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How blockchain will help smart cities and why interoperability is so essential

How blockchain will help smart cities and why interoperability is so essential

The advent of social challenges associated with urbanization, as well as the growing need to minimize municipal budgets, are two of the key reasons why smart cities are gaining traction. 

The number of cities with populations of 10 million or more is projected to rise from 33 to 43 between 2018 and 2030, according to the United Nations. Although urbanization is said to carry high economic power due to population and business concentration, it also has drawbacks, including the potential for increased pollution and environmental problems.

Expectations for smarter cities are rising, and the economic slowdown triggered by COVID-19 necessitates more effective urban management than ever before. Between 2020 and 2024, the smart city industry, which includes electricity, healthcare, and defense, is projected to expand at a 23 percent annualized pace, amounting to approximately $2.1 trillion.

Advanced technologies, such as blockchain, will help to solve these social challenges and achieve effective urban management. Without the need for a centralized controller, blockchain allows network users to share data with high reliability and accountability. Cities have several stakeholders, and data sharing among stakeholders is critical for providing highly convenient urban services.

For this data sharing, blockchain is supposed to be used. For example, Smart Dubai, which aims to make Dubai the happiest and smartest city in the world, is creating blockchain use cases in a variety of industries, including banking, education, and transportation. For example, a blockchain-based project is currently underway to streamline admission procedures for students traveling between emirates.

One thing to keep in mind is that having autonomous smart cities is insufficient for smart cities to contribute to social challenges and function effectively while enhancing service efficiency. Rather, ensuring interoperability and collaboration among multiple smart cities is critical. Efforts to accomplish this goal are still underway. In Japan, the cabinet office issued a white paper on smart city reference architecture in March 2020, citing interoperability as one of four fundamental principles essential in supporting smart cities.

The World Economic Forum acts as the secretariat for the G20 Global Smart Cities Alliance, which brings together local, state, and national governments, private-sector partners, and community citizens behind a common set of key guiding principles for the adoption of smart city technology, such as transparency and interoperability.

Smart cities will benefit from a newly released interoperability platform, which provides a three-layer paradigm for blockchain utilization:

Governance models, data standardization, regulatory structures, and commercial models are all part of the business model layer. Consensus mechanisms, smart contracts, verification, and authorization are all part of the platform layer.


Hybrid cloud, managed blockchain, and proprietary modules are all part of the infrastructure layer. It is necessary to remember that achieving interoperability necessitates more than just solving a technological problem; it necessitates addressing issues of regulation, data control, and commercial business models that incentivize ecosystem partners to cooperate with one another.

Consider one of the anticipated utilities in smart cities: mobility as a service (MaaS). MaaS links various transit networks together to offer extremely convenient mobility services. There is an attempt to use blockchain for data exchange and revenue sharing among multiple transportation operators in the realization of MaaS, and transportation may take place across cities.

At the business model layer, issues of data standardization – for example, for people movement data and data obtained from Internet of Things (Iota) devices – and commercial models, such as how to allocate revenue among transportation operators – must be addressed.

Smart contracts, which are computer protocols that allow self-executing, credible, and transparent transactions, can be used for transport ticketing at the network layer. However, since various blockchain networks use different languages for smart contracts, interoperability problems for ticketing need to be addressed.

Since permissioned blockchains (those with an access control layer that allows such activities to be done only by certain identifiable participants) are typically used for data sharing through multiple transportation networks, the presence of proprietary components can pose a challenge in achieving interoperability.

Other industries, such as real estate and electricity, may benefit from a similar model. There are attempts in the real estate industry to use blockchain to streamline land rent processes, but in order to streamline the moving process, the procedures relevant to the initial residence and the new residence must be arranged and processed.

In this case, programs on various blockchains can need to communicate with one another. Efforts are being made in the energy sector to use blockchain to perform energy transactions within an area.

Since different businesses can use different blockchain technologies, the three-layer model of interoperability mentioned above may be used in this situation. Smart cities have the opportunity to address a wide range of social problems and increase people’s quality of life – but they must ensure interoperability and be able to collaborate with one another.

In order to produce the best possible long-term results, initiatives should be pragmatic in their preparation around interoperability issues.