Top 10 Blockchain Cities in the World: The Methodology
So it was only yesterday, Breaker Magazine published my efforts to undertake a first more rigorous approach to ranking blockchain cities around the globe. The results have created a lot of conversation in LinkedIn, Twitter and Telegram and I have been receiving inquiries regarding why certain cities weren’t ranked, or clarifications on the methodology. While Breaker published a summary of the methodology, the full explanation of the methodology I employed, and the indicators and sources of data I used was not published in its entirety. In order to help those seeking more explanation on the methodology I am doing so here.
Let me start by stating that any ranking initiative, like the ones I previously led on smart cities, and this first attempt at a ranking of blockchain cities probably carries more weaknesses than strengths. Every choice made in the ranking process could be questioned. Did I select the right sample of cities, what about the weightings of the indicators, even the choice of indicators, and of course there are ample deficiencies with the data collection process, starting with insufficient or unavailable data to fully assess each city in the ranking. So, with this warning in place, below I will attempt to explain transparently the approach developed for this ranking. We hope to receive suggestions from the global blockchain ecosystem on how to improve the methodology in future iterations.
City Selection
Perhaps the most controversial part of this ranking process may in fact be the actual cities chosen for consideration in this first ranking. Naturally it is impossible to start with standard eligibility requirements such as all cities with a certain population of X, or perhaps any city with at least one incorporated ICO founded there. If resources were unlimited those could have been used as selection criteria. Instead, I leveraged a type of snowball methodology where I used different resources and previous blog posts to create a list of cities which had a reasonable chance of making a top 10 list. In the end, 18 cities were identified as potential candidates for the top 10 ranking. The primary sources of data for city selection included:
1) Token Report’s ranking of top 10 cities based on headquarters of projects completing a token generating event, or ICO.
2) The Global Startup Ecosystem Report 2018 (particularly their initial effort to highlight promising blockchain ecosystems (starting page 50).
3) My own work, with two research assistants, to identify other top cities based on ICO headquarters through the collection of data from Token Market’s database.
Indicator Selection & Weighting
In a first effort at ranking, with virtually no precedence in an emerging field, indicator selection (let alone data collection) is not an exact science. I actually started a spreadsheet with ideas off the top of my head, followed up by talking with other blockchain experts in my network and reviewing blog posts from authors pondering topics related to the quality of the blockchain ecosystem in any particular city in particular. As I started to create a list of potential indicators I simultaneously began exploring data availability. Some indicators may be incredibly relevant but if the data is virtually impossible to obtain, than the indicator is useless.
One thing that was very important to me in this process was to make sure I was not just counting ICOs or even just data about the ecosystem itself. Some of my network, and many current posts that recommend where to incorporate your ICO project for example, all focus on the regulatory context at the country level. In fact one trusted colleague said the only thing that matters is the regulatory and tax treatment for blockchain ICOs in that jurisdiction. As I indicated in the ranking post, I believe this is short sighted when thinking about where to locate a blockchain startup. The quality of the local blockchain ecosystem, and in some cases (especially for startups seeking to develop smart cities applications) the municipal government’s commitment to being a smart, blockchain city is also very valuable.
This led to a grouping of indicators in three separate categories:
1) Blockchain Startup Activities (BSA): 50 total points
2) Smart & Blockchain City Leadership (SBCL): 20 points
3) National Context (NC): 30 points
Below I introduce each category, the representative indicators and the weightings.
BLOCKCHAIN STARTUP ACTIVITIES (BSA)
This category ended up with 7 indicators which made it to the final analysis.
BSA 1: #of registered blockchain/ICOs in the city (10 points)
This is a logical indicator for assessing blockchain startup activity at a city level. Unfortunately I was unable to find one source that tracked all this data by city (many do it by country though). So I used numerous sources to capture this data and hired 2 research assistants at EADA to help research startups headquarters from Token Market’s list of 805 tokens as of April 15.
BSA 2: # Blockchain Professionals (10 points)
This data was collected on April 24th with a simple search of the term blockhain restricted by city via LinkedIn. This is a good proxy for measuring self-reported blockchain professionals in a city, although I suspect in some countries, for example in Asia, the resulting number could be under-reported since other professional networks have strong adoption as well.
BSA 3: # Blockchain Startups (10 points)
Similar to BSA 1, this indicator measures the amount of blockchain startups in a city. While in some cases projects could be double counted, it is important to note that many companies working in the blockchain space have not experienced a token generating event or ICO and may never do so. This data was collected from Crunchbase on April 25th.
BSA 4: Blockchain VCs, Intermediaries (7 points)
This type of indicator is ubiquitous in rankings of startup ecosystems. Surprisingly few people in the blockchain space who aim to report on the quality of the blockchain ecosystem in a jurisdiction have looked at this, I think in part because most of the current posts on the topic are done at a national level, and again, more focused on the national regulatory environment more than the local blockchain ecosystem in an urban area. This data was captured mostly on April 25th from a range of sources including: Angel.co, Crunchbase, Cointelegraph, and other google searches and conference presenters.
BSA 5: #Meetups per Month (7 points)
In my book, The Emergence of the Urban Entrepreneur, I wrote about the importance of collision density in cities which I consider to be the amount of opportunities for diverse professionals across a range of disciplines to cross-pollinate in social and professional environments. This collision density breeds innovation and dense cities with high levels of such activities are likely to be more successful in cultivating an innovation ecosystem in any sector. In this case, I measured the number of meetups scheduled for May 2018 which related to blockchain within 25 miles of each city via meetup.com (data collected on April 27th).
BSA 6: # Blockchain Jobs (3 points)
While these rankings may be biased towards startups, I felt it important to account for posted jobs in each city related to blockchain, be it in startups, corporations or even government. Data was collected via LinkedIn on April 28th.
BSA 7: Startup Genome Leader (3 points)
I have been following the work of the Startup Genome group since they first founded. Given my core academic training in entrepreneurship and my own previous work with measuring entrepreneurial activity and ecosystems I have much respect for the work this team does to collect data on entrepreneurial ecosystems around the world. This year they went further than usual and explored several different “sub-sectors” including blockchain. While they didn’t include much data, they did identify several cities around the globe which through their research, they felt had demonstrated potential to be a leader in creating a vibrant blockchain ecosystem. Therefore, this is a binary data point, yes they were identified in the report or no they were not.
SMART & BLOCKCHAIN CITY LEADERSHIP (SBCL)
This category ended up with 3 indicators which made it to the final report.
SBCL 1: # of Smart Blockchain Services Supported by the City (5 points)
I am a big believer that smart cities need to lead by example and to embrace blockchain technology to enable efficiency, foster continuous democracy through concepts like liquid democracy, and of course supporting inclusive economic innovation and quality of life. There is no repository or database of blockchain use cases in cities (at least not yet). So, instead I had to use good old fashioned google searches to identify applications being implemented in the eligible cities. Aside from this secondary research, I was able to supplement the research via my blockchain professional network in these cities, and in two specific cases (Singapore and Zug), I was able to visit with government and ecosystem actors. In the end this indicator, in my opinion is very important to the ranking, however, the lack of uniform data reduces the weight placed on it for this year’s rankings.
SBCL2: Blockchain Strategy for the City (10 points)
Let’s admit we are really in the embryonic phase of blockchain technology in general and even more so with its potential application to smart cities. Therefore it was to be expected that few blockchain cities have already deployed multiple blockchain services. Yet, pioneering smart cities would be expected to be devising or have already developed a framework for evaluating or at least a list of potential use cases for further research. Similar to SBCL 1, I leveraged Google searches supplemented by outreach to local experts and city officials to gauage the extent to which the city has a proactive strategy for embracing blockchain technology.
SBCL 3: Smart Cities Ranking (5 points)
For a city to succeed as a blockchain city, it needs to embrace holistic and ambitious approaches to being a smart city, combining aspects of urban leadership and citizen co-creation. As such, I have incorporated the city’s smart city ranking from Easypark’s annual ranking as it had the most coverage of the cities in our list. I did also review Juniper’s rankings and those from the Cities in Motion Index.
NATIONAL CONTEXT (NC)
This category also contains 3 indicators.
NC1: Favorable Regulation (20 points)
The relative weight of this indicator (20 points or 20% of total) will perhaps be the most controversial choice I made with the ranking methodology. As mentioned previously, some in the blockchain world would prefer a deep ranking only on this indicator and would argue that 100% of what makes a jurisdiction good or bad for blockchain companies is a favorable regulatory and tax perspective. I disagree with this view, as evidenced by the aggregate weight of all the other categories and indicators in this study. I do believe favorable regulation is a critical component and cities in countries with unfavorable regulatory or tax policies related to blockchain are going to lose out on attracting and retaining blockchain projects. While there is no universal standard of rating or comparing favorable regulation, there are many legal experts who have sounded off on this topic and I leveraged numerous ratings and commentary from such global experts to subjectively assess ratings for each of the eligible cities. I created my own independent assessment of the experts, and then as a second step, I sent the list of cities to Verum Capital an ICO advisory company from Switzerland, to independently rate the 18 cities on their national-level regulatory framework. I then revised the ratings I had previously developed as a result. As Switzerland emerged as the perceived leader regarding national context, I obtained a response from Daniel Gasteiger, co-founder of Trust Squre, a significant blockchain shared space community in Zurich:
“Already today, Switzerland has established itself as a global hub for blockchain technology. Legal protection, access to talents and research centres, proximity to the banking, wealth-management, pharma and insurance sector and a solid infrastructure are just some of the reasons for ventures to locate in Switzerland.”
NC2: Transparency (5 points)
A core value of blockchain technology is about increasing transparency. In fact beyond that, you could argue that blockchain, which was introduced to enable Bitcoin to function, was born due to a lack of trust in national governments. Therefore, I included the global corruption rankings from Transparency International to assess the transparency of the national government.
NC3: Best Places to do Business (5 points)
If a city does well in most other areas but has a bureaucratic and expensive process for incorporating and managing a startup, then it will also struggle to attract and maintain blockchain startups. The World Bank ranks 190 countries around the world across 11 sets of indicators.
Finally, the question is how to go from the raw collected data into a final ranking. For this I decided to keep it relatively simple. The city with the best/highest performance on each topic was assigned a maximum point score for that indicator, then the remaining cities were compared relative to the leader. It’s important to note I decided not to employ a per/capita measurement system because I do not believe that would result in an understanding of which cities are leading based on the real amount of activity, experts and more. For example, if per/capita was factored in, Zug, Switzerland a town with a population of 30,000, would win this competition hands down.
