Planning Magazine

Your Guide to NFTs, Cryptocurrency, and the Blockchain

The blockchain could have a big impact on city services — and the environment. Here's what planners need to know.

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Illustration by David Plunkert

When big-city leaders like Francis Suarez — Miami's Twitter-fluent, future-focused mayor — tout their blockchain bona fides, or when New York City's newly elected mayor Eric Adams offers to take his salary in the cryptocurrency Bitcoin, it seems like a shift is underway.

The ever-evolving, often hypercapitalist world of blockchains, cryptocurrency, and non-fungible tokens (NFTs) might seem too bleeding-edge for civic operations. The swift rise of crypto millionaires and fads that drive the prices of currencies up (and down, as we saw this spring) suggest a Wild West atmosphere, unwelcome at a city hall with the sober duty to serve its citizens.

"When you start looking at blockchain technology, you have to understand and realize how much hot air is in the room, and how much of it is irrational exuberance on the tech and money side," says Mark Wheeler, Philadelphia's chief information officer, who launched a city initiative last fall to explore its potential. "But I do believe there's a there there. And that it also has a use in government."

Amid the hype, experts say it's important planners understand the potential impacts, from more transparent and secure record keeping to the significant amount of energy often needed for operations.

Blockchain 101

At the center of this technological shift is the blockchain, a decentralized, digital record-keeping and ledger system that tracks transactions. In other words, it's a series of individual records ("blocks") that appear on a single list ("chain").

Whereas typical city data-keeping often relies on a single entity or agency controlling files and distributing them through a central depository or database, the blockchain is designed to take input from multiple sources and store it across multiple computers, resulting in a shared system that's meant to be transparent, incorruptible, and accessible. Transactions have little cost, typically occurring instantly and securely. A National League of Cities report describes the system as an "anonymous smart spreadsheet listing and time-stamping each new bill paid, purchase made, vote cast, and credit earned" that's "verified by a trusted third party."

Justin Hollander, FAICP, an urban planning and design professor at Tufts University, says existing government operations and traditional internet safety protocols are far more vulnerable to hacking than the blockchain, an attractive feature as more cities field ransomware attacks. (Hollander is also the author of the May 2022 PAS QuickNotes, Blockchain for Planners.)

The blockchain is designed to take input from multiple sources and store it across multiple computers, resulting in a shared system that's meant to be transparent, incorruptible, and accessible.

"It's important to understand that the only thing that has actually been hacked are the intermediaries that operate on top of the blockchain," says blockchain advocate Matthew Snider, senior vice president of strategy and business development at Centri Tech, a social tech firm focused on expanding broadband access. "The blockchain has never been hacked."

Within this distributed, digital file- and record-keeping system, it's possible to create cryptocurrency, a digital alternative to traditional currencies, as well as NFTs, tokens stored on the blockchain that each represent a one-of-a-kind digital item. Much of the hype around NFTs comes from artists and others creating singular art objects or collections and selling them as rapidly appreciating collector's items, but that uniqueness could actually be an advantage for secure record keeping — records stored on the blockchain can't be altered or faked.

Environmental concerns

But amid the hype, some critics are concerned about the environmental impacts. Cryptocurrencies must be "mined," which requires specialized computers that verify extremely complex calculations, known as "proof of work," to both authenticate transactions on the blockchain and create more. This process has been so energy-intensive that global mining activities already dwarf the total emissions of many medium-sized countries.

The U.S. alone created roughly 40 billion tons of carbon dioxide annually via mining operations. In some regions of upstate New York, where mining is prevalent, increased electricity demand has boosted local energy costs by tens or even hundreds of millions of dollars by some estimates. Tim Berners-Lee, inventor of the World Wide Web, has described the concept as "one of the most fundamentally pointless ways of using energy."

But as Bitcoin advocates and the cryptocurrency industry come to terms with their environmental footprint — roughly 250 industry players have signed the Crypto Climate Accord, promising to be net-zero by 2030 and decarbonized by 2040 — there have been more immediate efforts and initiatives to make these processes more sustainable. Some coins work on different proof methods that use less electricity. One of the major cryptocurrencies, Ethereum, is switching to a "proof-of-stake" system, in which a network of validators will "stake" their own currency to validate equations and earn rewards, which would significantly cut down on the competition and excess energy use of the proof-of-work method.

Many of the blockchain's current uses raise environmental concerns, but its transparency could create more sustainable options for the future. Suppliers could use blockchain record keeping to ensure that materials are accurately tracked and traced in industries like mining and forestry, for instance. Theoretically, cities could also use this tech to track suppliers and the second- and third-order environmental impacts of urban resource consumption and energy use.

Others see the potential to use Bitcoin's energy-hungry nature as a way to prop up new, green energy infrastructure. Colocating crypto-mining operations with zero-carbon, renewable power sources like hydro, wind, and solar would not only cut down on the carbon emissions of the mining itself but also provide a ready and willing market for green power. With renewable power sources able to sell excess power to miners when grid demand is low — and even charge a premium — such an arrangement might help accelerate the deployment of zero-carbon electricity generation. Theoretically, it could even help help finance and distribute the benefits of renewable power, making the complicated finances of selling solar across borders more seamless.

Planning implications

Planners exploring the blockchain should understand that many, if not most, of its applications are still in their nascent stages of development — and fairly impractical without additional advancements in technology — but there are exceptions. Reno, Nevada, and Miami may be the best known; their mayors have courted the industry and worked with staff and consultants to understand and embrace the technology.

Getting educated about blockchain tech at this early stage of development could help protect the public interest, particularly when it comes to environmental considerations.

While some consider promotion of Bitcoin a way to entice blockchain startups — and a play to be seen as a wealthier, tech-savvy city — Reno mayor Hillary Schieve has already pushed a blockchain-based system to track real estate contracts and monitor changes to agreements. "Politicians don't like to be the first out of the gate," she told Wired magazine. "I'm not afraid of that."

She's not alone. Dubai is seeking ways to digitize government data storage, technologists in Argentina and India have experimented with ways to track and incentivize garbage collection using the blockchain, and Estonia has instituted digital national IDs to vastly increase access to government services and improve bureaucratic efficiency. On a more local level, Cook County, Illinois, has used the blockchain to store property records in an effort to combat deed fraud.

Helium, a blockchain broadband network that provides open data to smart devices and uses tokens to incentivize its use and expansion, has also been used by San Jose to make passive income. They plan to test an expansion to pay for broadband for 13,000 households.

Wheeler, Philadelphia's CIO, says the key term here is "disintermediation": taking people out of the equation and freeing data to move and interact on the blockchain. This means that files or applications can proceed more quickly through reviews. Blockchain tech could be applied to city approvals, smart contracts, environmental impact statements, and all other forms of municipal documentation.

"Think about going from the Dewey Decimal system used in libraries to something like Google in terms of how you search for something," says Snider of Centri Tech. "From a government perspective, there [are] a lot of orders and rules, which are perfect for this environment. There are also inexpensive platforms for them to grow on."

Ultimately, big-city blockchain advocates envision a scenario in which records are evaluated and approved in a traditional manner, then stored in a digital system that is more flexible, accurate, accessible, and transparent. It's not a panacea, they say, but rather a better process that gets the gears of bureaucracy moving faster: a county registry of deeds available anytime from anywhere, for example, or property and zoning databases that require significantly fewer resources to maintain and archive.

Based on lessons learned throughout the pandemic, during which the rollout of emergency digital services made most of us more comfortable with and desiring of online government interaction, it's clear that digital solutions and quicker responses will only be more in demand. "This is all about smart contracts," says Hollander. "It could help speed up civic operations without as much need for operational oversight."

Illustration by David Plunkert

Illustration by David Plunkert

The record-keeping potential of the blockchain could be expanded to cover resident feedback and community meetings and even offer another avenue for voting. Hollander sees the same tech monitoring neighborhood-level decision making. That could include simple tasks, like seeing where the city is spending money and tracking voting records of representatives and council members, as well as more complex interactions between databases.

"That input can become alive in ways we've never been able to track before," Hollander predicts.

Protecting the public interest

The time to start learning about and experimenting with this nascent tech could be now, advocates say.

With the rollout of federal stimulus and infrastructure dollars, last year's record-setting investment in government technology, and the increasing digitalization of government operations, we may be seeing more opportunities to invest in trials and tests of blockchain-based services, as well as update some older legacy systems that have been coasting due to inertia.

Planners and other decision makers will need to traverse a vast skills gap to fully participate in designing new blockchain apps and products. At present, few schools offer majors or courses of study on the subject, but a handful of industry groups like the Blockchain Council and Government Blockchain Association offer training and certification. Some states and municipalities are even beginning to offer educational opportunities for government employees.

While grasping this technology might seem like a trial-and-error process, especially in the early days of civic blockchain rollout, experimentation can create clarity at a time when constant experimentation is becoming the norm. And getting educated and involved at this early stage of development could help protect the public interest — particularly when it comes to environmental considerations — and reduce municipal reliance on contractors and consultants.

Developing in-house understanding, appreciation, and, in some cases, apprehension of the blockchain can help us focus resources and continue moving toward the future communities want to plan — technology included.

Patrick Sisson is a Los Angeles–based writer and reporter focused on the tech, trends, and policies that shape our cities.