tudor Jones, Stanley Druckenmiller, Scott Minerd – names all related to institutional hedge funds – have opened their minds and wallets to an allotment of bitcoin. Large, private banks such as CitiGroup have come out $ 300,000 to $ 400,000 Price Predictions for the following year. As we continue to destroy the USD’s purchasing power, this game theoretical trend of scarce asset allocation will only increase in the future.
Last, and certainly not least, the wonderful NgU (Number Go Up) technology that is an integral part of Bitcoin continues to drive us to new highs. On December 16, bitcoin broke its previous record set in 2017 and rose above USD 20,000 for the first time. The further appreciation of bitcoin’s price over the next decade will drive its widespread adoption as a corporate financial reserve. A higher price will catch new eyes, leading to more awareness and ultimately less volatility. Bitcoin remains a shining beacon of hope in a world built on monetary slavery.
Protocol improvements and ecosystem innovation
As a technologist, the improvements to the various layers in the Bitcoin protocol remain some of the most exciting advancements of 2020. Schnorr Signatures / Taproot / Tapscript, via a multi-layer Bitcoin improvement proposal (BIP), was merged into the core code base earlier this year. ‘Taproot’, as it is commonly known, drastically improves the digital signature algorithm used by Bitcoin. Massive improvements in on-chain privacy, scalability, and transaction efficiency are baked into the Taproot upgrade. This series of upgrades will further increase adoption of the Lightning Network, multi-signature transactions and CoinJoins, ultimately leading to a more secure and personalized Bitcoin experience.
Aside from the core protocol improvements, the innovation ecosystem around Bitcoin continues to improve the tools available to Bitcoiners. I would like to name a few of my favorites:
- Swan Bitcoin: A new way to buy bitcoin that forces you to think long-term through the dollar cost average.
- Ghost: A desktop interface that integrates with hardware wallets and enables easy-to-use multisig.
- Strike: A payment application that allows users to pay a bitcoin invoice with USD.
- ColdCard: A secure way to store private keys with a device that is not connected to the Internet.
Aside from Bitcoin tools, developer grants through businesses and non-profit organizations have started to normalize in 2020. Organizations such as the Human Rights Foundation, Square, Cracking and more have started sponsoring developers to encourage them to work full-time on improving Bitcoin. Sites like BitcoinDevList and BitcoinACKs incentivized your average Bitcoiner to contribute to Bitcoin’s circular economy by donating sats to developers.
Finally, thought leadership continues to enhance Bitcoin’s educational experience, popularly known as ‘falling down the rabbit hole’. Podcasts, books, articles, conferences and personalities on Bitcoin Twitter all continue to stifle the complexity of Bitcoin with digestible and entertaining content suitable for both pre-Coiners and Bitcoiners. As more and more people devote their lives to Bitcoin, the influx of intelligence and ingenuity will hurl humanity into the stratosphere of innovation for decades to come. This synergy of thought leadership will enhance anyone who seeks it.
Looking ahead: the battle ahead
As we approach the New Year and envision the way ahead, a few trends seem to be emerging. The first will be in the introduction of central bank digital currencies (CBDCs) that will seek to replace the private banking sector with a combination of central banks and fintech. New currencies such as the digital dollar and the digital yuan are trying to accelerate the Orwellian future we are marching towards through direct taxation, capital controls, financial supervision and a universal basic income.
I would like to be explicitly clear: these currencies are no more of a threat to Bitcoin than any fiat currency. More than 90 percent of US dollars is already digital, and most governments want to do away with their money completely in the coming years. Creating a CBDC does not solve the problem of monetary cuts or the problems of financial supervision and censorship. Bitcoin remains the only imperishable money in existence today.
The second trend will seek to regulate Bitcoin. We are already starting to hear rumors about it restrictions on self-custody floating around. A complete ban on self-preservation is unlikely, but withdrawal limits and additional KYC prescriptions are almost certain. In the coming years, there will be direct attacks on anyone trying to use Bitcoin privately. We have to fight this. Privacy in itself is not illegal and is the basis for freedom. If Bitcoiners give up the ability to own their bitcoin by handing it over to institutions, this is one of the only real threats to Bitcoin.
The Bitcoin protocol was developed based on the binding incentives of social consensus. Anyone who chooses to use Bitcoin must agree to a set of rules that are validated by others on the network. When you take control of bitcoin yourself, you agree to these rules. When you run a Bitcoin node and verify your own transactions, you agree to these rules. When you mine bitcoin and contribute to securing the network by energy and work, you agree to these rules. By relinquishing the ability to self-control bitcoin and independently monitor supply, the social consensus of the Bitcoin protocol will expire and those rules may be changed. Individuals must be willing to fight for what they believe in. I believe in Bitcoin and I am willing to fight for it.
Finally, after all attempts to counterfeit Bitcoin have failed, governments have no choice but to take it over, otherwise they risk facing obsolescence. This is the last leg on the way to one Bitcoin standard. Competitive game theory will force the hands of governments to buy bitcoin by every means possible, namely through mining. After exhausting all the tools in the arsenals of governments, a new world reserve currency will emerge. It will be bitcoin.
This is a guest post from Kaz Bycko. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.