What’s the deal with Blockchains LLC and their Smart City?

From blockchains.com

So I just learned about this company, Blockchains LLC, that was founded by a certain Jeffrey Berns, a guy who became incredibly wealthy by trading cryptocurrencies and as a lawyer. The company was presided by his brother, David Berns (they look so alike I thought they had written the wrong name in the keynote).

Blockchains’ mission is to “reimagine and build the infrastructure and tools needed for greater personal control over digital interactions and better protection of personal information through blockchain-based security, while offering the freedom of choice and an easy-to-use interface—all for the purpose of empowering individuals“, which sounds pretty nice and all; privacy protection and decentralization (which could be considered the ultimate definition of ’empowering individuals’, I think) are pretty great.

The first thing I learned about this company is that they were building a blockchain-based city in Nevada, where they had purchased 67,000 acres of land, and I briefly learned about it in an article by Stuart Hollinger. I thought this sounded a bit delirious and utopian and I even kind of made fun of it and also got a bit irritated at it, thinking “Come on, if you have that kind of money there is so much you can do for humanity instead of siphoning your wealth into a vanity project that pretends to be helpful but won’t accomplish much in the long run”.

There have been lots of previous utopian projects, and to this day I’m pretty sure we are not living in one, since most of us still work 40+ hour weeks, can’t afford a house and are at the whim of a few very powerful entities.

But then I thought to myself that even if it was a bit ridiculous, I found it interesting and almost charming. So I decided to do a bit more research instead of just having the one opinion based on one piece of information. I went to their website and watched the keynote they did in 2018 (linked before but I will link to it again here in case you didn’t click it).

I recommend you watch it, but in case you don’t, here is the rundown:

The ultimate goal of the company is to better the world and people’s relationship with their assets (Berns mentions even the workweek as an asset, which I found interesting) through a wide range of technologies all based on blockchain. One of these “betterments” of society is the creation of Innovation Park, a 68,000 (why the number changes depending on the source, I am not sure) acre area in Nevada that will house a 1000 acre campus for the company in which 4 key technologies will meet: AI, Nanotechnology, 3D printing and blockchain.

Ambitious, but interesting. In this campus they will incubate their future projects.

There will also be a residential area, with schools, apartments, stores, etc.

And there will also be a “movie studio” that creates immersive content, again, based on blockchain. Games, movies, music, etc, and all with the intention of giving power back to the creator. Oh, yeah, and they also want to make an esports arena.

Some of the other things they’re up to:

NetID– Vein scanning technology. Hashes (creates a string of numbers) the information from the veins in the palm of your hand and you use it as your ID; and only you have the key to it.

Custody– Executed Distributed Code Contracts (EDCC’s) are like smart contracts, The EDCCs will store assets in cold storage and allow you to move them from cold to warm to hot storage. What does this mean? (I ask because I didn’t know when I heard them talk about it) Well, cold storage is where stuff that you access rarely is stored, and hot storage is where you store stuff that you access all the time. Basically cold storage is less liquid and hot storage is more liquid, and warm storage I guess is somewhere in between?

Blockchains will protect the backup keys for the EDCC’s in 3 different places in 3 different states in the US, and 2 of those places are bunkers built in the 60’s to withstand nuclear bombs. Jeepers. And for global users there will be another nuclear bomb resistant bunker in Switzerland and another in Sweden. They aim to have better security for everyone’s assets than any bank in the world.

The Big Bank Theory– Berns thinks that banks want to take over blockchain. He had a bad experience with banks (the IRS tried to get all the info from users of Coinbase at one time; Berns outed himself as a user of the site, helped prevent the IRS overreach, but during that time the government closed off his bank accounts with no warning), so he bought a bank. At the time of the keynote, it still needed to be approved.

Distributed Collaborative Entities– basically a way for Berns to make the Blockchains company a co-op, in which 6 different stake groups own 90% of the company.

This is all very interesting. What’re they up to now?

Well, when you go to their website’s ‘Projects’ Tab, you are met with a thorough description of the Smart City idea that they detailed in the Keynote three years ago.

A Decrypt article from last year (by Ben Munster) describes how they haven’t yet broken ground in this city, and are instead ‘focusing on developing Web3 tools’. It also talks about how an array of Senior executives (9, including David Berns, a 10th of the workforce, apparently) have left the company and how a lot of their responsibilities have gone to Slock.it, an advisory firm they acquired in 2019. Jeffrey has assumed the role of president.

There’s this little paragraph in that Decrypt article that I found interesting:

But Blockchains has made little progress since, having struggled to obtain water rights for the putative 10,000 resident city, sources say. The project was formally “put on hold” in the summer of last year, according to one former employee, and the “suite of Web3 products and tools” have yet to yield even a white paper. Reviews on employer-rating website Glassdoor (which we could not verify independently but match testimony from multiple sources) describe an atmosphere of aimlessness and confusion.

“Nevada’s $170 million “Blockchain City” facing challenges”, by Ben Munster, March 1st 2020

In the same article, the spokesperson for the company states that the city “was always a 10-15 year project”. I mean, that sounds obvious; I didn’t think they would finish the city anytime soon. It is a very ambitious project, and that might be the nail in their coffin. But I am getting ahead of myself.

Another article from March 10th 2021 written by Pat Hickey in the Reno Gazette Journal talks about how the smart city Blockchains wants to build hasn’t gotten approval from the locals either, in spite of the Governor’s support for the project. It goes on to quote Berns saying that if all goes well they’ll start building in 2023. At least in the article Berns sounds hopeful and committed to the project and the company.

The company also seems to be very much about supporting charities, with their “Our Story” page (also linked above), talking about over 900 thousand dollars donated to charities so far.

What else have I found… Their youtube channel seems to be quite active, so there’s that. While looking at their latest video I saw that there is a recent interview with Berns (March 10th, 2021), conducted by The Nevada Independent. Here’s a link to it if you want to give it a look, but here’s a rundown:

  • Daniel Rothberg (one of the interviewers) mentions how some people are a bit wary of a company owning a city (yes).
  • 2013-2014 is when Blockchains was founded
  • “The city is a place where people can come to create […] it’s a living sandbox”- Berns
  • They haven’t made any money as a company yet and they haven’t figured out where they will “extract fees”. Berns thinks that “the moment they start thinking about how to make money, that’s where you start moving the line on what you’re trying to accomplish”.
  • Berns is funding the company (I mean, himself? On his lonesome? Hmmm)
  • Rothberg: “How do you get to a point of sustainability?” Berns: “Our products are gonna be released next year. […] The revenue can come from people who come to create here, and then the city would be like any other city”.
  • “The infrastructure is what is different […] we need smart infrastructure, everything needs to change”. Basically the city would be an experiment; Berns called it a “bubble”. which might be a funny slip of the tongue.
  • They want to start the city with everyone having a liveable wage from the start. Berns might not be leading the project 10 years from now (I guess he expects the company to be profitable by then).
  • The technology they want to build the city with would be able to, say, pay sales tax immediately. It would eliminate middlemen, basically.
  • The idea would be for there to be multiple Innovation zones eventually.
  • Berns seems frustrated that some people (a Stephen Colbert segment is referenced) don’t understand that “blockchain is anti-big tech”.
  • “We don’t want to create our own government. The company would have control over how the land is developed, just like any other company [that owns land]; but people living there will elect their representatives and make the decisions”.
  • Rothberg: “In this instance, where is the line between public and private?” Berns: “The land is privately owned. The goal would be that the inhabitants of the city would control their land”
  • “We need a place where politics isn’t going to affect how things are done”.
  • Lovato: “Who is this for?” Berns: “For people who want to be part of advancing the ball of how we live our lives”.
  • On affordable housing: “All of it should be affordable housing. All the land is leased; the community is the one that benefits from everything that happens on that land”.
  • Lots of companies will be part of Innovation Park.
  • They are aiming to change a lot of things through blockchain technology (that is evident)
  • They have a bunch of potential investors, tech companies, undisclosed.
  • They want to create a stablecoin and back it through that bank he bought (I knew that had to pop up again)

I will leave the list there. The interview is and hour and a half long, and that covers roughly 40 minutes, in case you want to jump into it. He does mention the creation of Dapps within the city at some point, and about some other governmental entities interested in the project and even the prospect of sister cities.

Berns sounds incredibly passionate and with so many ideas and energy that only two things can happen: you like him or you think he is delusional. I like him and I think he knows his stuff. It also seems to me like he’s trying to be an advocate for crypto, blockchain and his projects, and the weight of it all is massive, especially since he’s dealing with actual government and legislation.

My thoughts

First I thought it was ridiculous. Upon further investigation, I saw the potential but I was still weary.

At this point I feel kind of bad for them but hopeful? I think their idea is very interesting, and Berns, as I said, seems genuinely invested (both mentally and financially) and knowledgeable about the project, and if they pull it off it would be a very cool experiment to see; one that could potentially start a chain reaction of change all over the world, because I do agree that Blockchain as a technology has a lot of potential.

But I think that his company bit way more than it could chew. There’s too many fronts that they’re trying to cover, and with not being profitable and only being funded by Berns alone (as far as I understood, though it seems like ther must be some other people financing this), it seems to me that they could go bankrupt or have to sell the land they bought before achieving anything. They spread themselves too thin.

I go back to my initial thoughts, in which it seemed to me they could do so much good with the amount of money they had, while still managing to start a company edging in the direction of what Blockchains LLC is now, and instead they’re letting all that capital slip away by trying to do too many things at once.

Who knows though, some companies manage to pull through in spite of trying to do a lot. We will have to wait and see, I suppose.

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