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Seetee shareholder letter

Mar 10, 2021

Seetee is a company in the Aker family.

They describe themselves as keeping their liquid investable assets in bitcoin and investing in exciting projects and companies throughout the Bitcoin ecosystem.

I loved reading their shareholder letter that expressed their vision on Bitcoin.

This is a collection of the highlights I made.

Not investing is the riskiest decision

Risk is not an obvious concept. What's commonly considered risky is frequently not. And vice versa.

Apartments in the wealthiest part of Oslo are 35 percent cheaper today than they were in 2004 if priced in gold. And most would say real estate returns have been spectacular in that period.

The more experience you have, the more you realise that nothing is certain.

Bitcoin may still go to zero. But it can also become the core of a new monetary architecture. If so, one bitcoin may be worth millions of dollars.

Money is a human invention, a social construct that only works since we collectively believe in it. In fact, the term "fiat money" is derived from the Latin word "fiat," which means "an act of will that creates something without further effort." It's a decree.

The estimated CO2 emission for producing new gold is more than 100 million tons per year. Estimates vary, but recent studies put Bitcoin's around 30 million tons annually. That's less than one third of gold's CO2 emissions.

Note that this is still disregarding the cost of refining and storing gold, as well as the negative impact land excavation in less compliant regions of the world has on both people and the environment.

That leaves the most optimistic scenario for bitcoin. The one that gets us excited. Where Bitcoin's ability to verify transactions between two parties without a trusted third party is used to build an ecosystem of applications.

Clearly, the protocol is designed to cut the rewards in half every four years or so. Miners will only expend the electricity if it remains profitable. 18.6 million of the maximum 21 million bitcoin exists today. So at the end of this year, 90 percent of the bitcoin is already in existence and paid for. Nine tenths of the infrastructure is there.

Since the block reward goes down significantly over time, the miners would be willing to expend less electricity all things equal. Either the variable transaction fees or the price of bitcoin have to increase substantially to compensate the miners. Since the block reward will approach long-term zero, fees are the only viable Since the compensation mechanism. transaction volume cannot increase given Bitcoin's design, fee increases imply that the value of single transactions must be substantially higher than today. Presumably, that's only possible if every transaction on the mainchain always involves very large amounts. Billions of smaller transactions would have to execute with acceptable security in second layers and sidechains. Again, all of this is only commercially and economically viable if the value of verifying large transactions without a trusted third party is sufficiently high. This implies high demand for the network's architecture, which again means that useful applications that create tremendous value have been built on top of the core network. Bitcoin can therefore only survive, and electricity will only be consumed, if the value created by the network is sufficient.

Even completely disregarding Bitcoin acting as an economic battery that may improve the economics of renewable projects, which could accelerate the installation of intermittent sources of electricity, we don't see a long-term problem related to Bitcoin's electricity consumption.

If it's a bubble, it dies and consumes nothing. If it's digital gold, it's more efficient and will emit much less than the asset it disrupts. And if it's really successful, it's because of demand from truly value creating applications that define our future and should be worth the electricity.

It is true that the Bitcoin mainchain cannot process the number of transactions that we depend on in modern society on its mainchain. But that's because Satoshi Nakamoto's design didn't trade censorship resistance and security for scalability. So scalability has to be solved by making slight tradeoffs.

Bitcoin doesn't compromise.

A Bitcoin takes about ten minutes to be confirmed and the design capacity is about seven transactions per second. Hardly sufficient to deal with today's transaction volumes.

The Lightning Network is built on top of Bitcoin to make it scale.

Transactions are done in bilateral channels that connect in a network and each channel is anchored to Bitcoin's mainchain with a single transaction. Lightning transactions complete in milliseconds and can process millions per second with hardly any use of electricity. It therefore leverages Bitcoin's security while increasing speed and reducing cost to levels not achievable by legacy payment rails. Does a global distributed network of bilateral payment channels sound impossible? In fact, that's how spot foreign exchange works. Aker is the largest investor in Abelee, a non-bank liquidity provider in the foreign exchange market. We have spent a lot of time learning about the microstructure of financial markets. It's only a matter of time before the old and the new world of money is seamlessly connected.

On that night, with all of us on video from Chicago, Tel Aviv, and Oslo, Mallers sent dollars from a regular bank account in the U.S. via a wallet in Tel Aviv and further on to Oslo. Then, for fun, we sent it to an Aker colleague in Accra, Ghana. All of these transactions took place instantaneously and at nearly no cost. This creates the possibility of programmable microtransactions, a payment stream, which can unlock limitless opportunities. Applications will have different needs and people will be willing to make slight tradeoffs to achieve those. I'm certain that, with time and creativity, applications that scale in sidechains and layers on top of Bitcoin will flourish. This ecosystem can provide massive scalability, and will only need to settle with the mainchain now and again. Like getting a stamp of approval from the source of absolute truth. As such, we believe Bitcoin will scale brilliantly in layers upon layers that make the trade offs applicable to particular application.

So when a new architecture for money emerges, it should not be entirely unexpected that criminals became its first users. It was more efficient to use cryptocurrencies than cash, which has always been and is still available for those who want a bearer asset to conduct illegal activities. But when the internet went mainstream it found other legitimate uses. We see the same development with cryptocurrencies: criminal use of bitcoin is relatively minuscule. In fact, the libertarian ideals of the cypherpunk movement holds promise and valuable ideas for the world today. On the one hand, our basic human rights include freedom of speech, religion, assembly, and association; and right to equal protection of the law.

Age of Surveillance Capitalism, the internet behemoths have turned us into the product. I'm certain we need to fight back against unlawful access to information, and that requires a new architecture. On a personal note, I am frequently frustrated that I give away usernames, passwords, locations, credit card details and other information to read newspapers or watch movies. I'm fascinated by the prospect of bitcoin Lightning wallets that may enable instant credit via micropayments without the need to offer personal information that my counterpart can monetise without approval or compensation.

Lastly, let's also remember that the current system doesn't work for everybody. As a business man in my I sixties, I have access. The current system works relatively well from my perspective. But what about the poor but hard working farmer? What about the billions of unbanked that have no way of accessing a bank account, much less credit to build their lives? From their perspective, what we have today clearly doesn't work. And the regulatory patchwork makes it even harder for them. It's unacceptable. Bitcoin's protocol should enable an ecosystem of applications that may change that because many more people will have access to mobile phones and the internet than have access to traditional financial infrastructure.

Gold survives bond fires. It cannot be increased to deflate the value (scarce), it is not perishable and can withstand time and use (durable), it can easily be stored and transported (portable), the value of any gold

Many argue that governments may ban bitcoin, or that new regulation will destroy it. While it would require near global coordination, which seems implausible, we cannot disregard that the introduction of more friction for adoption, for example a ban on exchanges to limit people's ability to buy or sell, would make the asset less attractive. But we remain unconvinced and believe that proper regulation may actually increase interest in cryptocurrencies as institutions can participate.

According to the World Bank, more than half of the global population has access to the internet today and coverage is increasing rapidly. Still, billions of people can't get access to a bank account. And even if they can, it's costly, cumbersome and slow. The current system mostly works, at least for privileged people in our part of the world. But banks remain inaccessible institutions for many. Let us all hope that can change. The direction is clear: finance will be disrupted as surely as fossil fuels will be. The question is not if, but when.

We believe the Bitcoin network has a real first mover advantage.

In any case, we have to expect a lot of volatility. But we don't care because we believe in the long-term functionality.

And more importantly, when we believe in something or someone, we are prepared to look like idiots for extended periods of time.

"you have to put yourself in the position to be labeled an idiot now and then-or else life would become too boring!"

We believe bitcoin is going to be on the right side of history. But we should remind ourselves that some will resist forcefully: Norway was the last country in Europe to adopt colour tv in 1972, several years after the technology was available. The brilliant Einar Forde famously addressed the Norwegian Constituent Assemblyb and said we accept that sin has come to Earth, but we don't want it in colour."

The future is defined by the young.

Therefore, I encourage entrepreneurs with knowledge about, experience with, and big ideas and ambitions for Bitcoin to reach out to me and the others at Seetee. The bigger the dream, the more we listen, especially when those ideas have an industrial angle or can be a force for good. We are not just going to wait for the future-we want to join in building it as well!"

Hightlights from the Seetee sharehold letter

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