How blockchain technology can unlock the ultimate potential of our cities

Representative image  |  Photo Credit: iStock Images

Since their earliest manifestations, cities have been vital to our collective future. Cities are engines of commerce, thought, culture, and innovation. Even during the downturn caused by the COVID-19 pandemic, cities have demonstrated their persistence and pushed humanity forward with critical leadership on the pressing issues facing the world. We need cities more than ever, to solve the challenges of climate change, globalized trade, and political stagnation. The best way to ensure that cities are up to the task is to bolster self-governance efforts. Blockchain technology is an ideal and underutilised tool to accomplish this task.    

The founder of Ethereum, Vitalik Buterin, published a stimulating thought piece this month outlining how he believes blockchain technology and cryptocurrency can aid the development of cities and encourage better self-government. Blockchains enable innovative governance, Buterin argues, by securing information. This isn’t limited to the straightforward storing of residents’ data but can aid in more efficient tax collection, allocation of resources, and crisis management. Using the example of Harberger taxes and other zoning mechanisms, Buterin shows how blockchains can fundamentally transform how cities function. The more efficient and trustworthy a city handles the heavy lifting of capital management, the better its self-governance will become. Better self-governance stimulates economic benefits across society and in the global economy.

Cities are so revolutionary because they generally have nimble legislative environments. The effects are evident in the battle against climate change. Many city governments have been able to push through more aggressive legislation than the national government regarding pollution standards because of their nimble legislative structure. 

However, this comes at a cost, and cities need ample revenue to continue forward. Buterin sees cryptocurrency as a catalyst to spur revenue. The remarkable rise in the price of cryptocurrency demonstrates the sheer amount of investor appetite for new coins. A cryptocurrency backed by a city could be an attractive and secure investment for the current market appetite. After all, there are popular alt-coins named after internet dog memes that have a market capitalization in the millions. The next mayor of New York City Eric Adams just announced that he would receive his first three paychecks in Bitcoin, in a sign of his warm embrace of cryptocurrency. 

If cities followed Buterin’s model, revenue generated from cryptocurrency projects could be recycled into exponential technologies such as solar energy projects, vertical farming, and 3D printing. These technologies increase the capabilities of cities and ensure that they remain on the cutting edge of the knowledge economy and the climate change battle.

Buterin isn’t writing in a vacuum. His ideas are already being put into action. In tiny Baltic nations such as Estonia, cities like Tallinn use blockchains to facilitate fully-fledged digital governments that can be operated from anywhere in the world. Dubai has one of the most ambitious blockchain strategies of any city in the world. From phasing out paper to moving all resident information to a blockchain, Dubai committed to a blockchain future more than a decade ago. Every month there are new developments in how Dubai uses blockchain technology to make governance more streamlined. 

Yet, there is one aspect missing from Dubai’s approach at this stage: The creation of a local cryptocurrency. The UAE’s relationship with cryptocurrency has been understandably cautious but it’s time for this relationship to change. The UAE and Dubai, in particular, are some of the most trusted locations for remittance. With money flowing out of the country to virtually all parts of the world, the UAE’s remittance trade is a big business. And remittances are built on trust. 

Given the track record of trust, Dubai is ideally positioned to create a local cryptocurrency that would, in turn, facilitate additional blockchain projects. This could be done in Dubai alone or as part of a national cryptocurrency in the UAE since there are already discussions about creating a digital version of the UAE Dirham. The issuance of a city token in Dubai (and Abu Dhabi) could be a part of a national currency model. 

The potential upside of these developments is straightforward and remarkably high. Dubai would become the first city globally with its cryptocurrency, and the revenue generation would be significant. As the city continues to build its knowledge economy, A Dubai coin would be a logical and necessary step in a longer-term plan. 

For this effort to gain genuine momentum in Dubai (or anywhere else in the world), a new discussion about the value of crypto needs to unfold. In the last year, attitudes towards crypto have changed dramatically, but there is still hesitancy about the new technology. Various concerns about crypto, from energy consumption to illegal usage, have been alleviated. For example, the increasing capacity (and falling cost) of clean energy from wind and solar are lowering the environmental impact of cryptocurrency. Using solar energy in a country like the UAE to power a Dubai cryptocurrency is a no-brainer. The future of humanity rests in cities. It’s time for creative solutions to ensure that cities continue to thrive and propel innovation forward. 

In arrangement with Syndication Bureau

Joseph Dana is a guest contributor. Views expressed are personal.