One new concept that has recently gained traction is the use of blockchain technology in cities. The idea is to empower cities with blockchain, a decentralized, distributed ledger that stores data permanently, in order to help improve the quality of life and optimize urban services.
To do so, cities will need to integrate blockchain and distributed ledger technology (DLT) into various aspects of their infrastructure, governance, and services. This could dramatically change the way things are done in these cities.
Here are five ways life will be different in a blockchain city.
5 Ways Life Will Be Different in a Blockchain City
1. Improved Banking System
Blockchain is the technology that underpins cryptocurrencies. It is a distributed ledger with growing lists of records (blocks) that are securely linked together via cryptographic hashes, making it possible to transfer value online without the need for a middleman like a bank or credit card company.
Cryptocurrencies have already proven that this concept works, paving the way for the integration of blockchain technology in banking systems in future smart cities. There are a number of ways blockchain technology can improve the banking system.
For one, blockchain’s decentralized and transparent nature makes it nearly impossible for hackers to compromise transaction records. The technology also allows banks to cut out middlemen from various processes like transaction settlement, record keeping, and compliance, increasing speed and efficiency while reducing costs.
Furthermore, cross-border payments that currently take days can be executed instantly using blockchain technology. Notably, smart contracts can also be written into the blockchain, allowing banks to automate back-office functions like compliance verification, KYC checks, and more.
2. Digital Identity and Tokenized Assets
The concept of digital identity has already started finding momentum, with countries turning to blockchain to offer a safe and cost-effective way to manage digital identities.
Last month, Brazil announced that it is set to issue digital identification documents for its more than 214 million citizens using blockchain technology. The states of Rio de Janeiro, Goiás, and Paraná will be the first to adopt this new system, according to an official announcement by the government.
Brazil’s move aligns with a similar initiative in Buenos Aires, Argentina, where residents can access their identity documents through a digital wallet. Likewise, the Commonwealth of Dominica partnered with Huobi last year to issue Dominica’s national token, Dominica Coin (DMC), and its Digital Identity (DID).
Alongside digitized identities, assets will also be tokenized in blockchain cities. Asset tokenization utilizes smart contracts to manage transfers of digital tokens that represent and verify ownership of assets, offering streamlined transactions, transparency, and high levels of efficiency.
One key trend in this realm has been the tokenization of treasury bills. According to data accumulated by rwa.xyz, in 2023, there is more than $625 million in tokenized US Treasuries across different blockchains, up by more than 450% since the beginning of the year.
3. Optimized Government Services
Blockchain technology can help optimize various government services like taxation, voting, license renewal, and more. Through blockchain, governments can not only make sure that citizens are paying their taxes but also simplify tax collection processes through smart audit trails.
Likewise, voting systems built on blockchain ensure integrity, transparency, and security, boosting voter trust and turnout while reducing the costs of physical infrastructure. Governments can also track materials, assets, and resource allocation on blockchain to offer enhanced supply chain management.
Moreover, the technology can play a key role in coordinating the benefit distribution. Smart contract-based welfare schemes can be used to distribute benefits directly to citizens, ensuring efficiency and transparency.
4. Transparent and Immutable Records
Blockchain’s distributed ledger technology enables the creation of transparent and tamper-proof records. Government agencies can utilize blockchain to maintain public records, such as land titles, birth certificates, and business licenses.
By storing these records on a blockchain, information becomes easily accessible, and the risk of fraud or manipulation is significantly reduced. Citizens can verify the authenticity of documents without relying on intermediaries, streamlining processes and reducing bureaucracy.
Storing data on blockchain systems can also facilitate secure and efficient data sharing between different government agencies. With blockchain, agencies can access a shared ledger, ensuring data consistency and reducing duplication of efforts.
5. Better Security
Cybersecurity is a critical concern for governments worldwide. However, blockchain’s decentralized architecture and cryptographic algorithms provide an additional layer of security against cyber threats.
Furthermore, blockchain technology will make it extremely difficult to get away with fraud, theft, embezzlement, or corruption. Although it may still be technically feasible to commit such crimes, the enhanced transparency, traceability, and trackability provided by blockchains make it easier for governments to find bad actors.
A blockchain-native city could offer an enhanced version of the various aspects of our lives. It can provide better supply chain management, voting systems, and energy consumption optimization while streamlining urban living with tokenized self-sovereign digital identities and autonomous services.