New, futuristic ‘blockchain cities’ are just castles in the air

The majority of these city projects are using blockchain and cryptocurrencies as mere buzzwords rather than as real solutions

OPINION
article-image

Midjourney modified by Blockworks

share

New cities are cool. Blockchain is cool. Combining the two sounds very cool.

But while governments may have good intentions, ambiguous efforts to enable innovative blockchain solutions frequently miss the mark — leading to unintended consequences and attracting fraudulent actors.

Over the last five years, several governments around the world have announced the creation of “New Cities.” Many of these cities will supposedly feature blockchain; but for the most part, details remain vague. 

The nonprofit Charter Cities Institute published a detailed map illustrating the proliferation of New Cities earlier this year. This map reveals that more than 45 New Cities are under construction, mostly in the Middle East, Africa, and Southeast Asia, with a total development budget hovering around $6 trillion. 

There are definitely clear-cut cases where adopting blockchain technology would improve urbanization; property registries come to mind as the perfect example. 

But many of these city development projects are using blockchain and cryptocurrencies as buzzwords rather than a solution to hype up and lure investors without needing to deliver anything.

Governments may harbor the belief that they can create fertile grounds for innovation by establishing blockchain spaces. But instead of fostering genuine progress, these initiatives often become hotspots for fraudsters wielding blockchain technology as their shield. 

Aimlessly waving the blockchain flag

New cities in Saudi Arabia, Egypt and Indonesia highlight the inconsistencies of governments promising to deliver on blockchain and then failing to do so in any tangible way: Perhaps they don’t even know how.

NEOM in Saudi Arabia is the new city with probably the most global attention right now. 

With massive funding — totaling $1 trillion from the country’s sovereign wealth fund and additional private capital — NEOM was touted as the next big thing in crypto. NFT websites widely reported on the announcement of NEOM’s $6.4 billion tech fund, stoking community hopes that it would invest in NFTs. Middle Eastern news outlets picked up on this, publishing headlines such as “Saudi Arabia to invest billions in metaverse, blockchain technology.” Arab News rhetorically asked “Will Saudi Arabia become a true trailblazer for blockchain innovation?” YouTubers began using this as evidence that Saudi Arabia, which outright banned cryptocurrencies from banks in 2018, was about to reverse its stance. My own conferences and events — which attract a crowd with a foot in both New Cities and crypto — began getting flooded with questions about NEOM’s use of these technologies.

Despite this, the city has only confirmed a single blockchain platform, cybersecurity platform Arqit, leaving much of its early expectations shrouded in mystery. NEOM has two dedicated tech venture capital funds, Neom Tech & Digital and Tonomus, but it has yet to disclose any investments related to blockchain as of July 2023, despite targeted investment sectors in virtual and augmented reality, robotics and data analytics. 

The significant press attention has spawned dozens of scam-coins that attempted to use NEOM’s name to pump and dump worthless tokens. 

NEOM’s official website has warned and emphasized that it has no association with third-party claims of a NEOM cryptocurrency, nor does it intend to offer any at this time. They also confusingly say that NEOM is currently investing in blockchain technology to “power the development of its city” — despite no sign of these investments.

This planning discrepancy between blockchain promises and realities is a recurring theme in these new cities. 

Egypt’s “New Administrative Capital” (NAC) — about 45 kilometers east of Cairo — aims to be an environmentally friendly, high-tech smart city. And Egypt is a country that desperately needs blockchain and cryptocurrency.

For example, one of Egypt’s largest real estate developers told the press that Egypt’s lack of a clear property rights registry would be a major barrier to developing Egypt’s NAC, instead suggesting that the government create a blockchain-powered registry.

The government has responded by taking a schizophrenic stance on whether or not it will deploy blockchain for its new Administrative Capital.

The Egyptian Ministry of Communications and Information Technology announced vague plans explaining that the government will use technologies such as blockchain register property, track carbon, and digitize banking by 2030. Likewise, the US State Department confirmed that the Egyptian Financial Regulatory Authority will regulate how banks use blockchain.

In both instances, few other details have been revealed. 

More significantly, the government has helped fund Nile University’s blockchain accelerator — the first blockchain tech accelerator in Egypt. This accelerator explicitly focuses on smart cities, supply chain, and Internet of Things applications, but will not fund any tokenized projects.

Paradoxically, Egypt’s top Islamic scholars have declared cryptocurrencies as “haram.” Since 2018, cryptocurrency has been mostly banned in Egypt. The Egyptian government again strengthened its prohibition in September 2022. This simultaneous push-and-pull approach is counterintuitive.

In Indonesia, Jakarta faces the risk of severe flooding due to climate change — so the government announced a plan to build a new capital city called Nusantara. Nusantara promotes itself as an eco-city, following the UN’s Sustainable Development Goals and plans to build much of its structure on the blockchain. 

Read more from our opinion section: Fiat is worth saving

President Joko Widodo expressed interest in attracting digital nomads and millennials who would use cryptocurrency to purchase stylish apartments in the city, in addition to creating a parallel city in the metaverse which is to feature “land tokenization.” Several unofficial cryptocurrencies and blockchain projects have appeared to facilitate this transition, and at least one has genuine government support. 

However, the Indonesian government’s historical inconsistency with blockchain is evident, with a ban on regulated financial firms trading cryptocurrencies, which was followed by state-owned enterprises pushing for the digitalization of banking services and the adoption of cryptocurrency.

This chaotic attitude is further highlighted when police in Bali arrested a small business owner for accepting cryptocurrencies, despite Indonesia having one of the highest cryptocurrency penetration rates in the world, with 17 million Indonesians owning cryptocurrencies.

Fostering genuine innovation

The surest indicator of a bad investment is hype. The more hyped-up a project is, the less likely it is to succeed. By contrast, the least hyped-up projects (or those most grounded in reality) often do the best in the long term. 

Prioritizing buzzwords undermines the credibility of real-world applications of blockchain technology in urban development, of which there are many. From securing and decentralizing data sharing across sectors such as property, transport or energy; to facilitating blockchain to be used by local businesses and banking institutions. 

It is crucial to prioritize practicality and tangible results over hype and vague promises. 

Innovation arising from New Cities comes from the people within them; when the government accepts that they are merely a catalyst, and not the innovation itself. 



Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495M in value locked, doubling Uniswap's Base deployment.

article-image

Also, former Valkyrie CEO lands new leadership role at Canadian investment firm Cypherpunk Holdings

article-image

This week’s biggest funding round saw Jump Trading, JPMorgan contribute to the round

article-image

Plus, a layer-1 for intellectual property is launching and Farcaster users peaked

article-image

Crypto still hasn’t shaken one of its most garish primordial tails — funny stories about fraud

article-image

Plus, publicly traded crypto companies had a pretty eventful news week

article-image

Committee members directed more questions to Christy Goldsmith Romero, who could soon be leading one of the more troubled federal agencies