Why Crypto Cities Fail: Understanding the Challenges and Opportunities in Blockchain-Powered Urban Development

Over the years, there have been several attempts to establish crypto cities – specialised zones that depend on blockchain technology for their operation. However, most of these experiments have not succeeded, and heads of various cryptocurrency firms believe they can pinpoint the reasons for this phenomenon. One of the recent and most notable projects in this regard was Akon City, the brainchild of the Senegalese-American singer Akon. First mentioned in 2018, this ambitious project aimed to build a $6 billion smart city powered by a crypto-based economy. Regrettably, the project was officially abandoned in July.

Notable Failed Crypto Cities

Another notable project was Satoshi Island, launched in 2021 with an ambitious vision of acquiring an entire island near Vanuatu and creating a home for crypto professionals with a blockchain-based economy. As of July, the project was still trying to establish essential services and secure a license agreement with the island’s stakeholders. There were also grandiose plans to construct a blockchain-powered city, Puertopia, at the Roosevelt Roads Naval Base located in Ceiba. Despite initial excitement, there have been no meaningful updates on this project for an extended period. According to Ari Redbord, the global head of policy and government affairs at blockchain intelligence firm TRM Labs, many crypto city projects fail primarily because they focus on goals that are impossible to achieve.

Moving Beyond Impossible Goals

These projects often aim to build a city from the ground up, a metropolis that relies on a blockchain-based economy, is funded by tokens, and is completely autonomous from the rest of the world. However, Rebord advocates for a different approach to utilise blockchain effectively. Instead of creating new cities, Rebord believes that the best strategy would be to modernise existing economies. This could be achieved by integrating artificial intelligence to assess risk, detect fraud, make more intelligent decisions, and utilising blockchain to provide the trust layer to ensure accountability and transparency. “Rather than building entirely new cities, the aim should be to upgrade the systems we already depend on. As institutional adoption grows and governments craft clearer rules, the world’s financial infrastructure is moving on-chain,” Redbord noted.

Views of Other Crypto City Insiders

Kadan Stadelmann, the chief technology officer of the blockchain platform Komodo, considers that self-sovereign cities powered by cryptographic and decentralized systems are viable, particularly in areas that lack governance, such as international waters. However, it requires dedication, a centralised vision, and willingness of the population to sacrifice modern conveniences until the systems are fully implemented. Vladislav Ginzburg, the founder and CEO of blockchain infrastructure platform OneSource, believes that integrating crypto usage in a modern city-state with government support, like Dubai, would be more feasible than starting from scratch.

Challenges and Threats to Crypto Cities

However, executing such visions comes with its own set of challenges. For example, while buying an island may be possible, how would one protect it against threats such as pirates? There would be no police or military force to defend it. Also, hospitals and other essential services may not be readily available. As Sean Ren, co-founder of the AI-native blockchain Sahara AI platform, puts it, the real opportunity isn’t in creating isolated zones for tech savvies but in creating regulatory sandboxes that contribute to national policy. To sum it up, while the ambitious dream of creating fully autonomous crypto cities is alive, there are more practical and sustainable ways of incorporating and implementing blockchain technologies in our existing cities and economies.