Seven Major Themes Related to Bitcoin in 2023: Lightning Network, CBDC, Miniscript Wallet, etc

Written by: Stephan Livera, Bitcoin magazine

Translated by: The Way of DeFi

This is a commentary piece from Stephan Livera, host of the "Stephan Livera Podcast" and Managing Director of Swan Bitcoin International.

As we close the chapter on 2022, it's time to turn our attention to what will happen in 2023. Here are some themes I believe will be relevant to Bitcoin in 2023.

Overregulation

The Financial Action Task Force (FATF) travel rules are forcing exchanges and Bitcoin service providers to record and share more information about customer transactions. We see politicians like Elizabeth Warren publicly opposing Bitcoin, even though the digital asset anti-money laundering bill she proposed has little chance of passing. This does signal that there will be battles over Bitcoin in the future.

On the other hand, we should also remember that governments initially opposed Voice over Internet Protocol (VoIP) technologies (like Skype), and now they are using VoIP. This is similar to Bitcoin, where some countries are adopting Bitcoin as legal tender, holding Bitcoin reserves, providing Bitcoin services to citizens, and encouraging Bitcoin investors and entrepreneurs.

CBDC and the War on Cash

In the war against cash, many countries have eliminated the circulation of large denomination cash or banned physical cash transactions above a certain threshold. Many countries are discussing trials of Central Bank Digital Currencies (CBDCs), but my guess is that most countries do not have the technological and overall economic capability to establish a fully functional CBDC in 2023.

2023 will mainly be about experimentation and rhetoric, preparing for the future rollout of CBDCs. In high-welfare countries, governments can especially force people to adopt CBDCs; you can interpret it as "if you want your welfare check, you'll take it as a CBDC."

Once upon a time, CBDCs might have been seen as a "conspiracy theory," but now they clearly pose a threat to financial freedom and privacy. Sadly, most people will only see the threat when it's too late and CBDCs are in front of them— and the pain of CBDCs will drive more people to use Bitcoin and the Lightning Network.

Maxis are Reviving

As casual "crypto" fans are being harvested by platforms like Celsius, BlockFi, FTX, Voyager, and Vault, Bitcoin maximalists are reviving. So, in a way, this is very cyclical; the bear market cycle of 2014-2015 followed the collapse of Mt. Gox, and during the bear market cycle of 2018-2019, we saw the collapse of QuadrigaCX. So, we are just going through another round of hard lessons for people.

By 2023, we will see a stronger self-custody culture, as the pain of 2022 is still fresh. This does not exclude future cycles and new waves of adoption, as newcomers are not as cautious when they come in. Yield and shitcoin scams will return in one form or another, but that will belong to a new round of people succumbing to them.

We are seeing more content and webinars related to self-custody. Providing simple automatic withdrawal features or 100% non-custodial options will be an important feature for Bitcoin entry points in 2023.

Miniscript Wallets and Features

According to Pieter Wuille's website:

"Miniscript is a language for writing Bitcoin scripts (subsets) in a structured way, supporting analysis, composition, general signatures, and more."
For those unfamiliar with it, Miniscript is a way to express different Bitcoin scripts or spending conditions more easily. This can be built into different wallets to achieve easier cross-hardware and software compatibility.

You might first think, "Why should I care?" At first, it's a valid question. But over time, this will enable more complex self-custody, business, and even inheritance planning scenarios. Want to have a 3/3 multi-signature wallet setup that degrades to a 2/3 multi-signature wallet setup after 90 days? Or have different "exit" conditions in a business context? Miniscript makes these things easier and allows people to use their existing software or hardware to achieve this. It's important to clarify that some of this can already be accomplished with Bitcoin scripts, but Miniscript makes it technically more feasible or practically easier to implement.

Building these solutions takes time, but their functionality seems promising. Businesses and enterprise clients may be particularly interested in this, as it can make their self-custody practices more practical for employees and key holders.

Currently, there are projects like Liana (developed by the same team behind Revault) and Ledger working on this, with the latter announcing support for Miniscript in its hardware, while Spectre DIY enabled support back in 2021! Rob Hamilton has also discussed the applications of Miniscript in the insurance sector. I expect to see more support for Miniscript in 2023.

This could help push Bitcoin usage towards self-custody and away from the "old model" of financial services, where you have to trust governments, banks, and fiat financial institutions more to keep their promises, or else your wealth diminishes.

Lightning Network First

It's time to introduce a Lightning Network-first model for two types of Bitcoin transactions (low-value transactions and face-to-face transactions). We saw the debate over mempoolfullRBF erupt at the end of 2022, but for most of us, the real answer is to promote and use the Lightning Network as much as possible first.

As a brief anecdote, I remember a conversation with Giacomo Zucco, who explained his experience using Bitcoin to pay at a supermarket in El Salvador. Unfortunately, the Chivo terminal at the time defaulted to on-chain Bitcoin payments, and when he paid on-chain, the people behind him had to wait for confirmation, which was very awkward. In contrast, a Lightning Network-first experience looks more like this:

We should show people the best side of Bitcoin, and for face-to-face, low-value commerce, we should prioritize the Lightning Network first. I believe we will start to see more Bitcoin enthusiasts and local communities promoting and encouraging this practice in 2023.

Expansion of the Bitcoin Community and Events

We will see more events and small conferences around the world. Contrary to some who think there are too many Bitcoin conferences, the issue is more about the assumption that you have to attend all of them!

Instead, you should attend events and conferences that align with your interests and/or geographical location. Having more conferences is a good thing, as long as they are conducted in a low-cost and effective manner. For example, the "Bitcoin bush bash" is a model we might see around the world—free to attend, held in halls or other free/cheap venues, no recordings, and hosting smaller gatherings in cost-effective places.

By lowering expectations for things that usually cost more money (like fancy, specialized operations, live streaming, and many international speakers), Bitcoin enthusiasts can expand their local scenes and gatherings. This is not to diminish larger Bitcoin events and conferences, as they also play a crucial role—but I see a "middle ground" that can be occupied by low-cost local events.

Overall Sentiment

Without a crystal ball for 2023, I believe the fiat price of Bitcoin will mainly remain in a sideways trend. Forget about what the zealots are posting and talking about; they are often chasing engagement or too immersed in their own "echo chamber." Cycles take time to bottom out.

But let's look at the bright side; this is a good time to accumulate Bitcoin and build things. Remember, in previous cycles, "Bitcoin will come back" was not so clear, and now the world is slowly realizing that Bitcoin will continue to exist.