The first question most people have about blockchain is, of course, “what is blockchain?” Those familiar with the term generally associate it with Bitcoin and cryptocurrencies — but it is so much more, and it presents great opportunities for cities.
In our newest report, Blockchain in Cities, we explore those possibilities.
Public trust in American lawmakers (particularly at the national level), elections and democratic institutions has plummeted in recent years. While there are many contributing factors, the explosion of digital information, digital misinformation and outright abuse has played a major role in this downward trend.
To restore confidence in the core tenets of our society, leaders need solutions tailored to an increasingly digital world. Additionally, blockchain presents direct opportunities for cities — voting, real estate, transportation, energy, water management and more. The potential exists for local governments to utilize blockchain to lower costs, improve efficiency and create a framework to accelerate innovation, access and accountability in public management.
Blockchain is a shared database or distributed ledger, located permanently online for anything represented digitally, such as rights, goods and property. At its core, it is a secure, inalterable electronic register. Through enhanced trust, consensus and autonomy, blockchain brings widespread decentralization. This is a departure from the traditional role that centralized intermediaries or entities — such as banks — played to manage our valuable transfers. Its inherent transparency promotes relationships and builds confidence.
In the early days of the internet, few people could have predicted the magnitude of the disruption it would cause and the pivotal role it would play in globalization. Some experts say blockchain will potentially change the nature and security of all interactions of value. Because blockchain has large implications for individuals, it will have even larger ramifications for cities.
Imagine an anonymous “smart” spreadsheet listing and time-stamping each new bill paid, purchase made, vote cast and credit earned. In order to transfer value from one spreadsheet to another, a trusted third party verifies both spreadsheets and ownership of the asset, its transfer and its deduction from the payer’s spreadsheet. The blockchain is a copy of this third party’s master ledger, with both accounts on it, held by all three parties.
Blockchain can empower cities to innovate how they work with local businesses, and invest in and improve efficiencies across many areas, such as transportation, energy and voting. Beyond city operations, blockchain promises to innovate the way we start businesses, structure investments and account for wealth creation and exchanges. Cities stand to benefit not just from increased efficiencies with lower costs, but also from greater economic integration and participation.
Here are seven key ways that cities can explore blockchain now:
- Use blockchain to expand digital inclusion initiatives and help support the un- and under-banked.
- Explore options for using blockchain in governance, procurement processes and business licensing.
- Consider blockchain to increase civic engagement and offer additional pathways for voting.
- Investigate how blockchain can help strengthen local alternative energy initiatives.
- Prepare for the utilization of blockchain for digital transportation infrastructure needs as autonomous vehicles are more broadly deployed in cities.
- While the benefits could be manifold, be cognizant of the potential for negative externalities that will need to be addressed and make sure that cities give themselves time to absorb each impact of introducing this technology.
- Pay attention to what other cities have experienced and learned when it comes to blockchain. And above all, keep an open mind and be open to change. This new technology might just bring some unexpected yet very welcome benefits to your city and its residents.
About the Author: Brooks Rainwater is the senior executive director of the Center for City Solutions at the National League of Cities. Follow Brooks on Twitter @BrooksRainwater.