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Although adoption is growing, there are still a small number of locations and businesses that accept cryptocurrency payments. Despite this, some locations have stepped forward to become crypto hotspots, attracting cryptocurrency enthusiasts and blockchain firms alike.
The continued interest and investment in cryptoassets clearly indicates a fundamental shift in how policymakers view this industry. For example, once on the outskirts of the tech scene, decentralized finance (DeFi) and non-fungible tokens (NFT) propelled crypto into the mainstream media throughout 2021. This increased public awareness of cryptocurrency, combined with new all-time highs for Bitcoin (did you forget this happened only last year? ), piqued the interest of politicians and business leaders looking to capitalize on cryptocurrency’s popularity.
Mayors, presidents, entrepreneurs, corporations, and even decentralized autonomous organizations (DAO) are racing to build the most amazing blockchain city. These efforts are not evenly distributed: Some aim to improve local crypto regulation, while others want to build a large city from the ground up, accept Bitcoin taxes, or even fund public services through crypto mining operations.
How does it Work to be a Blockchain City?
Because the term “crypto city” is so broad, there are numerous paths to becoming one. The following is the best way to describe what a crypto city is:
A blockchain city is a city, town, or metropolitan area with laws that facilitate or incentivize cryptocurrency trading, ownership, or use. Ideally, these policies make it very appealing for blockchain technology firms to establish themselves in a specific jurisdiction. Retailers, for example, in a crypto city may be enticed to accept digital currencies such as Bitcoin, attracting cryptocurrency enthusiasts to the local tourism sector.
Taxes and tax returns may be payable in cryptocurrency. Some crypto cities create their own city coin, which can be used for payments, donations, or to give citizens more direct control over the city’s administration.
Why are Blockchain Cities Important?
Now that we’ve defined a crypto city, we need to understand why they’re important in theory. Many political analysts have spent time delving into the various levels at which government centralization causes imbalances in large regions. One typical example is the federal government’s preference for larger cities over rural areas.
Because federal governments issue their own fiat currencies, these currencies and monetary policy tend to reflect the same biases as their creators, often working against municipal governments. Cities aspiring to be crypto hubs see cryptocurrency as a way to leverage this new industry as a technological, financial, and economic development tool that also grants the city independence.
If you believe in the importance of cryptocurrency and blockchain-based systems (that is, decentralization), blockchain cities may offer you some additional benefits. For example, the inherent decentralization (a word we don’t hear often enough) that this can create within political systems, as well as the promotion of technological innovation.
Cities are ideal for conducting experiments such as attempts to become a blockchain city because of their small size. The potential benefit of these experiments remains relatively high, as the resulting publicity and economic input can be extremely appealing for a crypto or blockchain city.
What Can a City Do with Blockchains?
As previously stated, the path to becoming a blockchain city is not clearly defined or outlined, so there are a variety of ways a given city (whether with genuine intentions or for promotional purposes) can obtain this status. Aside from issuing its own cryptocurrency, they can also incorporate the technology into their governmental processes.
Many governments began issuing official documents in digital format as a result of COVID-19 restrictions. Currently, it does not appear to be too far-fetched for them to begin analyzing other documents (e.g., recording driving permits, vehicle registrations, property deeds, and operational licenses) as NFTs, immutable and verifiable anywhere and at any time. These documents could be renewed through smart contracts that redirect associated fees to a city’s Treasury.
Another application for blockchains is for police records and citizen complaints. Blockchain systems can help corroborate information, promote transparency, incentivize positive action, and even punish bad behavior. Putting records on the blockchain provides a tamper-proof way to ensure politicians are always held accountable for ignored objections from constituents in complaint management.
Another application is to manage budgets and track expenses. A cryptographic ledger for government purposes, for example, could be used to provide users with a more transparent way to track financial transfers between government agencies and departments. Government contract bidding could be done on-chain, with bids registered and executed as smart contracts and zero-knowledge proofs, and all payments made in cryptocurrency.
Using these innovative solutions to improve public finances and local governments is a critical first step toward widespread acceptance, adoption, and, ideally, regulatory clarity. It’s worth noting, however, that this comes with a number of trade-offs.
Bitcoin’s white paper was published twelve years ago. Cryptocurrencies currently have a market capitalization of more than $1.5 trillion (3 trillion at their peak), but they have yet to gain mainstream acceptance. As a result, those outside of the proverbial rabbit hole may find the concept of a blockchain city perplexing.
Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of EGG Finance. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.