2020 was unforgettable, especially for Bitcoin. To help celebrate this year for our readers, we asked our network of contributors to reflect on Bitcoin’s price action, technological development, community growth and more in 2020, and to reflect on what it all could mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. click here to read all the stories in our 2020 year-end series.
Bitcoin’s short 12-year history is full of exciting moments. From the immaculate conception born through Satoshi Nakamoto to the extreme polarity between face fusion bombs, catastrophic corrections, infamous exchange hacks and internal Bitcoin civil wars; not many years have been as exciting for Bitcoiners as 2020 was.
While the infamous Bitcoin crowd “Paul Revere’d” for years, it looks like “institutions” are finally coming. New demand in the coming years will propel Bitcoin to become the world’s next reserve currency.
The case of a modern store of value
As we approach the end of 2020, more than 5% of the total supply of bitcoin is kept as a treasury reserve asset on the balance sheet of more than 20 public and private companies, a trend that began to materialize this year.
In the same period, the M1 dollar money stock – a metric used by economists to quantify the amount of money in circulation in a given country – increased by more than 60%. The reckless monetary and fiscal policy instituted 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 dollar liquidity into the United States and the global economy in general is known as quantitative easing (QE) or “money printing”. The Fed’s commitment to increase the money supply at will distorts price signals, reduces real wages, increases wealth inequality, and ultimately destroys the free market. Savers are punished as their time and wealth are plundered through the cancerous process of inflation. Although the status of the dollar’s global reserve currency creates an inherent demand, it does not appear that this trend of monetary degradation could continue for long into the future. The defense of a currency with a restricted supply that cannot be manipulated at will by governments and institutions has never been stronger.
In the stages Bitcoin Bull Bull Bull, Gigachad Michael Saylor.
Saylor, one of the longest-serving CEOs of a publicly traded technology company, became the Bitcoin rookie of the year this year after buying almost $ 1.3 billion in Bitcoin (about 70,000) with the balance of his company, MicroStrategy. He is not the only one to notice this trend.
Paul Tudor Jones, Stanley Druckenmiller, Scott Minerd – names all associated with institutional hedge funds – have opened their minds and portfolios to a bitcoin allocation. Major private banks like CitiGroup have released price forecasts of $ 300,000 to $ 400,000 for the coming year. As we continue to destroy the USD’s purchasing power, this theoretical trend of scarce asset allocation game will only continue to increase in the future.
Last, and certainly not least, the beautiful NgU (Number Go Up) technology integrated with Bitcoin continues to take us to new peaks. On December 16, bitcoin broke the previous record of 2017, rising above $ 20,000 for the first time. The further appreciation of the price of bitcoin in the next decade will lead to its dominant adoption as a reserve asset of the corporate treasury. A higher price will attract new eyes, leading to more awareness and, eventually, less volatility. Bitcoin remains a bright beacon of hope in a world built on monetary slavery.
Protocol improvements and ecosystem innovation
As a technologist, improvements to the different layers in the Bitcoin protocol continue to be some of the most interesting advances of 2020. Schnorr Signatures / Taproot / Tapscript, through a proposal for multi-layered bitcoin (BIP) improvement, has been incorporated into the main code base earlier this year. “Taproot, ” as it is commonly known as, dramatically improves the digital signature algorithm used by Bitcoin. Major improvements in on-chain privacy, scalability and transaction efficiency are incorporated into the Taproot update. This series of updates will further increase the adoption of the Lightning Network, multisignature transactions and CoinJoins, leading to a more secure and private Bitcoin experience.
Outside of improvements to the core protocol, the innovation ecosystem around Bitcoin continues to improve the tools available to Bitcoiners. I would like to highlight some of my favorites:
- Swan Bitcoin: a new way to buy bitcoin that forces you into a long-term mindset, averaging the cost in dollars.
- Specter: a desktop interface that integrates with hardware portfolios and allows easy to use multisig.
- Strike: A payment app that allows users to pay a bitcoin invoice using USD.
- ColdCard: A secure way to store private keys with a device not connected to the Internet.
Outside of Bitcoin tools, developer grants through corporate and nonprofit entities began to normalize throughout 2020. Organizations like the Human Rights Foundation, Square, Kraken and others have started to sponsor developers to encourage them to work on improving Bitcoin full time. Sites like BitcoinDevList and BitcoinACKs have encouraged their average Bitcoiner to contribute to Bitcoin’s circular economy by donating sats to developers.
Finally, innovative leadership continues to improve Bitcoin’s educational experience, colloquially known as “falling into the rabbit hole.” Podcasts, books, articles, conferences and personalities on Bitcoin’s Twitter continue to suffocate Bitcoin’s complexity with digestible and fun content suitable for prefabricators and Bitcoiners. As more and more people commit their lives to Bitcoin, the influx of intelligence and ingenuity will launch humanity into the stratosphere of innovation in the coming decades. This synergy of innovative leadership will improve all who seek it.
Looking to the future: the battle ahead
As we approach the new year and imagine the way ahead, some trends seem to be emerging. The first will be the introduction of central bank digital currencies (CBDCs), which will seek to replace the private banking sector through a combination of central bank and fintech. New currencies, such as the digital dollar and the digital yuan, seek to accelerate the Orwellian future that we are marching towards through direct taxation, capital control, financial surveillance and a universal basic income.
I would like to be explicitly clear: these currencies are no more a threat to Bitcoin than any fiat currency today. More than 90 percent of US dollars are already digital, with most governments looking to eliminate money completely in the years to come. The creation of a CBDC does not solve the problem of monetary degradation or 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 have already begun to hear rumors of restrictions on self-care. Complete bans on self-custody are unlikely, but the KYC withdrawal limits and additional regulations are almost certain. In the coming years, there will be direct attacks on anyone who tries to use Bitcoin in particular. We must fight this. Privacy, by itself, is not illegal and is the foundation of freedom. If Bitcoiners give up the ability to self-custody their bitcoin by handing it over to institutions, this is one of the only real threats to Bitcoin.
The Bitcoin protocol is designed 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 self-custody bitcoin, you agree to these rules. By running a Bitcoin node and checking your own transactions, you agree to these rules. When you extract bitcoins and contribute to protecting the network through energy and work, you agree to these rules. Giving up the ability to self-care for bitcoin and independently auditing the supply overrides the social consensus of the Bitcoin protocol and allows these rules to be changed. Individuals must be willing to fight for what they believe in. I believe in Bitcoin and I’m ready to fight for it.
Finally, after all attempts to counterfeit Bitcoin have failed, governments will have no choice but to adopt it or risk becoming obsolete. This is the final stage that remains on the path to a Bitcoin standard. The theory of competing games will force the hands of governments to start acquiring bitcoin by all necessary means, mainly through mining. After all the tools in government arsenals are exhausted, a new world reserve currency will emerge. It will be bitcoin.
This is a guest post by Kaz Bycko. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.