Add the dry beans, 8 cups of water, salt, and pepper to the Instant Pot.
Secure the lid and set the valve to the Sealing position. Cook on High Pressure for 20 minutes.
When the cooking time is complete, allow the pressure to release naturally.
Drain the beans in a colander and rinse them with cold water. Set aside.
Set the Instant Pot to Low Sauté. Add the bacon and diced onion and cook for 3–5 minutes, or until the bacon begins to brown and the onion softens.
Scrape the bottom of the pot well to loosen any browned bits, then turn off the Instant Pot.
Add the cooked beans, barbecue sauce, ketchup, spicy brown mustard, apple cider vinegar, liquid smoke, brown sugar, and remaining 1 cup water. Stir until well combined.
Secure the lid and set the valve to the Sealing position. Cook on High Pressure for 10 minutes.
When the cooking time is complete, carefully perform a quick release.
Remove the lid and stir. For a thicker sauce, set the Instant Pot to Sauté and cook uncovered for a few minutes, stirring occasionally, until the sauce reaches the desired consistency.