Bitcoin ; a Weapon and Shield

MACRO BACKDROP OF THE WORLD

After the unprecedented pandemic and the response from the Federal Reserve to print a surplus of money, we have seen an increased interest in many stocks, commodities, and other assets like crypto Assets like Bitcoin

Due to the Cantillon effect, the people who are closest to the Federal Reserve were able to benefit the most (i.e., people who held the most assets) while the people who got hurt the most were those in the lower to middle class who do not have as many assets and now have to deal with the increased cost of living.

What ended up happening was a Domino effect—the United States had roughly 15 to 20% inflation even though the official CPI number said 8%. But the rest of the world had a lot more inflation unfortunately. Some extremely impoverished Third World countries even had double and triple digits inflation and those countries were the first to fall.

For more than 10 years, El Salvador and Lebanon and other dollarized Third World countries have been using both currencies. However, last year the regular currencies collapsed, and these countries began solely using US dollars. This has led to field states and severe unrest. People were trying just to scrape by and central banks in these countries implemented capital controls with little avail and only increased the anger of the people.

This isn’t the first time the world has seen severe inflation. In the 80s, there was also a wave of increasing inflation but there was also a wave of fiscal stimulus and focus on infrastructure to match. This led to an increase in productivity and a boom in the economies of the world. It also led to a lot of populist movement at the time, especially in the Arab countries—for example Syria and Iraq.

But due to the free trade agreements and the entry of most countries into the WTO, more economies have been significantly intertwined. Although it was a benefit to experience growth and entry of foreign capital into these countries, like building factories due to cheap labor, it has also posed a significant problem. Some of these industrialized countries began collapsing and later outsourcing to China. This also connected every country to the petrodollar.

The agreements between the United States and these separate countries were based on Geopolitical and strategic partnerships in return for dollars and foreign aid. Even to the extent of mutual military agreements—especially in the Middle East, between Israel and Egypt.

So, the United States ended up exporting dollars to the world and importing all the materials to China to be manufactured for cheap labor.

Whether the consequences were intentional or unintentional, this has led to where we are today. Because America has the capability of printing more dollars and the velocity of money has decreased significantly due to the COVID-19 pandemic, the countries that have been living off of American dollars have lose their purchasing power.

By comparison, China’s economic foreign policy includes agreements for building infrastructure in these destitute countries in the Yuan. In return, China would take guarantees to control natural resources and, in some cases, — ports, either marine ports or Airports. Thus, enabling their grand plan of the Silk Road, where they try to control transportation in the Asian continent and are expanding rapidly.

THE MAIN PROBLEM WE’RE FACING

As previously explained, since America was exporting dollars, most of the Arab countries ended up getting the short end of the deal because the purchasing power had decreased rapidly, and they had been giving their natural resources in perpetuity for the past 40 to 50 years.

This is led to a decreasing ability for these countries to focus on improving their own infrastructure and their own GDP and merely just trying to keep up with the inflation costs of food. This has led to increasing unrest and agitation.

When the president of Egypt, President Anwar Sadat, made the agreement between Egypt, Israel, and the United States to get foreign aid of $8 billion per year back in the 70s, it was drastically different from the $8 billion they are receiving today. For example, wheat cost has increased significantly since then too.

These effects have drastically and disproportionately dissected the Arab world and other Third World countries that are not exporting oil.

These affects accumulated for 38 years until the Arab spring happened …

To be clear, I do not think the Arab spring is a standalone effect that happened only due to the corruption of separate governments. Rather, I believe it is a result of the right and the inability of people keep up with decreasing purchasing power.

After the 2008 financial crisis, and the beginning of the money printer to bail out all the major banks in the United States—our entire world economy would have collapsed had they not been bailed out—Greece defaulted on their sovereign debt loans. This contagion also could have affected the entire Eurozone had they not intervened and enforced austerity measures and bailed them out.

Then, within a few years, the Arab spring began in Tunis later in Egypt, and eventually in Libya and Syria. Some countries were able to escape with as little bloodshed as possible, but my home country of Syria and my hometown of Aleppo especially was met with brutal force.

But these events did not stop there….

In 2016, the United States had a huge rising populism— people were extremely angry, and there were too polarizing figures that were able to channel the anger of the people into those elections.

These two figureheads channeled the anger of the people in two separate ways. One channeled the anger of the people toward the establishment and the ruling elite class of the United States. While the other, channeled the anger inadvertently through racial tensions and immigration scare tactics towards the elites.

These two figures were Bernie Sanders and Donald Trump.

Unfortunately, Bernie Sanders was not strong enough to win and the establishment fought harder against him than Donald Trump, assuming they would win.

Those that stifle peaceful protests inevitably will cause violent ones….

THE CHALLENGES WE FACE AHEAD

The world in its totality is feeling these issues that I described above in varying degrees in one way or another. But eventually, there is going to be a boiling point.

The first world countries will probably be the last to feel this because they have enough wealth and reserves and industries to calm their people down, at least for a while.

The same cannot be said for most Arab countries. We are heading more towards corruption extremism and eventually failed states and revolution.

And since we are very close relatives to each other in the first one through 1/3 as a people who speak the same language, there will be some contagion happening to the more peaceful countries.

My biggest fear is that there is no semblance of peace and prosperity to a degree where there will be unintended consequences for the whole region.

Due to internal immigration between different Arab countries—especially the GCC nations from the other non-GCC affiliate nations—this contagion could end up affecting GDP and productivity of the GCC nations because several industries depend on these workers.

Additionally, the current situation between Russia and Ukraine, the effect of decreasing wheat production and exports, and increasing energy costs could spell catastrophe to these already struggling economies.

Let’s not forget that China has been feeling an increased pain and economic struggle due to swine flu in recent years. The Chinese population had to destroy their entire source of food for those years and ended up buying anything frozen that they could.

They will end up trying to buy as much food as they can, even from Arab countries that export wheat, and this will further exacerbate the anger and tensions within these countries—making people 10 times angrier due to hunger.

I fear that we may end up with another round of Arab Springs because young men will not be able to afford even the basic necessities of food in the upcoming years.

THE SOLUTION: BUY BITCOIN

But I want to describe in a specific way why it is imperative that we do this—the degree in which you all decide to do it is up to your discretion. But I want to paint the picture of why buying Bitcoin is the best decision.

Proof of work consensus means you must exert energy to produce something of value. This idea also translates across time because young adults use energy to create value to store later in time in old age to use when necessary.

It is a tale as old as time—of entropy in physics and mathematics, something as natural as gravity.

Another proof of work mechanism is war.

To produce violence, energy in the form of explosions and manpower produce The Wanted results of property conservation and legacy.

The race between your powers to arm themselves. It’s a race to conserve kinetic energy to make it more costly for the other side to make an unwise decision.

Even in Islam we have the same:

“ وأعدوا ما استطعتم من قوة و رباط خيل ترهبون به عدو الله”

So, the idea of preparation should be natural for us as a people—not because we are in active war, but because it is important to make it for our own well-being.

To prepare for the worst.

But unlike building your own army that will take many years, billions of dollars, and hundreds of thousands of men and women in arms to be prepared—there is a significantly easier and better way to conserve that energy and divert it into protecting one’s property.

A couple months ago, some very smart people at Mubadala announced they would be buying digital assets and companies in the digital asset space.

I want to make the case to buy bitcoin, specifically.

Because not only are you protecting your purchasing power and those of the people, but you’re also using the stored kinetic energy and hash rate of the whole world to provide that protection.

All miners across the world will provide protection in place of an actual physical army and manpower—to protect the property, which is protecting the purchasing power, which is a BTC.

The army units in this case would be the ASIC miners. In the hash power, it is the strength of that army that measures mathematically and methodically in designated time intervals.

The permissionless nature of the bitcoin network allows it to protect everyone who is plugged into the network. This means that you can be an enemy of a superpower and still benefit from the protection of the miners in America.

It means that your enemy will protect your back and vice versa. And to break that trust would be detrimental to the entire world, cost trillions of dollars, and still have a significant chance of failure.

Whether anyone objects or agrees is pointless if you are plugged in. Friends and foes alike will benefit to the upside, while the downside would be limited to only those who refuse to be plugged in or who decide not to be neutral. E.g., China

Because the network itself is extremely distributed among all these ASIC miners, this allows for no one side to control the purchasing power of everyone else.

There is no central pipeline, cable, satellite, database, or server that controls the network or that can bottleneck its speed.

The block size allows it to be distributed evenly among even the humblest computer, and the distribution allows it to survive even if war erupts in multiple nations.

Short of a nuclear holocaust or a meteoric catastrophe upon the earth, as long as one node survives, the bitcoin network will survive.

Hopefully this will incentivize peace because war becomes obsolete, it will also incentivize renewable energy and deflation in that area to make mining economically feasible.

It will also allow for conservation of otherwise wasted energy e.g., solar power, natural gas, volcanic geothermal energy.

In short, bitcoin incentivizes peace, neutrality, and innovation.

TIME IS OF THE ESSENCE

Being early disproportionately helps the people or the nations that are there first. Third World nations benefit more than second, who benefit more than first world nations, who will probably be the last to join the network.

Due to the Cantillon effect, it is universally well known that those who benefited from bitcoin the most were those who bought early and lost their seed phrase.

Of course, I’m not suggesting that a sovereign wealth fund lose its seed phrase, but to be the first or among the first to make the most benefit.

Not only that but owning 1-3% of your portfolio in bitcoin provides stability in A well-diversified portfolio protecting against inflation.

Any new funds that join in the future will essentially abide by the laws of supply and demand.

The game theory will apply one at a time to the nations that need the most help until lastly the largest wealthiest join or be left out.

People who are usually backed in a corner often apply the most innovative, albeit drastic, solutions towards their problems. But people who are comfortable have no need, and will not consider joining unless they absolutely find it necessary.

This coincides with a bigger purchase needed to move the market 1% allowing for more stable markets as time goes on.

The most important thing is to get off 0%

WHY BITCOIN SPECIFICIALLY?

Digital asset space is a very wide-open market. Unfortunately, not all of it is possible for wealth preservation and growth.

Many digital assets have single points of failure, bottlenecks, or shared infrastructure to enable its function.

While this enables significantly better transaction speeds and smart contract functionality, it does also imply that there is a single point that is vulnerable to attack.

Recently Ethereum came under a lot of pressure since a centralized company called Infura—owned by a bigger company Consensys—blocked the IP address of MetaMask users’ wallets in Iran and Venezuela due to sanctions.

Fortunately, I had known about this issue for many months and had even invested in other digital assets that help alleviate this issue and focus on decentralization and helping other chains decentralize. That is beside the point.

Ultimately, smart contract functionality does not mean anything if one single entity can control your assets. This disqualifies it from becoming a “Money “as nation states will not allow individual companies to compete for its sovereignty—I will explain later how that can be done through bitcoin.

This issue might be OK for an investment after due diligence. Ultimately if you believe in the CEO of a company there is nothing against buying a stake as an investment.

Add to that a significant important factor—Amazon Web services (AWS) runs a significant portion of the digital asset space on its servers. In the event of a cyber warfare, coordinated attacks on specific servers could produce catastrophic events.

And if a nation state would like to cripple the cyber-Infrastructure of another nation state, they could simply attack one of these points of failure with DOS attacks.

Recently over the past two years, I’ve noticed significant breaches in security of major multinational companies e.g. Solarwind , AWS , Spaceforce satellites.

The immaculate conception of bitcoin means there is no one person that could try to control the network. And with the price fluctuations that happened today there is huge demand to buy out what the whales are selling. It is safe to say that Satoshi Nakamoto will remain an anonymous figure in history as the only point of failure for bitcoin.

And with recent events in Ukraine, it has been proven that star link satellites and Bitcoin are a formidable economical force for good.

HOW TO PLUG-IN TO THE NETWORK

My mission over the past few years has been to facilitate specific entities to plug into the Bitcoin network as each entity has its own specific requirements and recommendations. This could be a simple as excepting Bitcoin as payment, running a node, setting up a miner etc.

Depending on the need, the steps would be progressive and more aggressive for different nation states and sovereign wealth fund ‘s.

I would recommend the following steps:

• Using alternative sources of energy whether it’s green or wasted to utilize it towards bitcoin mining.
• Also investing in these projects would be a significant way to gain exposure.
• Building the infrastructure to receive remittance payments through the lightning network to enable an inflow of bitcoin from citizens overseas and back up to their home.
• Having a nation sponsored wallet like the Chivo wallet in El Salvador, and accepting taxes, utility bills and other government related fees through it.
• This wallet will double as a form of identification which could be enforceable through KYC / AML laws.
• Buying a certain percentage of the treasury of central banks in bitcoin either in dollars or gold.
• The last “nuclear option” if a nation becomes desperate and destitute, they can print their own currency unlimitedly and buy bitcoin with it.

In addition to adding a referral mechanism or incentive program to open a wallet, this becomes imperative if a Third World country wishes to survive.

In the case of the nuclear option, by giving a certain amount of bitcoin denomination in dollars to all citizens this would improve the lives of citizens and potentially prevent bank runs by draining a rapidly depreciating currency into a rapidly appreciating one.

Ultimately the steps mentioned above would provide the nation to gain all the technological benefits of bitcoin with minimal drawbacks e.g., concern for privacy among individuals

But the fact that these decentralized wallets are available all over the world means that those concerns could be addressed. It is very unwise to go full authoritarian as some nations have decided to go this route because the incentivize is for the market to find cracks in the system.

Better to be transparent as long-term view.

IN CONCLUSION

There are multiple ways to adopt this viral technology and to benefit from it over the next 10 to 20 years. The amount of change that will happen during this time is going to be enormous, frightening, positive and negative at the same time.

It is a fully transparent, double edge sword. By plugging into the bitcoin network, we may have positives benefits and negative side effects to be studied carefully.

But not being a part of the network is the biggest mistake, with no potential upside at all. Me personally— I have made my choice and I have studied the risks, and I have made it my goal to educate myself as much as possible on the benefits of this digital asset revolution.

I hope you can utilize my expertise, vision of the future, strategic first principle thinking, to move forward in your decision making. I would be glad to provide consulting services for as long as needed until we reach a desired goal.

Thank you for your time and patience.

Sincerely,

Dr. Mohamed Sakkal