Blockchain urban applications: regenerative finance, decentralized governance, and infrastructure deployment
Blockchain technology is helping citizens to have participative ownership, access to finance, and decision-making in urban governance and planning. But what are the existing initiatives and how are they touching systematic problems? In this article, Paula Palermo, co-founder of Impacta Finance and co-host of Impacta Podcast, analyzes the blockchain urban applications and how this technology could transform our cities
The third generation of the internet is bringing decentralization, participation, and alternative financing as strong pillars. Still, in its early stage, new protocols, alternative economic and social formats are raising in the format of new platforms in which people are able to create, exchange, interact, and own digital assets. According to a16z, web3 is a group of technologies that includes, cryptographic protocols such as blockchain, decentralized finance (DeFi), social platforms, token economies — including NFTs — and Decentralized Autonomous Organizations, a new decentralized format of governance.
The technology behind cryptocurrencies is also thriving the path for other use case applications that include decentralized finance, adaptative and participative governance, regenerative solutions, and the new standards for ecological digital asset classes. Many of those concepts have been studied by the urban planning community and now have instruments to be materialized through the use and facilitation of blockchain technology and new financial instruments.
The built environment is historically dependent on financing processes due to the capital-intensive characteristics of projects, such as overall urban development, basic infrastructure, and housing. Now we see new solutions rising to apply blockchain technology for the public good and regenerative applications, on one side the crypto space is mobilizing a huge amount of capital and is bringing a new technological infrastructure format to financialization, this market has a current market cap of $1.77 trillion. On the other hand, public good has historically suffered from an infrastructure gap, with an inadequate level of investment regarding real needs, being a space with substantial corruption, lack of transparency in decision-making processes, and active public participation. How those two statements could be crossed to fund the underfunded and provide
According to Vitalik Buterin, one of Ethereum’s co-founders, the exploration of how decentralized mechanisms would look like while funding public good is one of the most important governance problems, and one of the most important applications of new governance mechanisms. There is an existing ecosystem trying to match and resolve those problems, funding the underfunded and adapting innovative mechanisms that have been applied to the crypto space, let’s deep dive into some of them.
How tokenization can help to build new participation, ownership, and governance mechanisms.
Tokens are digital representations of instruments that we have in offline and online human activities and refer to your stake in a project. Non-fungible tokens, as known as NFTs are digital representations of non-fractional ownership of a digital asset, this new format opens wide possibilities to deal with traditional assets as objects, physical properties, and assets with intangible value as art. 2021 was a mark for this format of digital ownership and no for nothing was chosen as the word of the year according to Collins Dictionary.
The assets traded recently in this format ranged from monkey draws, to pieces of digital land, accumulating a traded value hitting $10 billion in Q3 2021. The main difference between fungible tokens and non-fungible tokens is their ability to be fractionated. Most cryptocurrencies we know have a fungible format, meaning that you are able to buy a 0,000001 unity. A non-fungible structure instead, can be fractionalized into pieces, but the holder is able to have the asset even being a part of a series of similar assets. This represents a unique ownership structure and is another strong pillar for this new wave of the internet.
Each digital representation can be minted in the format of a Non-Fungible Token and added to the blockchain, a secure decentralized infrastructure composed of public ledgers that have all transactions recorded in a distributed way that is also publicly available. You can’t change information, just add them. This can be an interesting alternative to make accounting and infrastructure investing transparent, immutable, and available to the public.
With every transaction registered on the blockchain, information that cannot be changed is made publicly available. This aspect is one of the characteristics that compose this alternative solution, while the governance aspect of it is being something that is being revolutionized by blockchain technology.
The ownership structure of those digital assets can be individualized or collective, and a new interesting format is taking place to provide digital governance for online and offline ecosystems: the so-called Decentralized Autonomous Organizations. The ownership of special tokens allows active participation, which allows digital democracy to take form and be directed to concrete actions by a specific community. Traditional companies are migrating their governance format towards Decentralized Autonomous Organization (DAO) structures, in which members are able to actively participate in platform governance, influencing key decisions such as conservation strategies, asset release schedules, game directions, investment funds, art collections, among others.
According to Maurício Magaldi in an article from Cointelegraph, “Decentralized Autonomous Organizations, DAO, is a term used to describe groups of individuals who organize themselves digitally around a common idea, purpose or business objective and operate in a decentralized way to make that idea real, defend that purpose or achieve that business objective”, with increasing of experiments, many areas from life are bringing real form towards liquid democracy, with dynamic and participative decision making, consensus, and equality. The main instruments highlighted are the management of participant contributions, treasury, knowledge, identity, governance, and voting and hosting the pace for discussion and collaboration.
The connection of offline and online communities is one of the biggest challenges to be powered by those new technologies. This new format is an interesting reference and has possibilities to be applicable in other situations that need funding, deployment of infrastructure, and participation in decision-making and active transformation.
Use case applications: tackling systemic problems and conserving precious assets for the planet and humanity
Environmental Crypto Assets
Regenerative is the word to reflect the focus on positive externalities rather than the traditional production model that just leaves negative marks for the planet and society. Charles Eisenstein in the book Sacred Economics starts the discussion around Natural Capital-Backed Currencies, focusing on the argument that whatever involves money is an incentive for people’s willingness to multiply. In this regard, if currencies were backed and reflected by natural resources, we would be able to reflect economic activity through a growing environment conservation system.
In short, using financial instruments to solve systemic problems, regenerating communities and the natural environment is the space in which ReFi takes place. In a recent article at Forbes, Christopher Marquis shares his perspective about the market transition from impact investing to regenerative finance solutions as a new type of investment, crucial for the planet and further generations.
The combination of decentralized with regenerative finance takes place in the flourishing space of Web3, in which collaborations are key to joining forces to achieve complex goals. ReFi DAO is an organization that is connecting founders from the web3 industry that are building projects that contribute to an economic model that generates positive externalities and is able to change the systematic problems we have, like poverty, deforestation, lack of funding to impact projects, among others.
Regarding the environmental aspect of alternative finance, projects such as Public Land Protocol, Rewilder, ClimateDAO, and Ecorise DAO are working to bring real use case examples of regenerative finance solutions to tackle systemic problems being existing examples of how blockchain can impact directly the physical world and its assets.
Ecorise DAO, in its specific case, is building a Decentralized Autonomous Organization to fund and manage land stewardship. The model is based on a treasure in which the organization bond different digital assets, from there they are able to purchase land and do an NFT representation that will then fund payments for Exosystem Services and new revenue streams as carbon credits.
“Ecorise DAO is building the (framework and infrastructure) bridge to onboard impact investing from the traditional finance sector onto the blockchain and regenerative finance space. Through our Decentralized Organization, we facilitate and streamline decision making and funding toward social and environmental projects” (Corneile Uys, Founder of Ecorise DAO)
Toucan Protocol, Moss, Senken.io, and KlimaDAO are working to put carbon on the blockchain, by building a market that is still in its early stages, with a serious double-spending problem, and is not available for consumers and businesses to easily participate in, those companies are tokenizing the first ecosystem asset that is being mainstream and this space is just beginning to grow.
Cities, local communities, prosperity & alternative governance.
The main revolution brought by blockchain starts in the financial system. This new technology marks the independence of allowing peer-to-peer transactions with transparency, and avoiding the double-spending problem, through online trusted third parties able to verify whether a token has been spent or not. Those simple statements made a big revolution in the transparency of transaction processes that can be also applied, as we saw before, in other use cases for social applications.
Recently, Vitalik Buterin, one of the co-founders of Ethereum and a very influential writer in the blockchain space, wrote a piece about Crypto Cities. This is an important mark for the interaction of the blockchain space with government structures and overall governance. The article promotes a bright view about the application of blockchain to distinct categories as the use for verifiable and transparent existing processes, and new experimental forms of ownership for land and governance.
In the atmosphere of land and blockchain, CityDAO is a great example of synergy in the space, as they are the first DAO that officially was able to acquire land in the US after the city of Wyoming promotes a law allowing internet native organizations to acquire and manage real estate properties.
Projects in the space are highlighted as a radical transformation in the local economies, community funding, and even crypto-oriented cities built from scratch. With projects such as CityCoins.co, which is giving communities the power to improve and program their cities, also, projects such as Telosa, are proposing to bring the sustainable approach to cities with the effective triple angle of environmental, economic, and social positive impact. Common situations come into reality with Nkwashi, Culdesac, and Próspera as great examples too.
Community actions are getting independence through the use of blockchain technology, experimenting with new forms of governance and community decision making, incrementing radical alternatives for how we live, interact and build. This specific technology provides space for the implementation and testing of use cases that can change the vicious circles of systematic problems, including housing, citizen participation, city government structures, and overall democratic and decentralized practices.
In the scale of urban communities, projects such as CitizenDAO, and Impact Market are focusing on funding and implementing projects that are positive for the society on a local scale. Impact Market is a decentralized protocol for poverty mitigation and alleviation, that is allowing any vulnerable community to implement mechanisms such as Unconditional Basic Income.
On the local economy level, Ibiza Token is working on an economic structure to bring a circular economic landscape to Ibiza island, in which the value can stay in the community with its creators. VoizDAO, on a similar hand, is testing new formats for living and orchestrating complex ecosystems for planetary justice and starts with founders from Generation Z.
Kolektivo, for example, is a framework to impact local communities, demonstrating that this is not just theory, but practical examples of new formats of community infrastructure and urban living. Not just developing new frameworks and formats, Kolektivo is combining new technologies to scale and enable methods for communities to operate owned local impact economies. The full strategy includes community currencies, digital governance methods, impact measurement, and the availability to support projects and entrepreneurs through non-dilutive grants.
Merging blockchain, the environment, cities, and citizens.
A technology that had its beginning in the financial space is changing other industries that have voting, participation, and collective construction as characteristics. Being able to cover problems that would normally depend on governments and institutions to actually be concretized, through networks with a global presence, and local action.
Recently, some concerns regarding the environmental aspects of blockchain started highlighting some contradictions for environmental applications. On one side, it is fundamental to be able to apply blockchain technology in its most optimum way for the lower consumption of resources like energy. On the other side, blockchain is still an incipient industry that has started having broader applications after Bitcoin’s birth, 13 years from now. It is an industry that will evolve as machines have evolved from an incipient technologic revolution.
Even with projects being developed in this format and a lot of efforts on possible blockchain applications for physical assets, tokenization as a concept of decentralizing ownership of a certain class of assets is considered a more complex financial product as securities, and still have a long space to evolve on its regulatory aspect.
On the other side, blockchain brings possible benefits for future foundations on urban and rural economies, being applied to land, infrastructure, and general local development strategies. On the property side, it makes it possible to record transactions, brings transparency for financing any project, and reduces bureaucracy that delays processes that are important for the local and regional communities, connecting different stakeholders.
Which are the urban processes that can be potentialized by blockchain, bringing transparency and decentralization?
Looking to the global sphere, infrastructure and political decision-making processes are some of the main roots for corruption due to the lack of clarity in transfers and in the application of public money, as well in decision-making processes, making them lacking inclusivity, participation, and representation.
We discussed how the application of blockchain technology is already solving systematic urban, environmental, and social problems. This concept allows different strategies that can be applied in urban forests, urban spaces, and all the real applications that need positive impact and concrete action. Places with historical and social value, slums, and communities that lack investment in the social and physical infrastructure sphere. Sanitation, connectivity, with information grounded on the blockchain make transparency and action a must.
Not just bringing this information in a secure protocol, decentralized finance instruments make it possible to bring a project to action by collective funding and growth, decentralized finance and governance solutions, and making people able to not just raise funds for a specific project, but also to earn from digital asset appreciation.
There is still room for the development of new initiatives, and we, as a global community are at the forefront of the development of new technological and financial instruments, making us responsible for the directions that those new applications will take. It is time to use technology for good.
If people can earn from an investment on a valuable social and environmental asset, all the worldwide community wins as it is generating economic opportunities linked with the value creation of important assets for humanity.
Blockchain technology brings an opportunity to make ethical hype and is making able to build new ecosystems, economies, and ways of coexisting with technology, humanity, and nature that have not still been explored.
About the author
Paula Palermo is an Architect, Urban Planner, and Economist. Since 2016 she has worked with collaborative local development and in 2018 she started working with blockchain for social impact projects. She is the co-founder of Impacta Finance and co-host of Impacta Podcast together with Rafaela Romano. She was previously a member of the Ventures team at Plug and Play, working with startups and corporations on the topics of Smart Cities, Blockchain, and Sustainability.
Linkedin / Twitter / Instagram / Impacta podcast on Spotify
Interesting projects and what they do by their own words
Anatha is an ever-growing set of (decentralized) apps where you can do a lot of the things you do no.
Our vision is to build a protocol and community dedicated to creating an ecosystem of location-based Web3 applications and spatial contracts.
CityCoins give communities the power to improve and program their cities.
The DAO for decentralized asset ownership.
We connect ideas, people, & money together in new ways to work on moonshot projects.
Contribute your unique skills & knowledge to earn cryptocurrencies.
A decentralized activist fund focused on climate change mitigation.
A transparent, decentralized marketplace that allows participants to buy and share data and contribute to an open ecosystem of data-driven climate resilience applications.
A DAO for verified, transparent, and scalable ecosystem solutions.
The ERC-20 governance token running on Ethereum and Polygon Network created for the island of Ibiza.
Decentralized poverty alleviation protocol.
A web3 knowledge hub for impact-focused initiatives, providing insights, tools, and solutions for forward-thinking entrepreneurs, conservationists, and visionaries.
Fight climate change and earn rewards with KLIMA, a digital currency backed by real carbon assets.
Kolektivo enables local communities to create and manage their own regenerative economy to fuel prosperity.
Offset your carbon footprint. We make it easy and safe to preserve the planet.
Our house plans are designed by among the best architectural firms on the African continent and will be made available to plot owners.
Toucan’s infrastructure brings programmable carbon to Web3, unlocking its potential for a regenerative economy.
A platform for sustainable growth.
Is on a mission to regenerate the planet by tokenizing land, rewarding biocompatible design, and enabling decentralized governance of community assets.
Destruction of nature, climate chaos, the pandemic, over-consumption & greed have increased inequality and despair.
Regen Network’s infrastructure originates digital carbon assets in the Interchain economy, unlocking web3 regenerative finance.
Rewilder is a crypto-native non-profit that coordinates the global purchase of land for wildlife conservation.
Achieve net-zero goals and become a carbon removal pioneer. Develop and sell and/or buy and retire high-quality web3 carbon tokens. Simple, transparent, and auditable.
Join the Nature-Backed Economy and give forest owners a way to protect forests, wetlands and other ecosystems.
Imagine living in a city with an economic system in which citizens have a stake in the land; as the city does better, the residents do better.
A fully-functioning gen Z sustainability community.
Disclaimer: The information provided in this article does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the article’s content as such.
