Why Smart Cities Must Embrace Decentralization: The Case for Blockchain Cities
This post was co-written with Professor David LEE Kuo Chuen, BlockAsset Ventures and LeftCoast co-founder.
The term smart cities, and the movement, has been around for a dozen years now. While smart cities initially represented a top-down, multinational, tech-driven paradigm, in recent years, we have begun to witness cities embracing more bottom-up citizen co-creation. Despite this transition, much of the tech in smart cities is still being implemented top-down with proprietary software driving IoT, big data and the like.
A few months ago, the City of Barcelona’s CTO, Francesca Bria, made a declaration that the city would move away from proprietary software and towards open source solutions. Bria was quoted as saying:
“The presence of IT giant Bill Gates in municipal computers will be progressively reduced by the end of this municipal term of office.”
We believe Barcelona is onto something important, and would like to take it one step further. Smart cities must embrace open source and decentralized software tools to 1) remove municipal dependence on monopolies, 2) foster innovation and inclusion 3) ensure resilience and security of critical data and infrastructure, 4) allow more inclusive access to economic opportunities including for pensioners through fractional tokenized ownership models.
1) Remove municipal dependence on monopolies and oligopolies
Local governments have a responsibility to enable high quality of life for residents and visitors to the city. Venture capital-backed, profit-seeking, enterprises have a primary responsibility to their shareholders. This often puts multinationals at odds with local municipalities and residents when the interests of investors and shareholders are completely misaligned with those of local residents, as has been demonstrated with platform-based models like Uber and Airbnb who have quickly formed nearly global monopolies from their Silicon Valley headquarters.
There are legitimate alternatives to such models, such as via the emergence of platform cooperatives whereby the providers and users of a service actually co-own and share in the governance of the platform itself. Great examples of this can be found in music with Resonate and in efforts to compete with Airbnb such as what some community organizers are trying to do with Fairbnb. Of course, distributed ledger technologies (DLT) like blockchain we can go even further to provide alternatives to monopolies in urban environments such as The Bee Token which is building a decentralized homesharing network. Such technologies encourage alignment of community interest via the use of tokens and smart contracts without necessarily decentralizing governance. Thus, retaining a certain degree of centralized policy governance while pursuing decentralized technology. IoMob, for example aims to decentralize urban mobility through an Internet of Mobility (IoM) protocol and even sees a future for an individual taxi driver to tap into an app and plug into an open blockchain protocol and be discoverable by an open network of mobility users, meaning the driver does not even have to belong to a taxi company to compete with Uber for specific rides where the driver is located.
2) Fosters innovation and inclusion
Closed, proprietary solutions tend to lead to monopolistic and predatory approaches to markets. Large, multinational, heavily capitalized enterprises can kill local competition and we have seen that in cities around the world where Walmart and Amazon have driven many small retailers out of business. Open source approaches lead to more innovation as it lowers the cost and barriers of sourcing for crowd participation and wisdom. Smart cities which fail to embrace decentralized solutions, will struggle to create local economic opportunity. This will be even worse in the coming years as artificial intelligence (AI), Big Data, IoT and robotics result in substantially fewer jobs. Cities must support an open, local and decentralized, but interconnected economy.
Blockchain solutions can open massive opportunities for enterprising local residents while also supporting innovations in services and experience for locals. For example, in Barcelona, there are at least 51 shared mobility operators each of them spending scarce resources to build technology platforms to attract and retain customers and to compete with multinational mobility companies like Uber and mytaxi. This is wasteful and a major barrier to innovation in cities. IoMob, for example is building a blockchain protocol that will allow any mobility startup to plug into a 2-layer open architecture and to immediately be discoverable by any user of any other app also connected to the protocol, unleashing innovation opportunities for all to benefit.
3) Ensure resilience and security of critical data and infrastructure
Smart cities who have critical data and infrastructure tied into single closed, monopolistic systems are at risk for data breach and much more. There is probably no need to rehash what we have learned about data privacy from the Facebook scandal. However, it is just another example of how vulnerable our society has become and to the importance of secure identity and better systems for empowering users to determine when and how they are willing to share their data with others and for what purposes. Furthermore, breaches of proprietary systems could result to even worse offenses such as the risk of full system failure or even terrorism.
Back to mobility. Imagine if you will a city that has allowed Uber to achieve its goal of a fully autonomous ridehailing system that is so pervasive it may even illustrate predatory behavior on public transit systems, resulting in reduced access to mobility services for lower income residents. Furthermore, an AI powered all autonomous ridehailing system in a city, run by proprietary software like Uber’s could be at risk of hacking by terrorists, turning vehicles into autonomous weapons of war. The cost of hacking a decentralized system increases with scale and an open decentralized system is essentially more resilient in the long run. With zero-knowledge proof, signal and noise from data are both blocked from potential abuses by users of deep-learning AI and big data analytics, thereby enhancing the protection of privacy at the technology layer without necessary compromising governance.
(4) Fractional Ownership and Ensuring Transparency
Pension underfunding is a potentially major problem of many countries especially those with aging populations. Effective decentralized solutions may structurally change the fundamental landscape of how pension assets are held and distributed. Consumer behavior, social contracts, employment and retirement patterns are changing. Having sufficient resources or pension for old age is essential for citizen’s well-being. Given that two-thirds of all jobs in developing nations may disappear due to automation, robotics, AI and big data, financial inclusion is an integral part of social stability.
In the future, it is likely that many may not be able to rely on steady and sufficient streams of income from traditional work and pension when retired. The most ideal outcome may be a decentralized technological system such as blockchain that allows for cost effective fractional asset ownership. By fractional ownership, it means that everyone is a fractional owner of every subsistence level of service and essential product she or he might use. The current design and state of blockchain and tokenization already enables anyone to hold fractional, decentralized and liquid assets that are digital and readily usable. Decentralized and fractional access, if properly organized, could increase economic inclusion and social stability. The transparency of DLT may also add to willingness to fund socially impactful projects from the wider population and philanthropy. In mobility, IoMob even envisions the potential for strangers to share in the ownership of individual or groups of vehicles, and then share in the revenues generated from P2P carsharing networks or even autonomous taxis. This by itself could serve as a form of passive retirement income.
We believe smart cities have the potential to transform our lives, support more inclusive, safe and resilient cities and can foster open innovation but only if the digital transformation is open and decentralized. Open and distributed innovation encourages user innovation. Such innovation allows for user participation and increases the welfare and community experience. The blockchain cities movement has begun, with cities such as Dubai and Singapore embracing the use of blockchain for service delivery. Smart cities must follow Barcelona’s lead towards digital sovereignty while committing to decentralized technologies to ensure improved quality of life and in the end, happiness and well-being.