A Facebook friend of mine recently posted: “I love you, Iron Dome, and I want to have your babies.”Such is the outpouring of love and appreciation for an extraordinary piece of Israeli technology that has saved many lives in southern and central Israel.Nevertheless, despite this appreciation, there has been little analysis of the true strategic significance of Iron Dome.The writer is an attorney at Shurat HaDin – Israel Law Center, a civil rights organization and world leader in combating terrorism through lawsuits. Their website: www.israellawcenter.orgIron Dome is a game-changer that not only consigns Hamas’ and Hezbollah’s current terror model to the trash can, it completely undermines the military doctrines of all of Israel’s enemies.Before we discuss this fundamental strategic shift in detail, it is necessary to address a number of important misconceptions that are clouding this reality.Firstly, Iron Dome is no longer just a short-range missile defense system. The fifth Iron Dome battery, deployed months early just outside Tel Aviv on Saturday, features a significantly improved radar system (by Elta, an unsung hero of the Iron Dome story) and software upgrades that turn this system into a short- and medium-range missile defense system.While Iron Dome is regularly described as being able to hit rockets with up to a 70 km. range, according to the IDF this new upgrade allows it to intercept Fajr 5 (range 75 km.) and ZelZal (range 200 km.) missiles. Thus, the defense system is already achieving a significant part of what Israel’s forthcoming mediumrange missile defense system, David’s Sling, is intended to achieve. Secondly, Iron Dome’s Tamir interceptors don’t really cost $40,000 to $50,000 each to manufacture. Like any high technology system, the vast majority of the costs of Iron Dome are systems development and manufacturing setup.These fixed costs are spread over the number of items estimated to be manufactured and priced accordingly. However, if the number of items produced substantially exceeds the initial estimate, costs drop proportionately.The actual marginal cost of production of a Tamir interceptor is low and reflects the costs of the basic raw materials; metal, fuel, explosives and electronic components used in its manufacture, and the labor required to run the assembly line. If the IDF ends up ordering 10 times as many interceptors as originally estimated, then their “cost” will likely drop to around $5,000. At 100 times as many the “cost” will approach the marginal cost of less than $1000.Thirdly, the real cost of the rockets and missiles which Iron Dome intercepts is vastly underestimated by most commentators. Grad rockets may well cost Iran only $1,000 each on the open market, but this is not the delivered cost to Hamas in Gaza.The supply line from Iran to Gaza is an extremely convoluted and expensive one which involves huge losses from IAF action bombing convoys and factories in Sudan, and interception by western navies. Large bribes have to be paid at every step of the way, particularly to the Beduin in Sinai and the Egyptian soldiers in Rafah who are supposed to be stopping the smuggling.And the losses continue once the Grad gets to Gaza, with the IDF regularly destroying rocket caches. Thus, 1,000 Grads, which cost Iran $1 million to purchase, may end up as 300 Grads which cost a further $2 million in “delivery charges.” This turns a $1,000 Grad rocket in Iran into a $10,000 Grad rocket in Gaza.Fourthly, Iron Dome is fundamentally a highly advanced computer system with a very rapid upgrade cycle. So far Iron Dome is matching pace with the iPhone for major software and hardware upgrades, and consequent performance increases.This will not only continue but will actually accelerate in accordance with Moore’s Law and Ray Kurzweil’s Law of Accelerating Returns which state that the performance of computer systems increases exponentially with time. With each upgrade the interception rate will improve and the range of missiles it can intercept may also improve further. It is therefore that we can expect Iron Dome to reach a 95 percent or higher interception rate in the next year or two, and to continue to improve as the speed and processing power of the computers that make up its brain and eyes (radar) advance.The practical upshot of this is that the number of rockets per Israeli fatality has risen from 50-75 (Lebanon and Gaza pre-Iron Dome) to 300 in 2011 (75% interception) and around 500 in 2012 (90% interception), despite Hamas using more lethal rockets.The strategic implications are that the current rocket-based terror strategy of Hamas and Hezbollah has been rendered both ineffective and economically unsustainable. I estimate it is currently costing Hamas (and thus its patron Iran) around $5m. (500 rockets at $10,000 each) to murder a single Israeli. When Iron Dome reaches 95% interception rate these figures will double and at 97.5% they will double again.Contrary to some suggestions, the terrorists cannot bankrupt Israel by firing millions of rockets because the real cost of their rockets exceeds the marginal cost of the Tamir interceptor.Moreover, most rockets miss and Iron Dome ignores them. Indeed, this strategy will bankrupt Iran even more quickly than President Reagan’s “Star Wars” missile defense strategy bankrupted the Soviet Union.This is devastating not only to the terror strategy of Hamas and Hezbollah, but also to the military doctrines of Israel’s nation state enemies, such as Iran and Syria, which have heavily invested in missiles and rockets to compensate for their weak air power.Iron Dome is already 90% effective against many of Syria’s medium-range missiles, and Israel’s Arrow 2 missile defense system is similarly effective against Iran’s long-range missiles. The remaining components of Israel’s comprehensive multi-layer missile defense umbrella, David’s Sling and Arrow 3, will become operational in 2013/14 and will follow a similar technological upgrade trajectory as Iron Dome. As a result, the enemy’s missile arsenals will continue to decline in effectiveness at exponential rates as interception rates of Israel’s missile defense systems increase.Iran, Syria and their terror proxies are fighting a losing battle with the exponential rate of technological progress in a field in which Israel leads the world.Iron Dome is a game-changer that heralds the end of rockets and missiles which are being used by the less technologically advanced. In a sense, just like the organization I work for bankrupts terrorism one lawsuit at a time, the Iron Dome does so one interception at a time.