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Blockchain for Smart Cities Series: Blockchain and Smart Cities

The application of Information Technology is generally considered as a key driver in the development of Smart Cities. Blockchain technology, which is a relatively new technology development and comprises a multitude of underlying technologies and protocols, can be a major driver and asset in development of Smart Cities. The concept of Smart Cities represents a utopian urban development that integrates both information and communication technologies to enable citizens, governments, and organisations generate and exchange real-time data. With the growing possibilities of its many applications across a vast number of fields, blockchain technology can create a new level of ease and security for communication and transactions to occur between all the many stakeholders of a Smart City.

Blockchain is an open, decentralized ledger that records transactions between two parties in a permanent way without needing third-party authentication. When combining this technology with IoT and real estate, we can start seeing massive changes in the sprawl of a city. Having already established in parts 1 and 2 of the Blockchain for Smart Cities series how Blockchain can help drive innovation in the IoT and real estate spaces, we will now delve into the typical challenges faced when navigating towards a smart city, the risks, opportunities and how the use of Blockchain can enhance the city experience.

Globally, countries are experiencing increasing levels of urbanisation, while major cities are becoming magnets for top talent and businesses, resulting in these cities being a major driver for economic growth. But this comes with the risks of increased congestion and environmental issues. Increasing population numbers in cities bring with it, the issues of greater demand for resources, greater pressure on urban infrastructures, increased demand for public services, and more pressure on the natural environment.

The need for Smart Cities, supported by connected technologies, is growing. The economic downturn caused by the COVID-19 pandemic showed how there is a need for more efficient and reliable urban management. Advanced technologies such as blockchain can play a key role in addressing these societal issues while also achieving efficient urban management.

In order for efficient urban services to be delivered, it is crucial for a city to ensure that effective data exchanges are conducted between the many different city stakeholders. Blockchain enables network participants to exchange data with a high degree of reliability and transparency, without needing to depend on a centralised administrator.

Because a Smart City is a collection of industries and stakeholders interacting with one another, we have selected a handful of application areas. The application of blockchain technologies are specific for each application area, but when combined, can be viewed as the building blocks for a smart city.

The main objective of smart energy is for the efficient consumption of clean, low-cost energy. Blockchain has the potential to create a more resilient environment for the energy industry through the facilitation of peer-to-peer energy production and consumption. The city ecosystem can benefit from the use of blockchain to maximise energy efficiency and improve the management of energy resources. Greater transparency can be brought to energy transactions through using blockchain for the regulation of energy transformation and distribution. Blockchain can provide a strong communication backbone for use in the energy network, thus streamlining and securing peer-to-peer energy trading transactions. Blockchain technology can be used to store data generated from energy management systems. Decision makers will therefore have greater levels of comfort in using this data to measure levels of demand and supply.  

The concept of smart mobility is meant to improve access to modernised transportation systems that are efficient for users and sustainable for the city and the broader environment. This is a key component of any Smart City. One of the major hurdles faced by any city is the effective management of a transportation network. Blockchain technology can be used alongside IoT devices and systems for continuous real-time tracking of transportation vehicles and passengers. Various applications of blockchain technology can allow transport decision-making authorities to optimise routing strategies and schedules, plan for the differing needs of commuters, and achieve greater effectiveness with regards to environmental and sustainability goals. An efficient transportation network which leverages blockchain technology can allow users to securely pay for transportation services throughout the transportation ecosystem, regardless of which mode of transport they are using. Blockchain will allow for a greater level of understanding of commuter profile as it is capable of capturing and storing a vast amount of granular data and maintaining a complete and immutable history of commutes, driving performance, maintenance etc. Blockchain can also be an enabler for Mobility-as-a-Service solutions, where various additional services can be delivered to citizens such as car-sharing, payments, insurance, and maintenance. 

With the growing rate of urbanisation, there is more emphasis on the need for effective city administration and service delivery. Public administration needs to be redesigned in order to operate more efficiently and deliver value to citizens. This can be achieved by reducing the heavy reliance on centralised administration systems. With its higher levels of security and privacy, blockchain can be used to assist governments in achieving effective e-administration solutions. Smart contracts, which is a tool offered through blockchain technology can enable the transition to a Smart Government, where citizens can be more actively involved in their engagements with government services. Various services such as land registries, identity management and authentication, tax collection, and records management can be automated and delivered more efficiently through the use of smart contracts, enabled by the blockchain. Blockchain is also an effective tool in ensuring government transparency and accountability. Transactions can be verified and all parties involved will be accountable to deliver on the services they have been contracted for.  

Depending on the application(s) of blockchain in the city, there may be a need for the transfer or consolidation of data from several disparate systems. There is a risk that existing data may not be complete or accurate. In addition to this, with laws such as PoPIA, organisations are required to protect the personal information that they own. The challenge of what data can be shared and to whom will come into question.

Although not a direct Blockchain risk, with many interconnected systems and smart devices, the entire city can become a target for cyber criminals. All of these connected devices and interfacing systems provide potential entry points for hackers when not appropriately secured. Any smart or internet facing device could be susceptible to an attack whether it’s a smart camera or smart parking system. It only takes one unsecured device to allow criminals access to the entire network - a casino was once hacked through a smart thermometer placed in an aquarium! Strong controls will have to be put in place to ensure that the entire chain and network is appropriately secured.

One of the biggest opportunities for blockchain in cities lie in cryptocurrency. In April 2021, the value of the cryptocurrency market topped $2 trillion for the first time. With more coins being developed and strong investment made in this space by large companies such as SpaceX and Tesla, the market is in a strong position to grow. Future cities can incorporate this into the businesses that operate within. Business can look to accept payments in the form of cryptocurrency. Other applications, such as tokenisation may provide additional streams of revenue for businesses. A token community could open up myriad possibilities for citizens. Tokens can be used as a means to pay for services and products (refer to part two in the series where we explore using this for rental payments). It can also be distributed to citizens as rewards for engagement or even to incentivise behaviour such as providing tokens to citizens redeemable for a health check-up. The token community stands to stretch across all industries from healthcare, property and education to transportation, telecommunication, and sustainability.

Smart Cities and blockchain technology are still in their early stages of development. Both concepts are very broad and incorporate multitudes of stakeholders, systems, and processes. Significant progress and breakthroughs can be expected from both fields in the near future as more technological advancements are made and more people adopt the concepts of a Smart City and explore the possibilities of blockchain technology. New technological innovations will result in newer opportunities for applications into various ecosystems that form part of a Smart City and blockchain can lead this innovation with its far-reaching applications into various industries.


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