Smart City and Blockchain: Challenges and Opportunities

According to Rakesh Kaul, Partner at PwC, “a smart city is an implementation of an advanced and modern urbanization vision”. So, smart cities are structured to allow operational efficiencies, maximize environmental sustainability efforts and deal with citizen services such as:

  • citizen identities management and citizen participation;
  • payment system between people and organization;
  • employment;
  • health;
  • culture;
  • transportation;
  • environment and space;
  • energy and waste;
  • land management;
  • clean habitat;
  • infrastructure.

In this economic, social, technological and political context, these shifts are reshaping the world and new challenges arise for countries and particularly for cities. As governments are seeking to incorporate innovations within their smart cities, blockchain can offer something more.

So, blockchain’s role is quickly increasing because it brings decentralization, erases intermediaries, brings security among the systems and interoperability among users. To be clear, blockchain is a trusted distributed ledger system across a network of users. It is a system, where the parties cooperate to ease the transaction process, make it more anonymous and yet more secure.

According to Tom Zilavy, IBM Blockchain and Cloud solutions,  blockchain can be utilized for smart cities in different ways: first of all, blockchain can push citizens to smart choices motivating their behavior: for example, thanks to a smart contract, public authority will be able to automatically give you a reward for a conscious good behavior such as using public transport in your city; then, blockchain could increase effectivity offering the possibility to have all the information in one database with participants having predefined permissions to view or change (transact) the information they need (in the case of a smart trash bin); finally, blockchain can make energetics efficient: for example, citizens with solar panels on their houses could, thanks to smart contracts, automatically trade their unused electricity with their neighbours and others that are connected to the grid. These transactions would be executed automatically, with the help of smart contracts and therefore effectiveness would be achieved.

City worldwide are implementing blockchain projects: Estonia has catapulted itself on the global stage as a digital nation by proactively supporting blockchain startups and embracing blockchain in its own operations. In this context, Tallin hosts, for example, e-residency program that allows anyone to incorporate a digital enterprise in Estonia, without ever having set foot there; the Estonian Cryptocurrency Association, a nonprofit in Tallinn, has taken up the charge to help promote the ecosystem locally and globally. In Singapore, Smart Nation strategy seeks to transform former fishing villages into living laboratory of innovation, and that type of proactive thinking is one reason it’s 2018 year’s world leader in blockchain. Singapore GovTech office is exploring a handful of blockchain use cases, while the Monetary Authority of Singapore has pioneered a decentralized inter-bank payment and settlements solution. Finally, the city of Austin in Texas is currently piloting a program in which its 2,000 homeless residents will be given a unique identifier that’s safely and securely recorded on the blockchain

Blockchain brings a lot of pros but there are a great number of challenges still open. There is lack of coherent regulation, many players want to centralize blockchain and there is a need to increase performance, interoperability and reduce complexity and cost.