Blockchain Firm Planning to Build ‘Smart City’ Buys Slock.it

(Bloomberg) -- The German firm Slock.it is being acquired by Blockchains LLC, a Nevada company that bought more than 67,000 acres of desert land last year to build what it calls a “blockchain-based smart city.”

The deal will help Blockchains “fast forward” its plans to marry theoretical uses of blockchain technology with real-world applications, President David Berns said in an interview.

Berns declined to say how much the firm paid for Slock.it, but said a major incentive for the purchase was the target company’s Incubed product, which connects devices like appliances and vehicles to the Ethereum blockchain using minimal bandwidth and power. “For our vision of what we want to do for smart cities, that software is key,” Berns said.

Blockchains purchased the land in the Nevada desert last year, paying $155 million for a plot that is next to Tesla Inc.’s Gigafactory outside Sparks, Nevada -- which produces Model 3 electric motors and battery packs -- as well as an industrial park that’s home to Google and Apple Inc. Berns said he expects to break ground on a main campus and cryptocurrency storage facility within a year, while the smart city may get its start in four to five years.

Even as the broader market for cryptocurrencies continues to be plagued with fraud, theft and regulatory infractions, traditional financial-services companies are taking it more seriously than ever. Fidelity Investments, JPMorgan Chase & Co. and the owner of the New York Stock Exchange are among firms trying to understand how digital currencies and their underlying blockchain technology can change business and finance. In all these cases, Ethereum is the blockchain of choice.

Blockchains was founded by Jeffrey Berns, David’s brother, who made a well-timed purchase in 2015 of ether, the digital asset that makes the Ethereum blockchain possible. After ether skyrocketed in 2017, Jeffrey sold enough of his stake before prices crashed in early 2018 to buy the Nevada land later that year.

As for skeptics who say Ethereum is too slow and not yet ready for mainstream adoption, he compared it to how smart phones are now able to send emails. No one really knows all the details of how that works, nor do they care, he said. “Blockchain technology will get there,” he said.

Smart Locks

Slock.it is best known for creating the DAO, software that acted as a type of private-equity fund to raise and distribute money to develop blockchain projects. It was hacked and about $55 million stolen from it after a bug was found in the code. The stolen money was eventually returned after the Ethereum community voted to fix the bug in the code, which led to the creation of the ether classic digital token.

Slock.it got its start designing smart locks that are linked to the Ethereum blockchain. In a 2015 video, Slock.it co-founder Christoph Jentzsch turns on a tea kettle after “renting” the power socket it’s connected to with an ether purchase on the blockchain.

Jentzsch and his brother Simon were a major reason Berns acquired the company. “Slock.it brings a pool of developers that we think are world-renowned and have been involved with Ethereum since its inception,” Berns said. Christoph will become vice president of technology for Blockchains while Simon will be director of blockchain development, according to a company statement Monday.

©2019 Bloomberg L.P.

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