Bitcoin City Will Be Funded By Bitcoin Bonds

To investors,

The President of El Salvador announced on Saturday night that he was planning to build the world’s first “Bitcoin city,” which would live at the foot of a volcano in his country. There is a lot to unpack here. Before we get into the details though, it is important to remember what El Salvador and President Bukele have already accomplished.

The country announced in June at the Bitcoin Conference that they would make the digital currency legal tender across the nation. This legislation was proposed and approved just a few days later, which eventually led to “bitcoin is legal tender” going into effect in September of this year. Along with the legal tender decision, El Salvador has also created and launched a bitcoin wallet and payment system named Chivo, which has been downloaded and used by more than 50% of the 6.5 million Salvadorians. Bukele and his team then created a network of more than 200 bitcoin ATMs that have been spread across El Salvador to help onboard more bitcoin users. Lastly, the government created a bitcoin mining facility at one of the many volcanoes in the country so they could leverage volcano energy to mine bitcoin.

This context is important because President Bukele has a track record of not only successfully executing on his plans, but doing so in lightning fast speed. We live in an age of politics where you can discount almost any announcement and reliably believe a very small percentage of plans will actually be accomplished — that doesn’t seem to be the case in El Salvador at the moment.

So the country isn’t scared to make big announcements and then has a track record of delivering on them…great. But what about Bitcoin City?

The general idea here is to create a brand new city that would serve as the shining example of what is possible in the 21st century. Bukele specifically referenced the need for nation states and leaders to build modern-day versions of what Alexander the Great built in Alexandria, Egypt. The city’s ancient history is described with the following:

“Alexandria was best known for the Lighthouse of Alexandria (Pharos), one of the Seven Wonders of the Ancient World, its Great Library (the largest in the ancient world), and the Necropolis, one of the Seven Wonders of the Middle Ages. Alexandria was the intellectual and cultural centre of the ancient Mediterranean for much of the Hellenistic age and late antiquity. It was at one time the largest city in the ancient world before being eventually overtaken by Rome.”

The idea of Bitcoin City in El Salvador would include a quadruple-threat approach to an urban location — renewed ideas around energy, physical space, and taxation.

First, the energy approach is simple. The city will have no CO2 emissions and everything will be powered by the volcano that sits adjacent to the planned site. I’m not an expert on volcanic energy, nor do I have enough understanding of urban electrical grids to evaluate the potential efficacy of this plan. But the idea of using volcanoes to power energy demand isn’t a groundbreaking idea, so let’s give them the benefit of the doubt that this will be relatively straightforward to pull off.

Second, the physical space will be a fully functioning city. Everything from an airport to housing to commercial real estate. The overall shape of the city will be circular in design and will include a central plaza, where people can gather, that will look like the bitcoin symbol from above. These ideas are not new. In fact, they are quite old, especially given some of the inspiration goes as far back as Alexander the Great. The renewed focus on applying these old ideas is what makes it novel in modern society.

Third, there will be no income, capital gains, property, payroll, or municipal taxes in Bitcoin city. Yes, you read that right. The only taxation of a citizen in Bitcoin City would be a 10% sales tax. Every other tax plan that you have grown accustomed to in the developed world will be absent for residents.

It is easy to see why people are getting excited about this new city, but you may be wondering why it is called Bitcoin City?

It isn’t because bitcoin will be legal tender - bitcoin is legal tender in every city in El Salvador. It isn’t because many bitcoiners will consider moving there, although that is the hope. The new city is being called Bitcoin City because it will partially be funded by bitcoin-backed bonds.

This is where things get interesting. The local government will be issuing a $1 billion tokenized bond that will carry a 6.5% yield for investors. Approximately $500 million will go towards building the city, maintaining the infrastructure, and generally solving the cold start problem when you create a new place for people to live. The other $500 million in proceeds from the bond offering will be invested in bitcoin.

These are considered bitcoin-backed bonds for two reasons: (1) half of the bond proceeds will be invested in bitcoin and (2) the bonds will be tokenized on Blockstream’s Liquid side-chain. Both of these concepts are novel and innovative.

Here is the description from Blockstream’s blog post:

“Today, the president of El Salvador and I have announced that they will be issuing a $1 billion US “Bitcoin Bond” on the Liquid Network. The $1 billion US raised will be split between a $500M allocation of bitcoin (BTC) and a $500M infrastructure spend for building out energy and Bitcoin mining infrastructure in the region.

El Salvador also aims to create a government securities law and grant a license to Bitfinex Securities to process the bond issuance.”

They go on to talk about a special dividend from the bond as well:

“The Bitcoin Bond will have special dividends dispersed on an annual basis generated by the staggered liquidation of bitcoin. Using Blockstream’s Asset Management Platform (AMP), dividends are easily paid out to bond holders.

Since we’re using the Liquid Network and Blockstream AMP, we’re also able to easily accept investments as small as $100 to democratize access to the bond.”

And finally, the blog post culminates with the following statement:

“The Bitcoin Bond represents the start of a reformation of capital markets, built on Bitcoin and layer-2 technologies like the Liquid Network. Now, investment capital can flow in from around the globe without friction. Dividends can be distributed to investors instantly, with built-in cryptography to maintain confidentiality. Bonds can be traded 24/7 with other assets like stablecoins, using protocols that help eliminate the need for trust.

Bitcoin will save the day.”

There are two main takeaways that I have from the early information that we have received. First, El Salvador is plugging their entire country into the bitcoin network in the same way that MicroStrategy plugged their company in the network last year. This will likely prove to be an incredibly intelligent decision, but it will also create a number of fast followers that will attempt to emulate pieces of the El Salvador plan.

Second, I would imagine there will be immense interest in the El Salvador bitcoin-backed bonds. They are reportedly going to carry a 6.5% yield, which would make them competitive in the market by itself, but the bitcoin-backing means that they will become even more attractive. If El Salvador is able to easily capture demand for the bonds, you can anticipate them to issue many more of them, along with having a multitude of countries, states, and cities racing to do the same.

People around the world will have a million questions about the plan, how the government expects to execute it, and what their ultimate intentions are. I don’t pretend to have those answers, but it is obvious that no one is pushing the pace of innovation and experimentation at the nation state level faster and further than the country of El Salvador.

No one had nation state adoption of bitcoin on their 2021 bingo cards, which means it is unlikely that anyone had bitcoin-backed bonds to build Bitcoin City in a country where bitcoin is legal tender on their bingo cards either. We are living in wild, unprecedented time. Now would be a good time to start paying attention.

The world is changing. No one can predict the future, but we sure can study intently what is happening right now. Hope everyone has a great start to their week. I’ll talk to you all tomorrow.

-Pomp

GET HIRED IN CRYPTO: Are you looking for a job in the bitcoin and crypto industry, but don’t feel like you understand the nuances of the industry well enough to be hired? We have a training program aimed at helping people just like you.

The 3 week intensive course was created with the help of the HR teams at top companies in the industry and has seen graduates get hired at Coinbase, Gemini, BlockFi, Kraken, Anchorage, Strike, BTC Inc, and many more.

Our next cohort starts November 30th. APPLY HERE: www.pompscryptocourse.com

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

This is a throwback episode that was recorded with Murad Mahmudov that was recorded on October 31, 2008. It was only the 25th episode we had created for the podcast.

In the conversation, Murad explains why he is so bullish on bitcoin, including the path to bitcoin reaching $10 million per coin. Enjoy!

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

Coin Cloud has been serving customers since 2014 and has established itself as the world's leading digital currency machine (DCM) operator. More than just a Bitcoin ATM, Coin Cloud machines make it easy to buy and sell Bitcoin and 30+ other digital assets with cash. To get your $50 in free Bitcoin, visit www.Coin.Cloud/Pomp

Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit compassmining.io to start mining bitcoin today!

Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in bitcoin and 19 other digital assets inside your IRA. Choice enables you to trade real bitcoin, other crypto, and stocks without having to pay a dime in capital gains. Join me and the 20,000 other bitcoiners who have started their tax-efficient stack, and open your Choice Account today. Search ‘stack sats’ in the app store or visit www.choiceapp.io/pomp

BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and over 40 other cryptocurrencies. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days.

CityCoins are programmable tokens that allow citizens to become stakeholders in their favourite cities. MiamiCoin was the first CityCoin launched and within it’s first two months it has already raised over $10 million USD in donations for the City of Miami. Join the CityCoins Discord to become part of the community, and help us build towards a crypto civilization.

Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user-friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp” when you sign up for one of their metal cards today.

Circle Yield offers qualified businesses superior returns on USDC holdings for terms of up to 12 months. Managed by professional financial institutions, Circle Yield is the best way to earn returns on your USDC. Visit circle.com/pomp today; terms apply.

Nasdaq-listed BTCS was the first US-public company to secure today’s top layer one protocols. Recently, BTCS launched the beta version of its digital asset analytics dashboard! From across multiple exchanges, the BTCS Data Analytics Dashboard lets you evaluate your entire portfolio’s performance with plans to add year-end reports and yield earning on your crypto through linking to staking pools. Test out the BTCS Data Analytics Dashboard today at BTCS.com

LMAX Digital is the market-leading solution for institutional crypto trading & custodial services - offering clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp

Okcoin is one of the most popular licensed exchanges. Okcoin is the first to bring new cryptos to market, offering some of the lowest fees in the industry, an easy to use app, and Earn feature! It’s easier than ever to sign up, buy and trade crypto in just 2 minutes on Okcoin with credit & debit cards or just link your bank account to the best new crypto assets. So get started, and go to okcoin.com/pomp

Matrixport is Asia’s fastest growing digital asset platform with $10 billion in assets under management and custody. It offers one-stop crypto financial solutions including fixed income, DeFi in 1-click, structured products, Cactus Custody™, spot OTC and lending. Go download the Matrixport App and enjoy a welcome offer of 30% APY on USDC for new users.

Ethernity.io is the world’s first authenticated and licensed NFT platform, trusted by over 150,000 members. Visit Ethernity.io, where you can buy and sell authenticated NFTs from top notable figures, rights, license, and IP holders you can’t find anywhere else; the start of an entire ecosystem bringing utility to #NFTs.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable.

Nothing in this email is intended to serve as financial advice. Do your own research.

You’re a free subscriber to The Pomp Letter. For the full experience, become a paid subscriber.

Subscribe

© 2021 Unsubscribe
5 West Hargett St, Suite 1110, Raleigh, NC 27601