Let’s take a trip down memory lane and think about Bitcoin’s journey so far. I bet a few key moments immediately jumped out at you, right? Like, those big, unforgettable milestones. If you kept your mind going, you probably started piecing together more events, using those initial landmarks as your guide.

Now, don’t treat these thoughts as set-in-stone predictions. And please, try to ignore my tendency to get a little carried away with excitement – hyperbole just kind of happens. Also, keep in mind, I’m not throwing out any dates here. What I am going to do is walk you through a list of what I see as “game-changing moments,” or major shifts, that I’m pretty confident will either happen or kick off in the next ten years.

— A Visit To The US Supreme Court —

Bitcoin, in its very nature, creates a fundamental clash with how regulations and laws are currently set up, especially in the US and wherever the US’s influence is strong. This tension comes from Bitcoin’s core workings and two big themes in legal frameworks.

• KYC/AML Laws: These rules are there so that financial institutions are sure about who they’re dealing with. The idea is to stop criminals, money launderers, or terrorist groups from using these institutions for bad stuff. To make this happen though, it means collecting a ton of personal info, tracking everything, and sharing it around between different places. It basically demands that we toss privacy out the window. Or does it?
• Financial Privacy Laws: Here’s the thing: in a country like the US, with something like the 4th Amendment in our Constitution, we also have laws like the Right to Financial Privacy Act. These laws are in place to limit when and how the government can get their hands on your financial records. Funny enough, these laws came about after a Supreme Court case that was actually challenging KYC/AML laws (ironically under the Bank Secrecy Act). The court decided that financial records aren’t really the customer’s private thing, but more like the property of the bank.

See the problem? This whole system is based on the idea that your financial activity is locked away in private places, hidden from the public eye. The government’s access is supposed to be different from everyone else’s access. But Bitcoin flips that on its head. Everything’s out in the open on the blockchain for anyone to see. So, while financial companies have to follow KYC/AML rules and know who their customers are, are they also supposed to protect their customers’ financial privacy, unless there’s a legal order to reveal it?

We’re now seeing real advancements in privacy tools within the Bitcoin world. And already, we’re noticing a trend: using these privacy tools is being seen as “bad behavior” by Bitcoin exchanges. This can lead to extra scrutiny on your account (and maybe even them closing your account or seizing funds later) just for using privacy features. Now, I’m not predicting some massive overhaul of KYC/AML laws in the US anytime soon. But I do think there’s a really strong argument to be made against exchanges and banks punishing customers for using privacy tools.

The argument is simple: people have a right to keep their financial stuff private from the general public. The current system doesn’t keep everything secret by default; it’s supposed to selectively reveal info to the authorities. But with Bitcoin, everything is public and verifiable from the start, it’s built into how it works. So, if I have a Constitutional right to financial privacy in the old system, shouldn’t I have one in this new system too?

Again, let’s be clear: this isn’t going to magically erase all KYC/AML regulations or get rid of customer identification requirements. But I do believe it’s a solid enough point that it could lead to a Supreme Court decision saying businesses can’t just punish or target customers simply for trying to protect their privacy in ways that don’t directly harm the business. If things keep going the way they look to be going, I think a legal challenge to these kinds of practices is inevitable. If I’m right, what happens? Well, I guess we’ll find out.

— Inevitable Mining Landscape Evolution —

Mining is probably the easiest thing, besides the price of Bitcoin, to show someone to really get across just how far Bitcoin has come in the last decade. From mining on your home computer to huge data centers in ten years! That kind of change is going to keep happening fast, and the next big shift is already starting: vertical integration. We went from using regular computer processors (CPUs) to graphics cards (GPUs), and then to specialized chips called ASICs. But even ASICs were still something regular people, small groups, or smaller businesses could easily get their hands on. It was still pretty accessible to get efficient mining gear at different scales, though of course, the price changed depending on how big you wanted to go.

That’s going to change. And we’re already seeing signs of it. Mining is going to become less and less profitable for individuals and smaller players (ignoring professional hosting services). Big companies are going to start locking things down. The market is still super volatile, and miners, from the companies making the equipment to the people running it, have massive investments that can be really risky when prices drop. Things tend to go crazy when the market goes up, but then get really tough for those who aren’t ready when it swings back down. This time around, managing and minimizing risk is going to be crucial.

When Bitmain tried to go public in Hong Kong, their financial reports became public and showed how they made huge profits but then lost a ton by taking big risks that only worked out because the market was booming. It hit them hard. And when the Hong Kong Stock Exchange looked at this pattern, happening with pretty much all the manufacturers trying to go public, they said “no way” to all of them. They decided the whole market these companies were in was too risky to list a business that was so directly exposed to it. This cuts them off from the money they need to keep expanding as Bitcoin gets much, much bigger. That’s a big problem.

Bitmain’s response to this lesson has been to restructure their business to adapt (even ignoring the recent internal power struggle). They’ve got a bunch of mining farms in China where they run their own equipment and also host machines for other people. They’ve expanded these operations to places like Texas and Washington state in the US, and Quebec in Canada. The big advantage of these farms is getting predictable electricity costs and having the choice of either using their own hardware to mine Bitcoin or renting out space to other miners. Putting it all together…they’ve positioned themselves to: 1) make and sell the “shovel” (mining hardware), 2) use the shovel to dig themselves, and 3) sell the shovel to someone else and also offer them a place to dig. That’s exactly what Bitmain is doing now with a new service.

Jihan Wu has also set up new financial services and tools at Bitmain to help customers manage some of their risk by taking on some of it themselves, and other more detailed deals that favor Bitmain. It’s uncertain if this particular strategy will stick given the drama with Micree Zhan and Jihan Wu, but it does show that they recognize the risk from market volatility and are trying to deal with it. This kind of adaptation is absolutely essential to survive in this part of the Bitcoin ecosystem long-term.

This is the direction things are heading, with a lot of momentum. Companies in the mining sector playing different roles will gradually try to branch out and control every part of the process they can: Making the gear | Research & Design | Hosting facilities | Running the mining | Getting the electricity | Managing financial risk | Lobbying governments. As economies of scale keep pushing on the mining industry, forcing companies to become leaner and more efficient, they’ll start trying to integrate as much of the whole stack as possible to control and protect themselves from financial risks.

There’s going to be a second big effect from this economy of scale and survival-of-the-fittest thing happening with miners. Governments will start to get involved at a more basic level and realize they have power to influence things. To really explain what I mean, let’s look back at mining in China, based on both official reports and what I’ve heard privately. Mining exploded in China because of two main things: 1) there’s extra electricity in many areas, and 2) local governments were often in bad financial shape and saw mining as a way to make some money for themselves. This might be why the Communist Party hasn’t really cracked down on mining, despite hinting at it, except in cases of outright criminal behavior like stealing power.

That same pattern is already happening everywhere mining operations are growing to scale. First step: make friends with the local government. We saw how that went in Quebec when Hydro-Quebec tried to block mining and auction off electricity after seeing a huge jump in demand for Bitcoin mining. Many projects in the US have been set up with the cooperation or partnership of local governments, in Texas, Washington, Georgia, and so on. That’s just how it works, you set up shop and the most local government is the first to try and get involved. Then the level above that can get involved, and then the one above that. It’s like a hierarchy of leeches.

We need to be very, very aware of this. Unless you can find Harry Potter’s wand and a spell to instantly get rid of every government in the world, they’re going to be there, and we have to deal with them. There are really only two ways to handle this, and one of them isn’t realistic.

The unrealistic way is to try and go completely off-grid and into the black market. That’s not going to work. We’re talking about hiding datacenters, and the total energy use of the Bitcoin network is on the scale of entire countries. Not an option. And if you want to try and fix this with a change to how Proof-of-Work works…well, good luck. You know where the door is.

The workable way is to do two things at once: 1) push at the local level for rules that aren’t too restrictive or harsh where mining operations are based (and for Bitcoin in general where you live) if you can, and 2) push at higher levels for general policies that keep power and decision-making as local as possible. If Bitcoiners and other interested groups aren’t paying attention and active in this area, then those initial local hooks will turn into State hooks, and then Federal hooks from your national government, all around the most basic part of mining: electricity access. These hooks are already in place in some areas. If we don’t act effectively at a social level to deal with this, we’ll slide down a very slippery slope:

• Eventually, we’ll see national-level regulation and governments directly interfering in how mining businesses are run.
• If Bitcoin keeps growing in value and importance as fast as it has been, then whichever country has the cheapest energy will end up dominating mining.
• This could easily turn into a kind of superpower system for mining, and if it becomes stable (or “stable enough”), it could create a base layer for Bitcoin that is much more centralized and restricted, which wouldn’t be good for Bitcoin’s full potential.

This part of the Bitcoin system is the most vulnerable to real-world threats. Ultimately, if people in a country give their government the power, they can just show up and take your mining equipment. It would take an incredibly broke government or a very remote location for that to be impossible. The only real way to deal with this is through social action.

And forcing people isn’t the only way to mess with this part of Bitcoin. Changing the incentives is another way. Chain Anchor was a proposal from MIT to basically bribe miners to first favor, and then only mine, transactions from people who had gone through KYC (Know Your Customer) checks. The goal was to block blocks that weren’t compliant. (Seriously, out of all the links in this piece, READ THIS ONE YOURSELF when you’re done here). These kinds of problems with economic incentives being twisted can only be fixed by correcting the economic incentives themselves.

This “shift” about mining is the one I’m most confident about in this whole piece. I wouldn’t say it’s a short-term “OMG panic!” situation, but Bitcoiners can’t afford to just ignore this problem.

— Neo-Switzerland —

Earlier, I talked about “Binks,” and how it might be possible to “port” some of Bitcoin’s features over to them, and why people would want to do that. It’s basically taking advantage of different rules in different places to make a lot of money. But there’s an interesting twist, given that it’s the 21st century: cyberspace itself could be seen as a kind of place with its own rules. Remember Darknet Markets? So, “Neo-Switzerland” could happen in two ways: either a real physical place legalizes financial businesses with no or very little KYC and becomes a safe haven for them, or it could be a “beyond-jurisdiction” (in quotes because servers are still somewhere physically) darknet business.

Meatspace Neo-Switzerland

Let’s think about a real country deciding to become a safe haven for Binks that don’t require or barely require KYC. First off, Bitcoin is a global, borderless currency and payment system that anyone with internet can use. So, the potential customer base for these Binks is anyone in the world who can get Bitcoin and get online. That’s a massive amount of money that could flow in, in the best-case scenario. And that’s what a country could tax. Also, if these Binks are based in a real country, they can be legal, registered businesses and held accountable. Even without KYC, cryptography can provide proof for claims of fraud, or disprove them, at least as a starting point for legal stuff. These Binks could offer anonymous accounts in BTC, untraceable digital cash in BTC, loans, escrow services, oracle services for complex smart contracts enforced by the Bink. Basically, all the financial services we have now, but accessible with a smartphone, almost no KYC (like it was back in 2013!), and even some extra cool features.

This is a huge opportunity for a country to make a lot of money. And because it’s a real country with a legal system, it can build enough trust to actually attract international customers. Okay, so from a customer’s point of view, what happens if something goes wrong with your Bink? If you’re a citizen of that country, easy: you can take legal action. If you’re not a citizen? Well… taking legal action across countries can be complicated and expensive. But if a country wants to make this kind of Bink thing work and attract business, right? So, the government could make laws to make it easier for non-citizens to deal with disputes with their Binks. And more importantly, the government could actually enforce these laws fairly, for both citizens and non-citizens.

The big question is, how would other countries react? The US, especially, likes to tell other countries what to do, especially with their finances. How far can a country push this before the US sends in the drones? No one knows until someone tries it.

That said, the kind of country where this might actually happen would probably be one of a few specific types. Maybe somewhere like North Korea, Iran, Venezuela, somewhere heavily sanctioned and cut off from the global financial system. Desperation is a strong motivator. Or maybe a secession movement in Spain or Italy succeeds, or France slowly falls apart until we get a 21st-century French Revolution. Big changes follow big political chaos. What if the King of Thailand decided to host KYC-less (or KYC-lite) Binks? Thailand already relies a lot on foreign tourist money. Why not foreign Bitcoin deposits? Tourism has caused a lot of problems for the country… Bitcoin Binks wouldn’t, unless you thought China or the US would invade.

I’m not saying this is super likely in the next ten years, but it’s definitely not crazy to think it could happen.

Cyberspace Neo-Switzerland

Alright, let’s look at the “darknet, no known government, totally anonymous” version. It’s the same as before in terms of deposits and customers—they can process BTC deposits and withdrawals for anyone in the world. But a Bink that operates outside the law can’t legally register in any country or be a legally accountable entity. That’s a big difference compared to a Bink hosted in a country that’s okay with it. It’s much harder to build up a network of users as a Bink in this situation, in terms of getting people to accept your digital cash and deposits instead of direct Bitcoin payments. A Bink’s network depends entirely on trust in whoever is running it. That’s much easier to build if you’re a legal, registered business in a known country. The rules of the game are clear. A darknet Bink is the opposite.

There would be no legal consequences for a darknet Bink, no government to complain to, no legal process, nothing. You only get the guarantees that cryptography can provide, and everything else is based on blind trust with no backup. That’s it. This is a major challenge to getting started for this kind of Bink. How do you get customers to trust you with their money when they have no way to get it back if you cheat them? In my opinion, this makes it impossible for this kind of Bink to ever get as big as one that has a legal identity in a safe haven country.

A darknet Bink would probably never be used by regular people. It would be for people in very tough situations, people doing risky illegal things, scammers, people banned from the regular financial system. I just don’t see normal people risking their Bitcoin with a Bink where they have no legal protection and only know pseudonyms. It might be possible to create stronger guarantees than we have now through cryptography. But that gets into weird territory. Like I said before when talking about tech developments, there’s potential for things that blur the lines between service and protocol. If things go well enough, maybe a darknet Bink could make up for the lack of trust by having super strong cryptographic safeguards.

I think there’s a really good chance things like this will start popping up in the next ten years (especially a simple trust-based darknet Bink). The real question is, how many of them will just be exit scams?

— Birth Of A New Market —

Bitcoin is turning into money, that’s what we’re seeing and helping to create. It’s evolving from something people just speculate on, to a way to send value, and eventually to a system for measuring value. A crucial part of this is having a big, active market to trade between Bitcoin, regular money (fiat), and goods and services. This trading activity (arbitrage) is what will allow real businesses to actually accept and use Bitcoin. Once Bitcoin is big enough and somewhat stable, businesses can accept it and pay suppliers without worrying too much about price swings. The closer Bitcoin’s price gets to being stable compared to a fiat currency, the safer it is to just accept and use Bitcoin directly instead of immediately selling it for fiat. Traders who look for small price differences will trade in these gaps, and businesses might even trade these themselves! Is it more profitable to accept Bitcoin or fiat for something? Offer discounts to encourage one or the other. Is it better to pay your supplier in Bitcoin or fiat? That’s what you’ll decide based on. This is the kind of dynamic that will truly make Bitcoin into real money.

Now, the world is changing pretty quickly in terms of global power. The US has been acting like a global empire for the last 20 years since 9/11, invading countries and pushing other nations to isolate others. We’re clearly starting to see other countries react by developing their own payment systems and trying to rely less on the US dollar. China and Russia have started building their own versions of SWIFT to handle payments. They’re even trading oil using currencies other than the USD. Venezuela is even trying to push an oil trade using its own centralized “cryptocurrency,” the Petro. The world is tired of the US overreaching, and they’re starting to create platforms and systems that aren’t controlled or censored by the US.

This trend is definitely going to continue and will inevitably include Bitcoin. There’s no reason why the trading relationship between Bitcoin, fiat, and goods & services has to start with regular retail shoppers. In fact, I think it probably won’t. Within the next ten years, I’m very confident that a group of countries that are against the US will start trading and paying for oil using Bitcoin. If Bitcoin’s market value, how easily it can be traded (liquidity), and price keep growing at the rates they have in the past, it’s inevitable. The Bitcoin system can handle it, there are more and more services to protect against price changes (volatility), and the overall amount of available Bitcoin to trade would be more useful than individual non-USD fiat currencies and fake nation-state “crypto” money.

Something like this happening would bring in massive amounts of money and cause price jumps unlike anything you’ve seen. And I think the chances of this not happening in the next ten years are really, really low. So, buckle up.

In Conclusion

This next decade is going to bring changes and developments on such a massive scale it’s going to blow your mind. I really don’t think a lot of people involved in Bitcoin fully understand this. Of course, the people building things, the company leaders, the key players actually making these shifts happen, they know. And it’s also fair to say that the smart and thoughtful observers get it too. But most people who just hold Bitcoin, or casually follow or watch this space… I don’t think they have a clue.

The last ten years were about going from a crazy idea from a small group of techies to starting to play in the minor leagues. This next decade is going to be the move to the major leagues. Are we going to mess it all up? Are we going to hit it out of the park? Is someone going to get hurt in the stands if we hit a home run?

Who knows. I think people who pay attention can see where big trends are heading, see the trends themselves, and imagine different paths they might take.

Things are serious now, and we need to think and act seriously.

Source: bitcoinmagazine.com