How Blockchain Will Power Smart Cities

According to the “Population division” report from the United Nations, it is estimated that two third of the world’s population will be living in an urban area or city by 2050, compared to just over 55% today.

This sharp increase in urbanization is putting tremendous pressure on cities around the world to transform themselves and optimize the living standards of their citizens. From a purely economic standpoint, cities will face enormous pressure to provide adequate infrastructure, energy, food, administration, transportation, and work.

Governments and businesses alike are today working together to support the development of efficient urban areas which can face the challenges of urbanization. The early 2000s saw the emergence of the “Smart City” concept, which now massively relies on technological breakthroughs, such as blockchain and the Internet of Things, to underpin the development of efficient infrastructures and public services. Far from being marginal, Smart City initiatives are poised to attract technology investments of more than $81 billion globally in 2018 according to the International Data Corporation. A number that is expected to grow by 95% ($158 billion) by 2022.

The rest of this article will delve into the evolution of data creation in recent years to set the stage for the technologies supporting Smart City initiatives. Introducing concepts of Big Data and the Internet of Things (IoT), we will see how blockchain fits into this new paradigm and what solutions it supports within the Smart City framework.

Big Data and IoT

Before jumping into the heart of the subject it’s necessary to take a look at what has happened to the digital space and connectivity in recent years, and how these trends have laid the foundations to build the cities of tomorrow.

The world population is rapidly connecting to the internet, with a fivefold increase in the number of unique users between 2005 and 2015. Today we estimate that around 50% of the world population is connected. Seven years from now, we can expect this proportion to skyrocket and reach 75% according to the IDC. The proliferation of wireless broadband, fast telecommunication networks, coupled with the rise of mobile devices has propelled us into the information era where data has become a “right here, right now” type of necessity for consumers and businesses.

As the graph below indicates, the amount of information created will increase exponentially.

This forecast sees the total amount of data in the world in 2025 standing at 163 zettabytes (that is a trillion gigabytes). That is a tenfold increase compared to 2016. This astonishing forecasted growth can be attributed mainly to two trends.

First, physical storage has progressively been abandoned in favour of cloud-based solutions, widely used by businesses, thanks to service providers like Amazon, Google, and Microsoft. Wanting to gain access to content on a multitude of different mobile devices, users logically freed themselves from the constraints of physical storage supports, which are prone to failure and come with limited compatibility. Evidently, this trend isn’t limited to consumers and entertainment purposes. Businesses as well turned to these solutions to access non-entertainment and productivity material on the go.

As the graph below shows, mobile data will contribute greatly to the expansion of the global datasphere in the coming years.

The emergence of Big Data is in step with this pattern. Inundated by large volumes of data, businesses responded by innovating in their ability to collect, manage, and analyse increasingly complex and voluminous datasets. Driven by the need for better insight to drive strategic decisions, we pushed analytics even further as we understood that contextualizing data is crucial. As coined by Bruce Schneier in his 2015 book Data and Goliath, “Data is content, and metadata is context”.

As a general rule, the majority of the data we use is meant to be discarded once used or transmitted. In light of this fact, it becomes primordial to define ways to assess which data is relevant, if we shall retain it, in what form, and for how long. This is the type of granularity that metadata offers. This concept leads us to the other dominant trend that is greatly contributing to the explosion of data creation: IoT.

The Internet of Things is a network of embedded devices that are provided with unique identifiers. In short, the holy grail of metadata. Already present in factories, households, and in our pockets, IoT devices will experience a wider adoption in the years to come. Security cameras, fuelling stations, vending machines, digital signage, smart infrastructures, machine tools, wearables — these are only a few examples of areas where IoT can be used to provide real-time information to improve efficiency, better understand consumer behaviour, and increase business value.

Supporting the need for real-time data, IoT is expected to contribute immensely to the value of Big Data and metadata applications. As forecasted by the IDC, embedded data will constitute around 20% of the total data created by 2025.

So where does this leave us? On the one hand, we have cleared that internet and connected devices will become even more ubiquitous than today, and on the other hand we described how real-time information could be available across every imaginable aspect of human society to allow us to better inform our decisions and become more efficient.

If we already have the tools to connect every part of the value chain of a given process and analyse the data feedback in real-time, then where is the need for blockchain technology coming from? The answer lies in three keywords: Reliability, Transparency, and Security.

Smart cities & Blockchain

China, Korea, Australia, Taiwan, Ireland, Spain, Estonia, and many other countries are today engaged in Smart City initiatives. According to a recent McKinsey report, the number of smart cities will reach 600 worldwide by 2020. Even more astonishingly, it is estimated that smart cities will contribute up to 60% of the world’s GDP by 2025.

Enabling operational efficiencies, maximising environmental sustainability, enhancing urban living — these are the goals of Smart Cities. This concept should be viewed as a framework for advanced modern urbanisation. Smart Cities offer a perfect opportunity to implement blockchain technology, and the leaders in this sector have well understood that. Locations like Dubai, which aims at becoming the first blockchain powered government, and Moscow, which recently started implement blockchain in its electronic voting systems, are perfect examples of how this technology platform can be harnessed in the context of Smart Cities.

Here are a few use cases where blockchain can have an impact:

Identity — Citizen identity and civil registration can greatly benefit from Blockchain-based solutions to cut down administrative costs and improve issuance trust as well as reduce identity-related frauds. Smart contracts can be used for digitizing citizen rights and identification, transparent voting, tax, track ownership of assets, remove paper and automate bureaucratic processes.

Logistics and proof of provenance — The temper proof record of blockchain can increase the streamlining of sustainable value chains. Efficient, less costly, and transparent, blockchain coupled with real-time data from IoT devices could create the supply chain of tomorrow.

Smart Energy — Ever heard about distributed energy resources? A blockchain based peer-to-peer trading platform could lead to a more resilient power grid and allow for efficient energy redistribution at the individual level without the need for an intermediary. Promoting self-dependency on energy, a blockchain based system relying on real-time data could help enforce differential pricing models.

Waste management — Combining blockchain and IoT sensors would improve efficiencies for urban waste management. Accurately tracking the levels of waste production/disbursal at critical points can provide the required granularity to improve waste management strategies.

Pollution monitoring — A blockchain being fed information from IoT sensors about pollution-generating activities could help cities inform their citizens about air quality and provide detailed insights to devise more efficient ways to combat pollution.

Smart payments — Providing a secure and distributed way of recording data, blockchain and its smart contract capacity can be the basis for payments requiring metadata information to be triggered. Imagine parking meters and pay tolls relying on individual driving patterns to determine how much to charge you and execute payment only if specific conditions are met. A single example that showcases how smart payments can drive efficiency, reduce costs by relying on more precise information, and reduce time spent on burdensome tasks.

From the need to rationalize the way we use our resources to the realization citizens want to use modern digital technologies to connect with their city governments about daily life issues, smart city projects are being tested and implemented globally. As expected, we see blockchain technology being used routinely to support these projects.

Among other initiatives

Taipei, Taiwan, is aiming to become a smart city through the use of blockchain-powered solutions. The city has first announced a project of digital authentication for its citizens, a “Digital Citizen Card” designed to protect individuals from identity theft and voter fraud. Paving the way for other use-cases, notably in healthcare, patient records are being transferred into a distributed ledger platform to improve patient care and responsiveness in the industry. Even further, Taipei is addressing the subject of pollution, thanks to digital monitoring systems based on IoT sensors and blockchain to track air quality and sharing real-time information with citizens.

The UAE is also a prominent actor in smart city initiatives and has set up the “UAE blockchain strategy 2021” which focuses on “citizen and resident happiness, government efficiency, advanced legislation, and global entrepreneurship.” Saving millions of work hours, the forecasted cost savings in administrative spending thanks to blockchain solutions is expected to be substantial.

Relying on a comprehensive plan leading to a thousand government services going “smart” in 2017, the number of areas ready for blockchain adoption is astonishing: Transport, communication, infrastructure, electricity, economic services, and urban planning. It should come as no surprise that the UAE is home to some of the most developed smart cities in the Middle East and Africa, with Abu Dhabi in first place and Dubai in second.

The Chinese government and private sector are very active in projects of urban improvements based on smart technologies. Sponsoring the creation of 500 smart cities to support the rapid urbanization it’s experiencing, China’s forecasted spending on Smart Cities initiatives outclasses every other nation. Taking a collaborative approach, private sector technology companies — Ping An, Alibaba, Tencent, Huawei — are participating in this gigantic development framework.

Xiong’an (100 km from Beijing) has been estimated to receive $380 billion in funding, as the government seeks to make it a flagship smart city. This project could become a model for how we can build smart cities with blockchain. Auto-giant Wanxiang has also made big a investment and is seeking to integrate blockchain in its electric vehicles to cut costs and enforce property rights. Registering its batteries on a blockchain and using IoT and blockchain to monitor their use, the company could retain battery ownership — lowering costs for car-owners — and track performance to determine when to recall the product back.

The EU is also driving smart city initiatives supported by blockchain, IoT, and AI. Factors such as relaxed regulation, well-funded governments programs, dense and developed urban areas, as well as favourable tax condition have led many blockchain start-ups to settle in Europe. London, Zug (Switzerland), and Berlin have been ranked in the top world’s Top 10 Blockchain Cities.

The development of a digital single market and programs such as the “EU Blockchain Observatory and Forum” provide the fuel necessary for blockchain to make its way into urban developments initiatives. The IDC forecasted that blockchain spending in Western-Europe will increase to $1.8 billion by 2021 (compared to $200 million spending in 2017). The EU Blockchain Observatory alone has planned to spend an envelope of €340 million by 2020 to fund projects drawing on blockchain technologies.

Another initiative, the European innovation partnership on smart cities and communities (EIP-SCC), has already given the green light to 14 projects that will demonstrate how new technologies will lead to integrated infrastructures, sustainable urban mobility, and the creation of positive energy districts. Precisely working on the latter, a group of 32 partner companies — among which a blockchain start-up — have recently gathered under the “cityxchange” consortium. Securing €20 million from another EU program, the group has for ambition to demonstrate how new technologies can lead to smart energy district that can “generate more than they consume”.

Although very nascent, blockchain adoption is on the way. Healthcare, education, public safety, agriculture, governance, and many other fields can benefit from the transparency, resilience, and efficiency of this technological breakthrough. As demonstrated, Smart Cities projects are numerous and provide a fertile ground for blockchain adoption. If there is a need for multiple parties to update and verify data, if interactions are time sensitive, and if trust is key, then blockchain becomes a viable solution.

Conclusion

The advent of real-time information is pushing blockchain adoption today. Enforced by the need for instant access to critical information, the sheer volume and diversity of data we will be able to extract from all the devices, tools, and machines we interact with is astonishing. As a matter of fact, the IDC estimates that by 2025 “the average person anywhere in the world will interact with connected devices nearly 4,800 times per day — one interaction every 18 seconds.”

This forecasted exponential increase in created data, notably due to IoT devices, will allow governments and public sector actors to become even more responsive in the way they adapt and transform themselves to sustain urban life.

Leveraging a new technological environment and smart city challenges, the blockchain industry is poised to experience tremendous growth. Allowing communities to take control of their own destiny and generate even more economic value, we’ll witness blockchain pervading into urban services and public infrastructures.

As with many new technologies, blockchain implementation on a large scale will take time, but there is a clear trend towards massive adoption to solve real-life issues. Highlighting some of the promises of blockchain, the Smart City initiatives should pave the way for more efficient urban living and take us another step further into the future.


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André