Cryptocurrencies and smart cities: The Future?

Futuristic novels by William Gibson, Bruce Sterling and other cyberpunk authors inspired a whole generation which dreamed of revolutionary concepts such as virtual cities, flying cars, intelligent buildings, metaverses, virtual reality, artificial intelligence and AI agents which roamed the land enforcing the law.

Technology has come a long way since the invention of vacuum tubes over a 100 years ago, but we’re still far from Wintermute.

Earlier this year Slovenia announced its plans to establish the world’s first crypto-friendly shopping centre in its city’s capital, Ljubljana.

Named BTC City, all the stores in the shopping center will accept cryptocurrencies for payments and will operate on the blockchain.

The aim is to encourage people to use the existing digital currencies. Elsewhere, there are municipals trying to create their own altcoins from scratch.

So many smart cities are experimenting with cryptocurrencies like Dubai with its emCash, Seoul’s S-coins, Berkeley’s city-branded cryptocurrency, among others.

The big question is, how would a city-specific cryptocurrency work and how will it benefit a city in a way that cash can’t?

Why Cryptocurrency?

First off, there is a major difference between a cryptocurrency backed by the government and the cryptocurrencies that we have come to know over the years like Bitcoin and Ripple.

Those digital currencies are essentially air money. Its value depends on the level of coding applied to mine them and how much money buyers are willing to pay for it.

The value of a city-specific cryptocurrency, however, is backed by its assets. Unlike the traditional cryptocurrencies, it will not disrupt money. It just provides more avenues for people to make transactions and invest in their cities. This opens up opportunities for city municipals to fund projects they would not normally afford.

It’s still in its early stages, but if successful, it will help governments to sell bonds directly to the people. The underwriters will be eliminated, giving way to a system cheaper than the municipal bonds. It will also be less volatile than the existing digital currency. These are digitized and blockchain-based tokens that will act as security and not as a tool for speculation.

It will be an important step that will take power from Wall Street and give it back to the people.

Cheaper and More Accessible

The major selling point here is the level of accessibility. By tokenizing the bonds, it makes it possible for the average person to invest. A traditional bond is typically issued at thousands of dollars which are limited only to a few rich buyers.

By tokenizing the system, even a college student can do something about the poverty in his city by buying a few dollars’ worth of bond. He can then go on to use the token for other city goods or choose to keep it as an investment. It essentially opens doors for people who typically aren’t rich enough to be investors in the market.
This is just the next logical step in smart city financing.

Potential Drawbacks

Moving away from the traditional financial system has some drawbacks.

Cities are potentially paving the way for another bubble by developing their own cryptocurrency.
The huge sums of money coming in will be great for a city in the short term. But at the same time, this money is being diverted from other venues. We have all seen how volatile Bitcoin can be.

Once the excitement of the early stages has worn off, the number of investors might quickly wane for multiple reasons.

There is also the possibility for panic. If a whole ecosystem depends on cryptos and something extreme happens, people will suddenly feel at risk and mass behavior can be unpredictable.

To mitigate these risks, crypto-cities can make their tokens less risky by placing safeguards similar to the ones found in legacy financial institutions. Smart Cities can build financial reserves in other currencies in order to make their tokens more stable, for example.


Security is a huge concern when working with cryptocurrencies. Even more so when the crypto becomes a city’s official currency.
Smart cities launching their own cryptocurrencies will need to ramp up their blockchain and cybersecurity operations to prevent potential hacks. Heck, even Binance has been hacked recently!

Who will be in charge of keeping backups of the State private keys? What kind of vault will be used to store these keys? How will responsibilities be managed? How many state employees will have access to the keys in order to perform necessary procedures? The more people have access to the keys, the higher the risk, even assuming total honesty from everyone involved. There is always the potential for losses, mishaps, misplacing the keys and accidental access being granted to unauthorized parties. The more people involved, the higher the risk.


A cryptocurrency-run smart city will necessarily depend on good electrical infrastructure.

There must be fallback infrastructure that must kick in during blackouts and natural hazards. The system needs to keep functioning even if the core cryptocurrency infrastructure is somehow crippled.

As you can imagine, this isn’t an easy task. In fact, it’s perhaps the single greatest obstacle to implementing a 100% pure cryptocurrency-based financial system. It depends on electricity 24×7.

The network runs on top of the electrical infrastructure. Without a P2P network the cryptocurrency system does not work. So an eventual smart city must maintain a redundant and fully functional network running on top of the electrical infrastructure even in the case of major hazards. Again, not a simple requirement.
Citizens would own secure devices and private wallets to keep their funds secure. This would make up the private infrastructural components : the stuff private citizens own to keep the system going.

Private infrastructure must also remain functional during unexpected events, something that would require public and private sectors to work out somehow. In fact, private infrastructure could aid the public one in case of outages. In many cities around the world private citizens are already providing spare energy back to the grid.

A completely private infrastructure would not be unheard of : 100% decentralized, private-run electrical grid. This, of course, would match the ideas behind cryptocurrencies perfectly. Decentralization and complete independence from government. Private generators, solar or carbon-fueled, could provide energy for personal use and feed back spare energy into the shared grid. This’d be a revolutionary step towards completely decentralized government.


There remains much to be said about cryptocurrency-run smart cities.

Although the dream of fully decentralized communities remains crypto’s #1 goal, in reality there will need to be integration between the new paradigm and existing bureaucracy.

The obvious first link between smart cities and legacy urban centers will be money exchange. Supply shipments from the “outside world” will be settled in fiat money for a long time after the smart cities run entirely on cryptocurrencies. This financial exchange will require positive fiat money cash flow to guarantee settlements. It is a challenge many miners face, since their earnings are in cryptocurrencies and utility expenses must be paid in fiat money. Taxation and community finance within the smart cities will have to interact with fiat money banks to provide stable exchange services.

Smart cities are an exciting new idea that has benefited from much research, especially after the cryptocurrency boom. Cryptos fit in perfectly with the concept of autonomous, modern green cities and the future promises interesting new developments in this area.


Wikipedia: Smart city

​Secure, sustainable smart cities and the IoT

Smart Cities: The Future Of Urban Development

European Commission : Smart cities

About the Author
Published by Crypto Bill - Bill is a writer, geek, crypto-curious polyheurist, a dog's best friend and coffee addict. Information security expert, encryption software with interests in P2P networking, decentralized applications (dApps), smart contracts and crypto based payment solutions. Learn More About Us