I had a similar toy back in the 1960s in the UK. It was a bunch of little bricks and some special water soluble glue that acted as mortar. I used to build fire places and chimneys, and then light little small fires and watch the smoke come out. When you want to build a different model, you just submerged the old model in water and (after a time) it would just fall apart.

My google-fu isn't working well today otherwise I could find a reference to this toy (I can't recall what it was called).