“Correct.” Gorji smiled. “As long as politicians and government regulators continue to print money faster than it disappears, the value of that money decreases. A dollar today will be worth less tomorrow. Another way of saying it is that a loaf of bread, or a car, or a house will cost you more tomorrow.”
“But you are telling me that bitcoins are different?”
“That is right. Bitcoins, like gold or diamonds, are a scarce resource. And now that enough people have started to assign value to bitcoins, there is a sufficient demand that it can actually be used as a currency.”
“I still don’t see how something digital can be a scarce resource.”
“Chase, how do you acquire gold?”
“Usually the process starts by meeting a very attractive woman. I guess that’s what you called demand creation. Most women I meet are very demanding on that front. Afterwards, I go to a jewelry store.”
The two other men laughed. Gorji persisted. “But how do you get the gold? Not from the store. How do the jewelry makers get gold?”
“Gold mines?”
Gorji pointed at him. “Precisely. Mines. You see, bitcoins are based on a series of mathematical equations, many of which remain unsolved. These unsolved equations are like unmined gold. They are rare, sought after, and can be unlocked if you have the right equipment — which in this case is a powerful computer. The bitcoin code was written so that only twenty-one million bitcoins can ever be unlocked through the solving of these equations. Today, we have ‘mined’ about fourteen million of them. As each equation is solved, it unlocks another equation. Sets of them, really. And each equation gets exponentially harder to solve than the last. They are so hard to solve that they require more and more advanced computers to solve them. This has created a whole industry of bitcoin miners. Factories of computers linked together with only one purpose — solving the bitcoin equations to unlock more bitcoins.”
“So who gets the bitcoins when they are unlocked?”
“Whoever mines them.”
“How much are they worth?”
Gorji said, “Like I have said, supply and demand change. Last week, they were worth about four hundred dollars each. With the announcement of the Dubai Financial Exchange starting, the value has gone over six hundred dollars each. When word spread that China was going to back the RMB with bitcoin reserves, it went to fifteen hundred dollars, and it is still rising. And as the bitcoin supply runs out and demand increases, their value should continue to increase as well.”
Chase said, “Remind me why this is relevant to my firm? Because it’s untraceable?”
Waleed said, “Yes. People who use bitcoins don’t need to ever involve a bank, because all transactions are stored in the bitcoin peer-to-peer network. When Nakamoto Satoshi published his white paper in 2008, bitcoins were just a collection of software and ideas. They were worth nothing. Then, a few early adopters began exchanging them for goods and services. Eventually, one man even purchased a pizza in bitcoins. He had to get another man, half a world away, to facilitate the transaction and exchange another currency for the pizza, but it worked nonetheless. Almost overnight, bitcoins had actual value. They were worth only a few cents at first. But like gold and silver and Dutch tulips — once more people began trading bitcoins, exchanges popped up. There were crashes and software glitches and arrests and scandals. But bitcoins quickly grew in value.”
“A pizza, huh?”
“Yes. But there is an important lesson there. As new currencies are adopted, there must be an exchange to provide liquidity. Many do not trust the bitcoin network. They are afraid of keeping their money in bitcoins because they are afraid that it will disappear. Because it is digital.” He shook his head and laughed.
“Why are you laughing?”
“Because everyone’s money is held digitally today, most people just don’t think about it. Banks are all online. And your money can disappear there just as easily. But people trust what they know. They trust the current system. But the Dubai Financial Exchange and the bitcoin-backed currency will change all of that. This is what I believe.”
“So you think that this will be the start of a truly wide adoption of bitcoin.”
“I believe it will spur the global adoption of a decentralized digital currency, yes. Whether it is bitcoin or not, that could change. But for now, bitcoin is the most valuable and liquid option. This is the tip of the iceberg, as the expression goes. Mr. Jinshan calls it The Great Rebalancing. It will change the economics of the world. No longer will the United States have an advantage like it once did.”
Chase said, “Mr. Gorji, I appreciate the education, but again, what does this have to do with Abu Musa?”
“I will explain. In 2013, the amount of bitcoin that Nakamoto Satoshi supposedly owned would have meant that he was a billionaire in US dollars. Yet no one had ever seen him. He had been almost completely silent on the message board that he once used to communicate to his bitcoin disciples. Why would a genius who had created such an innovative technology remain in hiding? How, in this day of social networks, video omnipresence, and twenty-four-hour newsfeeds, is it possible that such a rich and famous man’s true identity is unknown?”
Chase frowned. “No one has ever seen this guy?”
He ignored the question. “Over the years, dozens of potential Nakamoto Satoshis have been ‘outed’ by the press. One was a legal scholar and cryptographer from the United States. Another was a Japanese-American physicist and systems engineer. One news source claimed that Satoshi was actually a group of exceptional computer programmers from several different nations.”
“That’s unbelievable.”
“I agreed with that sentiment. A few years ago, Mr. Jinshan approached my country with the idea of shifting to a bitcoin-backed currency. Iran did not want to shift to a volatile currency without fully understanding its origins, no matter how bad our inflation was. So I was asked to investigate the true identity and whereabouts of Nakamoto Satoshi.”
“What did you find?”
Gorji didn’t answer the question. “Today, as millions of people around the world are beginning to adopt the use of this new digital currency, regulators and banks are scratching their heads, still trying to figure out who created it. Large American investments banks are now investing in it. Bitcoin ATMs are popping up around the globe. They are in especially high demand in nations with declining currency. Popular websites are allowing consumers to pay using bitcoin. And all the while, its true origins remain shrouded in mystery.”
Waleed looked intrigued. It appeared this was the first that he was hearing of Satoshi’s whereabouts. He said, “Come, Ahmad, don’t keep us waiting. What did you find?”
Gorji said, “So Jinshan approached the Iranian government with a proposition. Bitcoin was becoming larger, and he had a solution that would solve Iran’s inflationary and economic woes. We agreed to allow one of Jinshan’s companies to set up buildings on Abu Musa. A very secretive project that would give Iran an advantage if and when the bitcoin-backed currency project launched.”
Waleed and Chase looked at each other, alarmed.
Gorji continued. “Jinshan funded the entire thing. He only asked for support from some of our IRGC components. We thought that it was strange, but the request was granted. He was a very smooth talker. They set up bitcoin mines on Abu Musa. Huge ones.”
Chase said, “So that’s what this is all about? Abu Musa has bitcoin mines?”
“Abu Musa has bitcoin mines. Enormous buildings filled with computers with a single task. Solve the mathematical equations that unlock new bitcoin block chains. Jinshan split the profits with Iran. Once the Iranian leadership saw the promise of the investment, and at Jinshan’s request, we gave him more control over the operation. A lot of things went on there that the Iranian leadership wasn’t privy to. Let me ask you another question. Do you know where most of the world’s bitcoin mines are?”