Blockchain for Smart Cities: The New Innovation For Urban Management

The emergence of societal issues associated with increasing urbanization and the growing need to cut government budgets are two of the main reasons why smart cities are receiving so much attention. According to the United Nations, the number of cities with 10 million or more inhabitants is expected to increase from 33 to 43 between 2018 and 2030. While urbanization is said to bring strong economic power due to the concentration of population and industry, it has also are risks including the potential for increased congestion and environmental problems.

Expectations for smarter cities are rising. With the economic downturn caused by COVID-19, there is more need for more efficient urban management than ever before. Between 2020 and 2024, the smart city market, including the energy, healthcare, and security segments, is expected to grow at an annual rate of 23%, which equates to approximately $ 2.1 trillion. Blockchain technology can play a role in these developments, in the right direction.

How We Can Utilize Blockchain In Smart Cities

Advanced technology, including blockchain, can play a key role in solving societal problems and achieving efficient urban management. Blockchain enables network participants to exchange data with a high degree of reliability and transparency without the need for a centralized administrator. Cities have various stakeholders and the exchange of information between stakeholders is essential for highly convenient urban services.

Blockchain is expected to be used for this data exchange. For example, Smart Dubai, with a mission to make Dubai the happiest and smartest city in the world, is developing blockchain use cases across multiple sectors such as finance, education, and transportation. For example, a project is underway to facilitate enrollment procedures for students moving between emirates using blockchain.

Collaboration Is The Key!

An important point to remember is that for smart cities to contribute to solving societal problems, work efficiently and at the same time improve the quality of service, it is not enough to have independent smart cities. On the contrary, it is essential to ensure interoperability and coordination between multiple smart cities. Some efforts are already underway to achieve this goal. In Japan, the cabinet released a whitepaper on a reference architecture for smart cities in March 2020, which identified interoperability as one of the four fundamental concepts important in promoting smart cities.

The G20 Global Smart Cities Alliance, for which the World Economic Forum serves as its secretariat, brings together municipal, regional and national governments, private sector partners and city residents around a shared set of core principles. These are the core principles for the implementation of smart city technologies, including openness and interoperability.

Smart cities can learn from a recently published interoperability framework, which presents a three-tier model for using blockchains:

The business model layer. This layer includes an aspect of governance models, data standardization, legal frameworks and commercial models.
The platform low. This layer includes the consensus mechanisms, smart contracts, authentication and authorization.
The infrastructure layer. This layer includes the hybrid cloud, the managed blockchain and proprietary components. It is important to note that achieving interoperability requires more than solving a technical problem. Namely, it also requires solving a governance, data ownership, and commercial business model problem that encourages ecosystem stakeholders to collaborate.
The three-layer model in practice

The three-layer model can be very abstract at first. That is why we are going to explain this with the help of an example. Take, for example, one of the expected services in smart cities: mobility as a service (MaaS). MaaS seamlessly connects multiple transportation systems to provide highly convenient mobility services. In the realization of MaaS, there is an effort to use blockchain for data exchange and revenue sharing between multiple transportation companies, and transportation can take place in different cities. At the business model layer, it is necessary to solve the problems of data standardization - for example, for information about human movements and collected through Internet of Things (Iota) devices - and that of commercial models, such as how to distribute revenues among transport companies. .

On the platform layer, a smart contract (a computer protocol that enables credible and transparent transactions) can be used for transport ticketing. However, different blockchain platforms sometimes use different languages for smart contracts. So interoperability issues for ticketing may need to be resolved. At the infrastructure layer, the existence of proprietary components can pose a challenge in achieving interoperability. This is because secured blockchains (which maintain an access control layer to allow certain actions to be performed by identifiable participants) are typically used for data exchange between multiple transport systems.

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