A cryptocurrency millionaire is staking his fortune on a giant plot of land in the Nevada desert … vaults burrowed into the side of mountains … and blockchain.
Jeffrey Berns is taking a big risk with his planned creation of a “crypto utopia.” According to a New York Times story published Nov. 1, the 56-year-old is planning a community with thousands of homes and businesses, all tied to the digital infrastructure that underpins Bitcoin.
It is a giant, real-world experiment with a potentially huge payoff.
Blockchain is a distributive ledger system. It is unique because it is completely transparent. Every transaction is validated by complex cryptography. The same mathematics ensure these entries cannot be altered or removed. They exist forever, for all to see.
That type of transparency removes the need for trusted intermediaries like lawyers, accountants and regulators. It is efficient, cost-effective and secure.
At least, that’s the theory.
In practice, blockchain is still an unknown quantity. There has been a great deal of buzz, especially in financial services. Banks, brokers and insurers see untold riches. They want to cut back-office costs.
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A 2017 research report from McKinsey & Co., an international research group, claimed blockchain implementation could lead to $110 billion in annual savings for the global financial services industry. Subsequent analysis from Accenture showed savings of up to $10 billion for the top 10 investment banks alone.
Away from financial services, Walmart (WMT) began working with IBM (IBM) in 2017, to track pork production in China. The companies paired up again in 2018 to keep tabs on the spread of E. coli in romaine lettuce. And Maersk, the world’s largest shipping company, is using blockchain to secure shipping for its 786-vessel fleet.
reported in August that the Maersk blockchain platform, created in collaboration with IBM, had been used in 154 million events. And those are growing at a rate of 1 million per day.
Most investors know blockchain as the technology behind Bitcoin, the cryptocurrency that caused a digital gold rush in 2017. And the explosion in cryptocurrency awareness made Berns rich.
A class-action lawyer by trade, he came to cryptocurrencies in 2012 when he discovered Bitcoin. By 2015, he bought a major stake in Ether, the digital coin associated with Ethereum, an open source distributed computing platform. Wisely, Berns sold his stake before the crypto crash.
Now, he is parlaying his winnings into his Nevada desert dream …
Based on Ethereum and smart contracts, Berns plans to build a futuristic community. One where every resident will have a digital address on a blockchain. This identity will allow them to vote on local measures. It will also facilitate the storing of their personal data.
To overcome tangible security fears, Berns has taken the unusual step of securing physical vaults located in the mountains of Sweden and Switzerland. More vaults are planned for the mountains of Nevada.
He has already spent $300 million buying land and planning. His staff of 70 works with local politicians and power companies. Their next step is to start courting businesses that will also use blockchain. It is all part of a larger plan to show the usefulness of the digital ledger system in real-world settings.
It is a big idea that is gaining traction as worries about data proliferation grow. Researchers at the MIT Media Lab, working on the Enigma project, have shown a decentralized blockchain sitting atop other networks can keep personal data safe.
For investors, the best way to play the rise of blockchain is Accenture
(ACN). The Ireland-based management consulting company is the recognized leader in enterprise blockchain implementations. At the end of fiscal 2017, it had business ties with 95 of the Fortune 100.
On the strength of cloud, security and digital services, its sales grew 13% in fiscal 2018, to $41.60 billion. And in September, Pierre Nanterme, chief executive officer, raised the forecast for the first quarter of fiscal 2019 to a range of $10.3 billion to $10.6 billion, well above the median consensus estimate of $10.2 billion.
Financial services and the supply chain companies are obvious candidates. However, FutureScape, an October 2018 report from global information technology research firm IDC, sees blockchain as part of a larger digital transformation. The shift could be worth $7 trillion by 2022.
Companies across the spectrum are now stepping up their investment, to the immediate benefit of Accenture.
The stock is down from $175 in September. It trades at only 19x forward earnings, and 2.5x sales. With a market capitalization of $102 billion, Accenture is still inexpensive given the size of the addressable market.
More important, the global consultancy has already made the blockchain investment. Shareholders are on the cusp of reaping the reward.
Jon D. Markman