Radoslav Dragov (Senior Research Analyst, European Customer Insights & Analysis, European Blockchain)
Max Claps (Research Director, IDC Government Insights)

Cities are the centre of attention of the 21st century. Most of the global population lives in cities, and they are the fulcrum of economic and social innovation.

To bring together quality of life, economic growth and environmental sustainability, cities of any size are embracing digital technologies including Internet of Things, artificial intelligence and blockchain on a big scale.

City leaders cannot yet see the immediate bottom-line benefits of blockchain in smart cities. In fact, according to IDC’s European Tech and Industry Pulse Survey, 2019–2020, only 9% of European municipal and regional governments have adopted blockchain and a mere 12% are planning to adopt it in the next 12 months.

While we think that blockchain should not be applied everywhere, some of its benefits cannot be revealed through small-scale pilot projects. Smart cities can be the necessary environment where the benefits of blockchain can be practically demonstrated on a larger scale and across a variety of use cases.

Smart cities are not just about embedding connected devices in the city environment, but also about collating data from a variety of sources and making automatic decisions.

Blockchain stores information in a decentralised manner and is designed to be incorruptible, resistant to attacks, highly secure but providing transparent information to authorised parties. These properties make blockchain and distributed ledger technologies (DLTs) in general suitable for smart city initiatives:

  • Security — With greater surveillance and automatic data collection there needs to be a fine balance between data management and the right to privacy. Blockchain is in the best position to provide the needed security of private information and the ability to share data only with authorised parties. Moreover, blockchain provides extra layers of security in the case of cyberattacks.
  • Stability — With blockchain there is no single point of failure and therefore the entire system is more resistant to cyberattacks or just technical problems caused by natural hazards. The more we rely on technology to manage our cities, the higher the importance of uninterrupted operations.
  • Interoperability — Cities’ ecosystem players (municipalities, utilities, retailers, etc.) should communicate with each other, collate information and make decisions. With so many systems, interoperability can quickly become unwieldy. Blockchain allows the use of fewer digital ledgers, therefore reducing intermediaries and costly interoperability problems.
  • Trust — A lot of important private information is stored and handled across the city’s ecosystem. Also, data that directly relates to the health and wellbeing of citizens is made publicly available: CO2 emissions, water quality, air pollution — storing such critical information on an immutable database gives a degree of trust to the local population in these times of widespread public distrust.

Blockchain Use Cases

While these are early days, some blockchain use cases have risen in popularity in smart city scenarios. While many of them can be achieved by conventional means, DLT provides simplified interoperability while ensuring greater security, stability and trust. These are crucial qualities especially when handling sensitive information and transferring value.

  • Digitising documents: not only to go paperless but also to speed up the processing of applications and other documents
  • Identity management: ensuring a high level of trust and security when storing and validating citizen identities
  • Payments: speeding up all municipal-related payments (welfare, payroll, city programs)
  • Electronic voting: reducing barriers to voting while maintaining a high degree of security
  • Energy trading: excess green energy generated by citizens can be sold on a marketplace
  • Promoting good behaviour: monitoring and rewarding the good behaviour of citizens such as recycling or using public transport.

Blockchain Initiatives in Smart Cities

Perhaps the best-known example of smart city integration is Dubai, where the government is leveraging several emerging technologies including blockchain, IoT and AI to make Dubai “the happiest city on earth” and the first city fully powered by blockchain by 2021.

One of the most prominent and ambitious initiatives is to conduct all government transactions on the blockchain by 2021. The end goal is to eliminate 100 million government paper transactions per year by digitizing all government services such as visa applications and bill payments.

This measure is projected to save about $1.5 billion (about the cost of Burj Khalifa tower) each year, reduce economic productivity used to process documents by up to 25.1 million hours, and cut up to 114 MTons of CO2 emissions from trip reductions. This is one of many initiatives and the government is working with private entities on 24 blockchain-based use cases across 8 industries.

Dubai may be the most prominent example, but there are other smaller blockchain initiatives around the world. The government of South Tyrol in Italy has experimented with digitising citizen data by using blockchain technology. Under the project, citizens of Tyrol must enter basic personal information only once instead of every time they engage with public departments. Their information is automatically shared with authorised government employees. The goal is to streamline service delivery, eliminate redundancy and reduce operational costs.

The European Commission has broadly recognised the importance of blockchain and its potential to transform the way we citizens interact with public services. That is why it established the European Blockchain Partnership in 2018 as a political and technical group that brings together local authorities, national governments and the private sector. The European Commissioner for Digital Economy and Society, Mariya Gabriel, stated that: “In the future, all public services will use blockchain technology.”

Meanwhile a whole country, Estonia, with its population of 1.3 million, has made serious efforts to operate like a smart city. For example, the country’s electronic health record system collates information from different healthcare providers and creates a common record that can be accessed online. Doctors can easily access their patients’ data, including blood tests, recent treatments and image files such as X-rays. Blockchain is used to ensure the security and integrity of the entire health record system. Patients can review recent doctor visits and prescriptions and see which doctor accessed their information. After many years of dedicated effort, an astounding 99% of all public services in Estonia are available online and a hash of the information is backed on the blockchain.

Final Thoughts

Smart cities could be the petri dish where public investment and private interest push blockchain technology forward and prove its benefits to the wider population. IDC expects smart city ICT spending to surpass $190 billion by 2023, with 27% of that spending taking place in EMEA.

We advise smart city leaders and the ICT suppliers that partner with them to prioritise use cases that take full advantage of blockchain technology, where data sharing, trust and resilience are of paramount importance.

Blockchain opens the opportunity not only to replace conventional databases but also to rethink business processes. Like the Estonian government, they need to look for new ways to speed up the exchange of information, simplify identity verification, and remove data silos.

The needs of a smart city are vast, and the right blockchain architecture must be selected in order to handle the high number of transactions.

While blockchain initiatives remain limited to a few cities we believe they point the way toward the future. As William Gibson famously wrote: “the future is already here — it’s just not very evenly distributed”.

Discover more about IDC European Blockchain Research through this link. Do not hesitate to reach out for more insights or to continue the conversation.

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