Cryptocurrency is no stranger to controversy. It comes with the territory of dealing in untraceable, non-physical money – often heaps and heaps of it. Bitcoin’s first big claim to fame was the currency of choice for the Silk Road black market. Crypto exchanges are still largely unregulated, making market tactics like the pump-and-dump common. At least one huckster has been nabbed for selling fake, physical “Bitcoin” tokens on the streets of New York City.
Yet amidst all the weirdness and wonder surrounding cryptocurrency, Brock Pierce’s Sol project stands out. A crowd of ultra-rich cryptocurrency players aims to turn a corner of Puerto Rico into a city of and for the future, built around blockchain technology. Yet this crypto playground for the Bitcoin millionaires is attracting a good deal of negative attention for its neo-colonial setup and its sometimes-shady frontrunners.
“Eternal Boy Paradise”
Sol wasn’t the project’s original name. The original name for envisioned crypto commune was slated to be “Puertopia,” a portmanteau, presumably, of Puerto Rico and utopia.
However, “Puertopia” sounds very much like a Latin phrase meaning childhood paradise, or eternal boy paradise, so the developers quickly changed the name to “Sol,” the Latin word for sun.
The initial moniker becomes a bit ironic – and maybe a bit sinister – considering the front man of the Sol project is former child actor and blockchain entrepreneur Brock Pierce.
The Young Gordon Bombay
Pierce made his film debut in “The Mighty Ducks” film series, which follows a group of underdog hockey brats to regional championships, the Olympics, and beyond. Pierce portrayed the youthful version of cynical hockey coach-turned-heartwarmer Gordon Bombay. He also starred in “First Kid” and a smattering of other projects.
The next time Pierce appeared in Hollywood headlines, it was as a defendant in an alleged child sex ring case.
Pierce was an executive vice president at dot-com darling Digital Entertainment Network in 2000 when it was hit with a lawsuit alleging that the company was at the center of a child sex ring involving numerous players in the Hollywood circuit. Pierce ultimately resigned from the company and moved to Spain alongside other Digital Entertainment Network executives. Pierce later settled with one accuser for $21,600.
Brock Pierce on the roof of the Monastery, a San Juan hotel in Puerto Rico. Image from NYTimes
Pierce formed Internet Gaming Entertainment during his time in Spain. The company acted as a broker for in-game currencies for games like World of Warcraft and Diablo 3. After the company began hemorrhaging money after 2007, Pierce was replaced as CEO by Steve Bannon, a former advisor to now-President Donald Trump.
Pierce then re-entered the digital currency world by founding Blockchain Capital in 2013. He became the chairman of the Bitcoin Foundation in 2014, sparking the resignation of 10 board members. The departing board members cited a lack of transparency as their reason for leaving, as well as the previous allegations against Pierce.
Since then, Pierce has been a centerpiece in a number of crypto initial coin offerings, notably Tether – a cryptocurrency that purports to be tied to and backed by the U.S. dollar, though doubts as to the realities behind that mechanism have been raised. Specifically, several industry observers have pointed out that Tether likely does not have the dollar-for-Tether matchup that it purports to have.
There’s another important thing to know about Pierce. He’s wealthy. Very wealthy. Forbes puts him in the top 20 richest cryptocurrency magnates with an estimated net worth of $700 million to $1 billion.
Tropical Crypto Paradise
This all circles back to the Sol project.
Puerto Rico has long been a tax haven for U.S. expats. Residents of the unincorporated U.S. territory don’t pay federal income taxes or capital gains taxes. Since the federal rules on cryptocurrency mirror the rules on assets – that is, both long- and short-term capital gains taxes apply – Puerto Rico makes for a lucrative spot for big crypto holders.
Some Sol project leaders are seeking to buy land in Puerto Rico for their own city. At least some reports put the estimated figure at 250,000 acres. Others are content to live in Puerto Rico’s established neighborhoods while the project develops.
San Juan, Puerto Rico. Image from Cryptomarket360
The controversy stems from a concept known as crypto-colonialism. Originally, the term had nothing to do with cryptocurrency. It denoted a country gaining political independence by taking on economic dependence – Greece and Thailand being two notable examples.
The term appears particularly apt in the Puerto Rico situation. Much of the island is still reeling from Hurricane Maria, which knocked out electrical power to the entire island. Enter the Sol project, which promises hefty investment in a city for the ultra-rich – possibly to the detriment of native Puerto Ricans.
Sol Opponents and Proponents
Critics of Sol are legion, and many of their arguments have nothing to do with Pierce’s past legal woes.
Some label it as a form of disaster capitalism. Puerto Rico, still weak from Hurricane Maria, will likely welcome any kind of investment – particularly an investment that promises an upgrade to the power grid.
It’s not likely, however, that electrical generation improvements will move much beyond Sol itself. Bitcoin usage and creation consumes large sums of power. A sizable city running entirely on blockchain technology and using Bitcoin or other altcoins for every transaction will consume much more electricity than traditional systems.
One Sol member disagrees with this analysis. Entrepreneur Joshua Boles describes the project as almost religious in nature. And if not outright religious, he says, Sol is certainly philanthropic.
“The block chain technology architecture provides a level of security and next-generation governance self-inherent through predetermined and evolving protocols, which is exactly what is needed on this beautiful island,” he wrote. “The bitcoin Grand WIZARD (BP) )[sic] made me a believer as it relates to this conversion to an epoch where all things are sustainable, available and resources are plentiful. The Silicon Valley connection, especially with target municipalities that I have personally worked with before and Puerto Rico, is quite possibly the most powerful piece of all of this as the government pays way too much money for their infrastructure.”
Boles adds that Sol is not a money grab at the expense of the Puerto Rican people, as some opponents have alleged. It’s a long-term, long-range project.
“This isn’t about going down there to make money, although that’s always a primary focus to establishing a foundation and keeping things going for the long-term, it is more so about the spreading of a new religion,” he wrote. “It’s the religion of peace, it’s the religion of economy, it’s the religion of all things that are beauty and all things that we want for this world.”
Out of This World
Sol’s goals are lofty, and it’s drawn at least its fair share of criticism. It has all the makings of a Netflix original movie – a front man with an (allegedly) sordid past, lots of money, innovative technology, and an exotic locale. It’s not clear at the moment just what the future holds for Sol. The majority of its would-be residents are still hanging around Puerto Rico’s Old San Juan neighborhood, waiting for the project’s next phase. Meanwhile, the island continues to rebuild following the devastation of Hurricane Maria. Could Sol potentially speed up this process or push it in a new direction? Could a crypto utopia in a U.S. territory influence the policies on the mainland?
One thing for Sol is certain. Its success or failure will serve as a barometer for cryptocurrency’s global future. If Sol ends up thriving, it provides a compelling use case for future crypto-centric cities. Its growing pains might contain a microcosm of the sphere’s more general adoption problems. On the other hand, if Sol falls apart, it will only confirm what many crypto critics have long suspected: Crypto is a bubble, and bubbles eventually pop.