This is an opinion editorial by Stephan Livera, host of the “Stephan Livera Podcast” and managing director of Swan Bitcoin International.
As the chapter of 2022 closes, it’s time to look at what’s coming in 2023. Here are some of the themes I see for Bitcoin in 2023.
Regulatory Overreach
The Financial Action Task Force (FATF) Travel Rules is forcing bitcoin exchanges and service providers to record and share more information about customer transactions. We’ve seen politicians such as Elizabeth Warren publicly oppose Bitcoin, and although the proposed digital asset AML action is not a real possibility, there are signs that a battle is in the future.
However, on the other hand, we must also remember that the government was initially against voice over internet protocol (VoIP) technology (for example, Skype, etc.), and now they are use VoIP. It will be similar to bitcoin, where some countries use it as legal tender, keep bitcoins in reserve, provide Bitcoin services to citizens and encourage bitcoin investors and entrepreneurs.
CBDCs and the War on Cash
The war on cash continues, with many countries taking high-denomination cash notes out of circulation, or banning physical cash transactions above the threshold. There are many countries talking about central bank digital currency (CBDC) trials, but my guess is that most of them do not have the overall technical and economic ability to establish a fully functional CBDC in 2023.
2023 is mostly about testing and rhetoric, in preparation for the future launch of CBDC. Governments can especially force people to go to CBDC in countries with large welfare states, with the understanding, “If you want to check welfare, you will take it as a CBDC.” Like Darth Vader in “Star Wars,” it will be a case of, “Pray I don’t change the deal again.”
In the past, CBDC may have been seen as a “conspiracy theory” but now it is clearly a threat to financial freedom and privacy. Unfortunately, most people won’t see the threat until it’s too late and CBDC is already there – but it’s also the pain of CBDC that will drive more people to use Bitcoin and the Lightning Network.
Maxis Transferred and Reinstated in Custodial Interests
Bitcoin Maximalists are being printed as “crypto” casual enthusiasts asking for rekt on platforms such as Celsius, BlockFi, FTX, Voyager, Vault, etc. So, in some ways, it is very cyclical, the bear cycle of 2014 to 2015 followed after the collapse of Mt. Gox, and during the bear cycle of 2018 to 2019, we saw the breakdown of QuadrigaCX – so we just went through another round of learning the hard way.
For 2023, we will see a stronger custody culture because the pain in 2022 is more recent. This is not to preclude future cycles and waves of new adoption with people coming in who are not careful. Produce and scam shitcoin will return in another form sooner or later, but there will be a new round of people who succumb to them.
We are seeing more content and webinars related to custody. For example, with Swan Bitcoin, I hosted several 101 custody webinars myself (which I will be doing soon), and these webinars had the highest interest and registration from any Swan webinars are never offered. Offering an easy automatic withdrawal feature or being 100% non-custodial will be an important feature for the Bitcoin on-ramp in 2023.
Miniscript Wallet and Features
According to Pieter Wuille’s site:
“Miniscript is a language for writing (a subset of) Bitcoin Scripts in a structured way, allowing for analysis, composition, public signatures and more.”
For those who don’t know, Miniscript is a way to more easily express different scripts or spending conditions for bitcoins. It can be built into different wallets in a way that makes cross-hardware and -software compatibility easier.
You might be thinking, “Why should I care?” and, in the beginning, you will be right to ask that. But over time, this will enable more sophisticated planning, corporate or even legacy scenarios. Want to have a three-out-of-three multisig setup that degrades down to a two-out-of-three multisig setup after 90 days? Or have different “backward” conditions that exist for business contexts? Miniscript makes it easier to do that, and let people use existing software or hardware for this purpose. To be clear, some of this is already possible with current Bitcoin scripts, but Miniscript makes it technically more feasible or easier to achieve in practice.
It will take time for the solution to be built, but the functionality looks promising. Business and corporate customers may be interested in this as it can make self-custody practices more practical for employees and key holders.
Currently, there is Liana (by the same team behind Revault), and Ledger, which has announced Miniscript support in hardware, and Specter DIY has activated support in 2021! Rob Hamilton has also talked about the use of Miniscript in the insurance world here. I expect more support in 2023.
This could help push the use of bitcoins in the direction of self-custodial, and away from the “old model” of financial services where you have to trust governments, banks and fiat financial institutions to honor your word or not devalue your wealth.
First Lightning
It’s time to create a Lightning-first model for two types of bitcoin transactions: low-cost transactions and private trades. We see the mempoolfullRBF debate erupting in late 2022, but the real answer for most is to promote and use Lightning first, if possible.
As a quick anecdote, I remember talking to Giacomo Zucco who described his experience in El Salvador about paying with bitcoins in a supermarket. Unfortunately, Chivo’s terminal at that time defaulted to Bitcoin on-chain, and when he paid on-chain, the people in line behind him had to wait for confirmation, which was very awkward. Contrast this with a Lightning-first experience that might look like this:
We need to show people the best of Bitcoin and for cheaper private trading, we need to find Lightning first. I believe we will start to see this pushed and supported by more Bitcoiners and local communities in 2023.
Community Expansion and Bitcoin Only Events
We will see more small scale events and conferences in different countries around the world. Contrary to some who believe that there are too many Bitcoin conferences, the problem is more one of assuming that everyone should attend!
You should even attend events and conferences that align with your interests and/or geography. Having more conferences is a good thing, as long as it is done cheaply and effectively. For example, the Bitcoin bush bash is a model that can be seen around the world – free to attend, held in a hall or other free/low-cost area, no registration, small-scale gathering held anywhere that is cost-effective.
By lowering expectations for things that usually cost more money (eg, good, professional operations, live streaming, lots of international speakers), Bitcoiners can improve the local scene and meetup. This is not to detract from the larger Bitcoin events and conferences, because they also play a key role – but I see a “middle ground” that can be taken up by low-cost, local events.
Overall Sentiment
Without having a crystal ball for 2023, I believe the fiat price of bitcoin will remain in its usual downward trend. Forget what the bull-hopium people post and say, usually chasing engagement or getting caught in their own echo chamber. It takes time to cycle down.
But let’s look on the bright side, it’s a good time to stack sats and build something. Remember, in previous cycles, it wasn’t so clear that “Bitcoin is coming back,” but now, the world is slowly realizing that Bitcoin is here.
This is a guest post by Stephan Livera. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.