A recent decline in democratic participation and faith in government indicate a clear need to enhance public trust in planning departments and other agencies. The first step is empowering citizens to take a greater role in urban planning and community ownership. Results of a recent survey from Deloitte show that digital infrastructure plays a major part in enhancing public trust. This is especially so as it relates to data protection, direct participation and transparency. In this post, we explain how blockchain technology could improve public trust and make strategic urban planning more democratic. By storing data transparently and immutably, blockchain technology could hold local governments accountable to the public. Blockchain technology also presents a number of tokenization opportunities in urban areas. Tokenization could incentivize civic engagement and empower community members to directly invest in infrastructure. The latter could help redistribute wealth from institutional investors to everyday people. Decision-making power could shift from local government to community members. This could help us create smart and sustainable cities that are more responsive to the needs of their citizens. Follow below to learn how blockchain could make urban planning more democratic.
Terms to Know
As most readers will already know, a democratic system of governance affords citizens some level of decision-making power. According to USAID, democratic governments aim to build “open, responsive, and accountable institutions and processes that serve the needs and preferences of the public.” However, the amount of control citizens have differs from system to system.
Direct democracies — which afford citizens the most control — are far less common than representative democracies. The former empowers citizens to make decisions that impact their society directly without involvement of elected officials. The latter allows citizens to elect officials who then make decisions — hopefully guided by the people who voted them into office.
One of the issues acknowledged within this post is that city officials do not always act in the interests of local residents. In many cases, they are not required — or even incentivized — to do so. In city government, elected officials are often responsible for appointing members of the local planning commission and/or zoning department. Their appointees must act within the confines of local laws and respect current policies.
However, these unelected officials might prioritize the interests of developers and institutional investors instead of responding to the “needs and preferences” of community members. As we explain in further detail below, this shortcoming of representative democracy might have eroded trust in city governance.
As we note in a recent post, blockchain is a type of distributed ledger technology through which data can be managed securely and immutably. Distributed ledger technologies can be either private, public or permissioned. This refers to who can access and add to data recorded on the blockchain. Blockchain was originally created to support the cryptocurrency Bitcoin, but has since evolved. Today, blockchain technology boasts a number of other applications. For example, the Ethereum blockchain enables smart contracts.
How Blockchain Works
Here’s how blockchain networks function. The computers – or servers – that record data are referred to as “nodes.” It is through these nodes that blocks of data are entered, verified and stored. Miners, validators and/or delegates are the network participants who actually verify transactions and add new blocks to a chain. The decentralized network of nodes makes transactions and other operations recorded on public blockchains more secure, more consistent and less expensive.
The term “blockchain” refers to the way in which data is processed and stored by nodes. Each “block” of data must be verified by a node before it can be added to the “chain.” While new blocks can be added after they are verified, old blocks cannot be altered or deleted. Every node that participates in adding new data to existing blockchain networks stores the complete history of that blockchain. Even if a hacker were to alter data stored by one node, the other nodes would be unaffected.
Nodes must achieve network consensus. The consensus mechanism by which new blocks are verified differs from chain to chain, but the two most common are PoS and PoW. PoS stands for “proof of stake,” while PoW stands for “proof of work.” You can learn more about consensus mechanisms in our recent post “How PoS Makes Validating Transactions More Energy Efficient.”
Blockchain and Urban Planning
If network consensus cannot be reached, the falsified block of data is rejected. This characteristic of blockchain technology is what makes it so applicable and sought-after in industries like finance and real estate. It is also what makes blockchain a partial solution to lack of trust in local government. Some argue that blockchain systems could not only provide more efficient service management, but also transform our representative democracy into a more direct democracy. Keep reading to learn more about blockchain and urban planning.
According to this Cryptopedia entry, “tokenization is the process of converting something of value into a digital token that’s usable on a blockchain application.” Tokens can represent everything from property ownership to voting rights. In a recent paper, researchers from the University of Florida, Columbia University and the University of Michigan identify the different functions of cryptographic tokens. (We will delve deeper into tokenization as it applies to civic engagement, urban planning and service management later on.) Yifeng Tian, Chaofeng Wang, Junghoon Woo, Zheng Lu and Peter Adriaens note that “cryptographic tokens can be grouped into three categories.” These categories include “payment, utility, and security tokens.”
First are “payment tokens,” which most readers will know as “coins” or cryptocurrency. These tokens are designed to “make and receive payments on the blockchain.” On the other hand, utility tokens “grant access rights to products or services to token holders.” Security tokens represent fractional ownership of a shared asset like bonds or real estate. In this post, we explain how tokenization could empower community members to invest in real estate, influence city budgets and affect future development projects.
Public blockchains have no central authority. Instead, decision-making is decentralized. In her article “Exploring Decentralization: Blockchain Technology and Complex Coordination” for the Journal of Design and Science (JoDS), Mally Anderson explains. Anderson writes that blockchains are controlled “by the entire network of participants.” Together, participants “establish the rules for participation themselves and can elect to evolve the system according to consensus.” Upon reading this definition of decentralization in blockchain technology, direct democracy might come to mind.
Anderson posits that the decentralized nature of public blockchains is what makes them more transparent, “censorship-resistant and…elastic than most other decision-making mechanisms.” Later in this post, we argue that a decentralized management blockchain system could shift the balance of power from local government to community members.
We tend to refer to cities that utilize emerging technologies or undergo any type of digital transformation as “smart cities.” This is a somewhat outdated definition. In their 2018 paper for McKinsey Global Institute, Jonathan Woetzel and colleagues provide a more contemporary definition of smart cities. Woetzel et al. write that smart cities were originally all about “installing digital interfaces in traditional infrastructure or streamlining city operations.”
Today, smart cities are less about exciting technological updates — some of which were more flashy than functional. Smart cities are more about “using technology and data purposefully to make better decisions and deliver a better quality of life.” With a more holistic vision, cities are now focused on how digital applications can address human issues like crime, representation, health and sustainability. Some researchers argue that blockchain technology could usher in the smart city era. Blockchain-supported systems could provide cities with the digital infrastructure they need to improve transparency and trust.
The Problem: Lack of Local Control, Eroding Trust in Government and Declining Civic Engagement
Lack of Local Control
Community members often express concern, frustration and even outrage when they learn about development projects approved by local planning departments and city governments. From luxury apartment buildings and fashion centers to fulfillment warehouses and office buildings, community members often feel left out. A common complaint is that these development projects cater to certain groups that do not reflect the community as a whole.
Many cities have public outreach programs that inform local residents of upcoming developments in their area. Some planning departments offer a period of public comment in the form of hearings and community meetings like town halls. However, most complaints lodged during periods of public comment are taken as mere suggestions. They are not deterministic. The city is not required to act on advice from community members as long as the planned development follows local policies and regulations.
Eroding Trust in Government
Lack of control over what happens to our communities could be one reason why trust in local governments has declined in recent years. Summarizing survey results in an article for Gallup, Megan Brenan points to a “rare decline in trust in local government to handle local problems.” According to the 2021 survey, trust in local governments remains higher than trust in federal and state governments. Still, only “66% of U.S. adults now say they trust their local government…the lowest since 1997.”
Declining Civic Engagement
Not only is trust in local government eroding, but civic engagement is also on the decline. According to this 2020 NCL resource, “only 15 to 27% of eligible voters cast a ballot in their local election” across the US. Demographics who did vote in local elections were rarely representative of the entire community.
The National Civic League reports that seniors and high-income community members are more likely to vote – as are white Americans. In fact, “affluent voters have 30-50 percent higher turnout in local elections than low income voters.” Similarly, citizens aged 65 and older “are seven times more likely to vote…than voters aged 18 to 34.”
The Solution: Harnessing Blockchain Technology to Improve City Management, Democratize Urban Development and Boost Trust
As explained earlier in this post, key features of blockchain technology are immutability, security, decentralization and required consensus. Each of these features makes blockchain technology applicable to the problems described above. Tokenization also plays a part as it relates to surveys, voting and fractional ownership. Several entities have proposed blockchain-based systems to increase residents’ control over what happens in their community, encourage participation and boost trust in local government. Researchers, political scientists and other experts often argue that trust in city government cannot improve without full transparency and direct participation from residents. Below are three ways a blockchain-based approach could shift power from government officials and institutional investors to local community members.
#1 A Blockchain-Based System Would Ensure All Data is Recorded Immutably and in a Timely Manner
Throughout this post, we have repeatedly pointed to the “immutability” of on-chain data, but what exactly does “immutability” mean? In the context of decentralized ledger technologies, “immutability” means that data recorded in blocks on the chain cannot be altered. Writing for Investopedia, Adam Hayes notes that because each new block is “chained onto the previous…the data [are] chained together in chronological order.” The data is essentially time-stamped, permanent and unalterable.
The immutability of data recorded on-chain is significant in an urban planning, zoning or city management context. This is because it could make local government departments, officials and appointees more accountable to residents. Everything from town hall transcripts to demolition orders to environmental site assessments to planning permissions to public comment period announcements could be recorded on-chain.
Residents would be able to check whether certain documents had been uploaded in a timely manner — as determined by local laws and regulations. They could then hold officials accountable if key information had not been provided to the public by the legal deadline. This might involve delaying demolition or construction and altering the trajectory of a development. The decentralized nature of blockchain could also lessen fear of a central authority controlling the flow or quality of data.
#2 Issuing Tokens could Incentivize Participation and Ensure Community Members Have Outsized Influence When Approving New Developments
Next, issuing tokens could encourage residents to participate in surveys, attend town halls and take advantage of other voting opportunities. Back in 2019, researchers at The Einstein Center Digital Future at Technische Universität identified this as a key feature of their BBBlockchain project.
In “BBBlockchain: Blockchain-based Participation in Urban Development,” Robert Muth et al. write that they explored several participation incentives when developing the app. They eventually determined that tokenization would “have the highest impact on the upper layers of participation as tokens…are an instrument of exchange.” If tokens are issued as “coins,” their monetary value would incentivize participation in consultative processes like polls and surveys.
Of course, Muth et al. caution against tying monetary value to tokens used in direct decision-making processes like voting. To that end, tokens could instead be used to validate voters. In fact, Muth et al. plan to “use tokens for authenticating whether a user is eligible for participating and voting.” Under their plan, each user who receives a token would be able to vote on key community issues.
The number of tokens issued to each user would “indicate the user’s priority” as it relates to certain issues. For example, teachers and administrators might receive more tokens to use in a vote about a high-rise hotel planned near a grade school. An environmental scientist or historian might receive more tokens to use in a vote about whether to preserve a site of interest.
Using Tokens to Protect Local Residents
In “How Blockchain Technology Could Make Zoning Work for People” for NextCity, Jen Kinney identifies another way in which tokenization could empower residents. However, this alternative approach shifts some of this decision-making power to an algorithm instead of community members. Using a blockchain-based system, Swytch cofounder John Henry Clippinger and MIT Media Lab research scientist Kent Larson hope to create the type of “smart city” described above.
Under Clippinger and Larson’s system, someone would gather key statistics about a neighborhood. These statistics might include “an inventory of [the] neighborhood’s current housing stock, mobility patterns, demographics, amenities, energy consumption, and other factors.” Based on this data, the algorithm would generate a “simulation model [that] would propose solutions to maximize residents’ wellbeing.” It would issue tokens based on this proposal to community members.
While a planning commission might still have final approval over new developments, community members would be protected and have some amount of power. At the very least, their needs and preferences would be heavily considered by both planners and developers. For example, Kinney writes that a developer who wants to build a luxury apartment building “could still build.” However, “they might be required to rent or sell only to holders” of tokens that were issued based on the model described above.
#3 Tokenization Could Empower Community Members to Fund Projects of Their Choice
Third, tokenization could empower community members to fund projects of their choice by lowering the cost barrier. As noted above, tokenization makes fractional ownership attainable for non-institutional investors who have limited access to capital. If awarded tokens, community members could use those tokens to jointly fund meaningful projects. In doing so, community members could either reduce or eliminate the need for public sources of financing and/or wealthy private investors.
Community members could also invest in infrastructure and large-scale development projects — opportunities that have traditionally been closed to non-institutional investors. This would allow community members to actually own property in their neighborhoods. They could own property even if unable to afford to buy a house, apartment or office space. Over time, the monetary value of these tokens would increase as the value of the property increases. This would provide community members with a return on their investment and could also offer a renewed sense of ownership.
What kind of change do you think a blockchain-based system could affect in your community? Let us know in the comments below.