What Big Changes Are Coming to Bitcoin Over the Next Year?

Bitcoin Matures as an Asset

When looking into Bitcoin, one must consider more than just what its technology can do. Putting the debate of slow transactions and lack of smart contracts aside, it is important to look at the adoption of BTC itself. Now more than ever, BTC is being held by a wide range of individuals, companies, and now nations.

Political Acceptance

Bitcoin is attaining a level of political acceptance that many (including myself) did not think we would see by 2022. For starters, El Salvador has made BTC legal tender, paving the way in terms of ironing out the kinks for nations that follow. The state of Arizona is also considering making bitcoin legal tender.

The mayors of Miami and New York city are opting to take some of their salary in BTC. Then across the world, nations like India, Turkey, Korea, and a swath of European nations are providing frameworks of acceptance for BTC, as well as other cryptocurrencies. At the same time, there are nations like China who continue to increase controls and dissidence for Bitcoin. Regardless, it seems like the political scales tilt more towards acceptance and regulation than outright bans.

Now the conflict in Ukraine is generating even more interest in crypto as citizens look for a safe haven for their assets.

Corporate Adoption

From a corporate perspective, the outlook for bitcoin in 2022 looks promising. In recent news, KPMG Canada added undisclosed amounts of BTC and ETH to their balance sheet. KPMG is one of the big four international providers of accounting services which makes the acquisition particularly interesting considering they have a firm grasp on money related services. The acquisition is expected to trigger KPMG’s competitors to also acquire bitcoin in order to keep up on how to account for it on the balance sheet of corporations.

In the last two years, a number of other tech giants such as Twitter, Tesla, and Microstrategy have also decided to include BTC in their treasury. These large institutional players bring vast volumes of money to the market which enhances the maturity and stability of bitcoin. Because these corporations are American, publicly traded companies, it creates a disincentive for lawmakers and regulators to create laws penalizing the holding of bitcoin in treasuries.

Individual Adoption

On an individual level, the cohort of people that are getting sucked into the bitcoin rabbit hole are the people that are most affected by inflation taking place in their countries. Turkey for example has some of the highest rates of adoption of all cryptocurrencies, bitcoin in particular.

Turkey’s 2021 inflation rate of 38% likely has something to do with why its citizens are paying close attention to bitcoin. Citizens of more developed countries like Canada, United States, Australia, and the UK are using bitcoin more as an investment vehicle, whereas citizens of developing nations are closer to seeing bitcoin as actual money. This is evidenced by the use of the lightning network in places like El Salvador and Nigeria.

Sidechains, Layer-2’s, and Smart Contracts

Bitcoin will be the recipient of a variety of upgrades and improvements in 2022. However, none of the upgrades will take place within Bitcoin’s core protocol. The upgrades will take place on sidechains, and layer-2 scaling solutions such as the Lightning Network.

Internet Computer

One of the more exciting upgrades coming to Bitcoin in 2022 is smart contracts on the Internet Computer. Developers will have the capability of building smart contracts that are centered around actual BTC. This is different from networks like Ethereum or Binance Smart Chain wherein bitcoin is wrapped into WBTC and BTCB respectively. The difference is that the Internet Computer uses BTC directly, and other networks issue a token that represents a claim on actual bitcoin. This novel implementation will allow users to retain access to their private key whilst using BTC within lending and liquidity providing smart contracts.

Lightning Network

The lightning network is likely to receive the bulk of bitcoin’s technical development throughout the year. In 2021, the lightning network set new all time highs in terms of use and capacity. The trend of the lightning network growing is showing no signs of slowing down especially when we consider who is building on top of it. Jack Dorsey resigned from the CEO role of Twitter to spend more time working on Bitcoin. The first action he took was to rebrand Square underneath the umbrella organization of “Block”. The organization consists of Square, Cash App, Spiral, and Tidal. Each of these companies have something to do with bitcoin, but right now, we’re going to focus on the Cash App.

Cash App

In January, the Cash App announced that users can now send and receive bitcoin instantly, and for free using the lightning network. This is a major step forward for the growth of bitcoin, the lightning network, and the Cash App. As of 2020, the Cash App had more than 34 million users, this number is only expected to grow as it gives greater capabilities for its users to buy and use bitcoin in everyday transactions.

One of the biggest critiques of bitcoin since its inception was that it would never be able to handle a global load of transactions. This is true, but only for the base layer (the Bitcoin blockchain). The lightning network is anticipated, expected, and now close to being ready to handle millions of users and their transactions. Now that Block, and its related organizations are dedicated to building on bitcoin, you can expect to see a stream of development news for bitcoin in 2022.

Wider Adoption of Bitcoin

All of what lays ahead for bitcoin in 2022 amounts to a continuation of widespread adoption. Bitcoin has already been exploding in awareness since 2020 when central banks and governments all over the world decided to print their way out of the COVID-19 crisis.

While it may not be directly related, it does seem like Bitcoin has entered the cultural zeitgeist in a much larger way than in 2017 when much of the discussion around Bitcoin was focused around its price. Now it seems like individuals, companies, and nations are all discussing the use of bitcoin in solving real economic problems at all scales. Regardless of whether or not the conversation is a positive one, the attention that Bitcoin is getting is arguably positive under the trope “no press is bad press”. If you’re following Bitcoin, expect 2022 to be a big year.