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Bitcoin billionaire Brock Pierce wants to transform Puerto Rico into a crypto paradise

Bitcoin billionaire Brock Pierce wants to transform Puerto Rico into a crypto paradise
24 Jul
3:32

Updated July 24, 2018 13:07:52

Hurricane Maria was one of the worst natural disasters in US history, devastating the island of Puerto Rico and destroying the entire power grid.

Harvard University estimates more than 4,000 people may have lost their lives … a bigger death toll than 9/11 and Hurricane Katrina combined.

Ten months on, thousands are still without power or safe shelter as the annual hurricane season starts again.

Yet while some see catastrophe, others see opportunity.

Cryptocurrency entrepreneurs have been storming in, promising they have the technology to rebuild.

Transformative technology

At 37, Brock Pierce is a billionaire. And he has chosen storm-ravaged Puerto Rico as his new home.

“Puerto Rico has the possibility now to be put on the map as a hub of innovation,” he told Foreign Correspondent. “And the pleasure of bringing essentially the most innovative industry the world has ever seen to a place that normally wouldn’t have been a hub, that’s a wonderful thing if it works.”

Mr Pierce was a child actor in the 1990s, starring in Disney films such as The Mighty Ducks.

He went on to invest in video games before making a fortune in cryptocurrencies such as bitcoin, which jumped from below $US1,000 ($1,346) to nearly $26,932 in 2017, before crashing to a low of $8,887 in April.

But Mr Pierce said the technology that made cryptocurrencies possible would change the world.

“Has the internet changed our lives? Have mobile phones changed our lives? The blockchain is something that is that transformative,” he said.

“But you don’t need to understand it in the same way that you know how your phone works.”

Que es blockchain?

Ask any Puerto Rican what blockchain is and the chances are you will get a blank stare.

Few people have heard of the new technology and more are grappling with low-tech problems, like how to fix their roofs or rig up power lines before another hurricane comes.

Across the island, many are still waiting for disaster relief funds or for their villages to be reconnected to the grid.

But Mr Pierce believes blockchain could empower people to rebuild without relying on governments or banks.

“On the most basic level, it has the potential to democratise the global financial system,” he said.

“And by the way, having access to simple financial tools is almost as important as having clean drinking water.”

At its simplest, blockchain is an online data management system that keeps encrypted records of transactions.

The records, called blocks, are almost impossible to hack. Each new block updates a chain, creating a secure chronological history.

In short, blockchain is like a bank ledger except you do not need to use a bank. You become your own bank.

All you need is a mobile phone to do business transactions directly. You do not need a third party to validate them. And you have a permanent and secure record of every transaction online.

Advocates say that has real implications for reconstruction. Villages could use the software to set up communal building funds and track how every dollar is spent.

They could install solar power grids and charge each household for how much they use. They could use cryptocurrency to transfer funds or buy goods directly without paying commissions or bank fees.

So far there are more ideas than actual examples. But slowly, signs of blockchain business are emerging.

‘Blessing from God’

As a taxi driver in the capital San Juan, Jose Santana has faced two big challenges.

One is negotiating busy intersections where the traffic lights have not worked for months.

The other is satisfying customers wanting to pay for the ride in bitcoin. The first time a digital entrepreneur booked him, he had to google what bitcoin was.

“I had one hour and 30 minutes to figure it out because I tell the client a white lie. Like I said ‘I accept cryptocurrency’ but I didn’t. So I had to figure out how to do it because maybe this is going to be an opportunity for me right now.”

Mr Santana downloaded a crypto-wallet to his smartphone and soon became the driver of choice for dozens of blockchain developers moving to the capital, San Juan. He said 10 per cent of his business now came from cryptocurrency payments.

“Everything is down in Puerto Rico and for me and for my business, I was worried,” he said.

“I think this was a blessing from God and a message.”

Even more blockchain developers have gravitated to the resort town of Rincon on the island’s west coast. Cynics say they are not coming to help people but to enjoy the surf and sun … and, more importantly, the financial incentives.

Under act 20 and 22 of the tax code, businesses moving from the mainland pay just 4 per cent corporate tax and zero tax on passive income (shares and dividends).

The Puerto Rican Government’s economic spokesman Manuel Laboy said over the last couple of months blockchain had been “an unbelievable trend in a positive way for Puerto Rico because we are receiving a lot of individuals and companies looking for this special treatment”.

“Initially we were talking about cryptocurrency, but people have discovered that blockchain is a technology, a digital platform, that can be applied for many other things, for example, healthcare, energy, water,” he said.

The activist writer Naomi Klein has called them “disaster capitalists”, taking advantage of Puerto Rico’s misery.

Mr Pierce is indignant. “Hang out for a moment and you should be able to tell instantly that that’s not our intention,” he said.

Puerto Ricans buried in debt

While rich investors from the US mainland are getting tax breaks, poor people on the island are being squeezed.

Students at Puerto Rico University have been protesting against the local government tripling their fees and cutting the university’s budget by $269 million.

Healthcare, pensions and public-sector wages are also being slashed, even as people are struggling to rebuild their homes and find work in the hurricane’s wake.

The US Congress has ordered the island’s Government to impose an austerity program to start clawing back $97 billion in debt.

Successive administrations borrowed excessively to finance spending, leaving the present Government effectively bankrupt.

“That’s a debt that we didn’t create and we’ve been forced to pay,” student activist Adriana Rodriguez said.

“It was politicians in power with these corrupt practices that got us into that debt. And I would even say that banks in the United States, knowing that we didn’t have the capacity to pay them back, loaned us the money anyway in this plan to keep us in debt.”

Walk around the old centre of San Juan and it can feel more like Cuba than a territory of the US. The architecture is similar to Havana and the famous Bomba music has the same Latin, Caribbean roots.

Both islands were Spanish colonies before the US seized them in 1898. Cuba eventually won independence and fell under Soviet influence while Puerto Rico became a US territory with liberal capitalism and American junk food.

But scratch the surface and you can sense a growing anti-Washington militancy that would be at home in Cuba.

“Basically, Puerto Rico’s a colony,” Ms Rodriguez said.

“It’s a property of the United States.”

Part of the anger is over the post-hurricane relief effort. People felt insulted by President Donald Trump when he flew down and tossed paper towels at people.

The much-touted reconstruction program has been far smaller than relief efforts on the mainland.

While Puerto Ricans are US citizens, it’s literally second-class citizenship. They can’t vote for the president and while they can elect a member of Congress, that representative can’t vote in the chamber.

They can’t even import food directly from their neighbours. Everything has to come on a US ship from a US port, making consumer goods far more expensive.

“So if we want to get an avocado from Dominican Republic, it has to go to Florida first,” music professor Luis Rodriguez explained.

No faith in the hype

Professor Rodriguez’s home town of Mariana is still waiting to be reconnected to the power grid so he and his neighbours have taken matters into their own hands, buying solar power panels and installing them without any technical training.

The Government has done nothing to help.

“It’s the contrary,” he said. “They want to put a tax of 30 per cent on every solar thing.”

And he has no faith in the hype he is hearing from cryptocurrency and blockchain investors.

“It’s that whole imperialism again and again and again in different forms, right? Just people coming, thinking that they can save us.”

If there is one thing that everyone agrees on, it is that things have to change. The old ways of doing things have left the island bankrupt and vulnerable.

But whatever advantages blockchain technology can bring, it is going to be a while before ordinary people see them.

Right now they are just hunkering down for the next inevitable hurricane.

Watch Blockchain Island on Foreign Correspondent at 8:00pm on ABC TV.

Topics: computers-and-technology, internet-technology, world-politics, puerto-rico

First posted July 24, 2018 05:01:04

Source: http://www.abc.net.au/news/2018-07-24/bitcoin-billionaire-brock-pierce-wants-to-transform-puerto-rico/10013026

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