Vitalik Buterin: Encrypted cities are budding, read these interesting new experiments

More and more cities plan to use blockchain and cryptocurrency to optimize local governance mechanisms.

Original title: ” Vitalik: The era of encrypted cities has arrived. Explain three major experiments and trends in detail “
Written by: Vitalik Buterin, founder of Ethereum Compiler: Hu Tao, chain catcher

An interesting trend last year is that people’s interest in local governments has increased, and there have been greater differences and more experiments in the ideas of local governments. In the past year, the Mayor of Miami, Francis Suarez, has often interacted with the mainstream technology industry and the crypto community on Twitter to attract interest in the city.

Wyoming now has a DAO-friendly legal structure . Colorado is experimenting with quadratic voting . We are seeing more and more experiments creating a more convenient street environment for the offline world. We have even seen radical projects of varying degrees- Cul de sac , Telosa , CityDAO , Nkwashi , Prospera, etc.-trying to create entire communities and cities from scratch.

Another interesting trend last year was the rapid mainstreaming of cryptocurrency concepts, such as tokens, non-fungible tokens, and decentralized autonomous organizations (DAOs). So, what happens if we combine these two trends? Does it make sense to have a city with coins, NFT, DAO, some on-chain records for anti-corruption, or even all four? It turns out that someone has already tried this:

• CityCoins.co is a project to establish tokens, aiming to become a local trading medium, and part of the token issuance will be handed over to the city government. MiamiCoin already exists, and the “San Francisco Token” seems to be about to be launched.
• Other experiments on token issuance (for example, see this project in Seoul )
• Experiments with NFTs are often used as a way to fund local artists. Busan is holding a government-supported conference to discuss what they can do with NFT.
• The mayor of Reno Hillary Schieve’s broad vision for the city’s blockchainization, including NFT sales to support local art, RenoDAO issuing RenoCoins to local residents, real estate rental from the government, blockchain security lottery, blockchain voting, etc. To earn income.
• An ambitious project to create a cryptocurrency -oriented city from the ground up: see CityDAO , which describes itself as “building a city on the Ethereum blockchain”-DAO-based governance, etc.

But, in their current form, are these projects a good idea? Are there any changes to make them better ideas? Let’s find out…

Why should we care about the city?

Many governments around the world have shown inefficiencies and slow actions in responding to long-standing problems and rapid changes in people’s potential needs. In short, many governments lack on-site participants. Many out-of-the-box political ideas that are being considered or implemented for national governance are indeed terrifying. Do you want the United States to be taken over by the Portuguese dictator Antonio Salazar or a clone of “American Caesar” during World War II to combat the evil scourge of the American left? For every idea that can be reasonably described as free expansion or democracy, there are ten different forms of centralized control, separation walls, and universal surveillance.

Now consider the local government. As we have seen from the examples at the beginning of this article, cities and states can achieve real vitality, at least in theory. There are huge and very real cultural differences between cities, so it is easier to find a city where the public is interested in adopting any particular radical idea than to persuade the entire country to accept it. Many other areas of local public goods, urban planning, transportation, and urban governance have very real challenges and opportunities that can be solved. Cities have a tightly integrated internal economy, where things like the widespread adoption of cryptocurrencies can actually happen independently. In addition, experiments in cities are unlikely to lead to dire results, because cities are regulated by higher levels of government, and cities have an easier escape valve: people who are dissatisfied with what is happening can exit more easily.

So all in all, the local government seems to be a very underestimated government. Given that criticisms of existing smart city initiatives often focus on issues such as centralized governance, lack of transparency, and data privacy, blockchain and encryption technology appear to be promising key factors in achieving a more open and participatory path forward.

What are the current urban projects?

Actually quite a lot! Each of these experiments is still small, and to a large extent still trying to find solutions, but at least they are all seeds that can become interesting things. Many of the most advanced projects are in the United States, but the world is interested; the government of Busan, South Korea is holding an NFT conference. Here are some examples of what is being done today.

Reno’s blockchain experiment

Hillary Schieve , the mayor of Reno, Nevada, is a fan of blockchain, focusing on the Tezos ecosystem. She has been exploring urban governance concepts related to blockchain recently (see her podcast ):

• Sell ​​NFTs to fund local art, starting with the “Space Whale” NFT in the middle of the city
• Create a Reno DAO, managed by Reno tokens, and Reno residents will be eligible to get it through airdrops. Reno DAO can start to get a source of income; a proposed idea is for the city to rent out the property it owns and use the income for the DAO
• Use blockchain to protect various processes: blockchain secure random number generators for casinos, blockchain secure voting, etc.

CityCoins.co

CityCoins.co is a project built on Stacks. Stacks is a blockchain run by an unusual “Proof of Transfer” algorithm, which is built around the Bitcoin blockchain and ecosystem. 70% of the token supply is generated by the continuous sales mechanism: anyone with STX (Stacks native token) can send their STX to the city token contract to generate city tokens; STX income is distributed to existing ones City token holders, they hold their tokens. The remaining 30% is provided to the municipal government.

CityCoins made an interesting decision, trying to build an economic model that does not rely on any government support. The local government does not need to participate in the creation of CityCoins.co; a community group can issue a token by itself. “What can I do with CityCoins?” FAQs include examples such as “The CityCoins community will create applications that use tokens for rewards” and “Local companies can offer discounts or benefits to people who pledge their CityCoins.” However, in practice, the MiamiCoin community is not alone; the Miami government has in fact publicly supported this bill.

MiamiCoin Hackathon Winner: A website that allows co-working spaces to offer discounts to MiamiCoin holders

CityDAO

CityDAO is the most radical experiment: Unlike Miami and Reno, Miami and Reno are existing cities, and the existing infrastructure needs to be upgraded. People need to believe that CityDAO is a DAO with legal status under the DAO law of Wyoming. Create a brand new city from scratch.

So far, the project is still in its early stages. The team is currently completing the purchase of the first piece of land in a remote corner of Nevada. The plan is to start with this piece of land, and then add other land in the future to build cities, managed by DAO, and make extensive use of radical economic concepts such as the Huberger tax to allocate land, make collective decisions and manage resources.

Their DAO is one of the few progressive ways to avoid coin-operated governance; on the contrary, governance is a voting scheme based on “citizens” NFTs, and some ideas have been proposed to further increase voting by using a proof-of-humanity mechanism . Limited to one per person. NFT is currently being sold to crowdfunding project funds, you can buy it on OpenSea.

I think what can the city do?

Obviously, in principle, cities can do many things. They can add more bicycle lanes, they can use carbon dioxide meters and far-ultraviolet lamps to reduce the spread of COVID more effectively without causing inconvenience to people, and they can even fund life-prolonging research. But my main specialty is blockchain. This article is about blockchain, so… let’s focus on blockchain.

I think there are two very different blockchain ideas that make sense:

1. Use blockchain to create a more credible, transparent, and verifiable version of existing processes.
2. Use blockchain to implement new experimental forms of ownership of land and other scarce assets, as well as new experimental forms of democratic governance.

There is a natural fit between blockchain and these two categories. Anything that happens on the blockchain is easily publicly verified, and there are many free tools available to help people do this. Any application built on the blockchain can be immediately inserted into and interact with other applications in the entire global blockchain ecosystem. Blockchain-based systems are efficient in a way that paper does not have, and are publicly verified in a way that centralized computing systems do not have-if you want to create a new form of voting, let citizens give high-level votes , This is a necessary combination-massive real-time feedback on hundreds of different issues.

So let’s get into the details.

Which existing processes can blockchain make more credible and transparent?

A simple idea that many people, including government officials from all over the world, has repeatedly proposed to me is that the government creates a whitelisted stablecoin for internal use only to track internal government payments. Every tax from an individual or organization can be bound to a publicly visible on-chain record to mint the amount of tokens (if we want the amount of personal tax to be private, a zero-knowledge method can only disclose all , But still convince everyone that it is calculated correctly). Transfers between departments can be done “explicitly”, and these tokens can only be redeemed by individual contractors or employees who demand their payments and salaries.

This system can be easily expanded. For example, the procurement process of choosing which bidder to win a government contract can be done mainly on the chain.

Using blockchain can make more processes more trustworthy:

• Fair random number generators (for example, for lottery tickets), can be used as fair random number generators, and can be used to make government-run lottery tickets more trustworthy. Fair randomness can also be used in many other use cases, for example as a form of government lottery.
• Certificates, such as encrypted proof that certain individuals are residents of the city, can be completed on the chain to increase verifiability and security (for example, if such certificates are issued on the chain, then if a large number of false certificates are issued, This will become obvious). This can be used for certificates issued by various local governments.
• Asset registration is used for land and other assets, as well as more complex forms of property ownership, such as development rights. Since the courts need to be able to distribute under special circumstances, these registries may never become fully decentralized bearer tools like cryptocurrencies, but putting records on the chain can still make it easier to see what’s going on Dispute over the order.

Eventually, even voting can be done on the chain. Here, many complexities are faintly visible , and it is very important to be careful. We need a complex solution that combines blockchain, zero-knowledge proofs, and other cryptography to achieve all the required privacy and security attributes. However, if humans really want to switch to electronic voting, local governments seem to be a perfect starting point.

What radical economic and governance experiments might be interesting?

However, in addition to these blockchains covering what the government has already done, we can also view the blockchain as an opportunity for the government to conduct new and radical experiments in economics and governance. These are not necessarily the final thoughts of what I think should be done; they are more preliminary explorations and suggestions for possible directions. Once the experiment begins, real-world feedback is usually the most useful variable in determining how the experiment should be adjusted in the future.

Experiment #1: A more comprehensive vision of city tokens

CityCoins.co is one of the visions of how city tokens work, but this is far from the only vision. In fact, the CityCoins.so approach carries significant risks, especially in terms of how seriously the economic model is leaning toward early adopters. 70% of STX income from minting new tokens is allocated to existing pledgers of city tokens. More tokens will be issued in the next five years than in the next fifty years. 2021 is a good deal for the government, but what about 2051? Once the government approves a particular city token, it will be difficult to change its direction in the future. Therefore, the city government must carefully consider these issues and choose a long-term meaningful path.

This is a different possible sketch of the narrative of how the city token works. It is far from the only possible alternative to CityCoins.co’s vision; see Steve Waldman’s excellent article , which advocates a city-localized trading medium for another possible direction. In any case, city tokens are a vast design space, and there are many different options worth considering.

The current concept of home ownership is a significant double-edged sword. Many people believe that actively encouraging and legally constructing specific ways of home ownership is one of the biggest economic policy mistakes we make today. There is an inevitable political tension between housing as a place of residence and housing as an investment asset, and the pressure of satisfying the community that cares about the latter often ends up seriously damaging the affordability of the former.

Residents of a city either have a house, which exposes them to excessive housing prices and introduces improper incentives to oppose the construction of new houses; or rents a house, which puts them at a disadvantage in the real estate market, thereby Make them economically contrary to the goal of making the city a good place to live.

But even with all these problems, many people still find that owning a house is not only a good personal choice, but also worthy of active subsidies or social encouragement. An important reason is that it encourages people to save money and build their net worth. Another important reason is that despite its shortcomings, it establishes an economic alliance between residents and the communities in which they live.

But what if we can provide people with a way to save and build economic alliances without defects? If we can create a divisible and fungible city token, residents can hold as many units as they can afford or feel comfortable, and as the city prospers, will its value rise?

First, let’s start with some possible goals. Not all are necessary; only three out of five are completed in one token, which is already a big step forward. But we will hit as many of them as possible:

• Obtain a sustainable source of income for the government. The city token economic model should avoid redirecting existing taxes; instead, it should look for new sources of income.
• Establish an economic alliance between residents and cities. This first means that as cities become more attractive, the tokens themselves should obviously become more valuable. But this also means that economics should actively encourage residents to hold more tokens instead of distant hedge funds.
• Promote savings and wealth accumulation. This is what home buyers do: when homeowners pay their mortgages, they build up their net worth by default. The same can be done with city tokens. Accumulating tokens over time becomes very attractive and can even gamify the experience.
• Encourage more activities that benefit society, such as helping cities take active actions and use resources more sustainably.
• Be equal. Don’t overly favor the rich over the poor (because poorly designed economic mechanisms often happen by accident). The divisibility of tokens has avoided the sharp binary division between rich and poor. A lot has been done, but we can go further, for example. By allocating most of the newly issued bonds to residents as UBI.

One model that seems easy to meet the first three goals is to provide benefits to holders: if you hold at least X tokens (where X can increase over time), you will get some services for free. MiamiCoin is trying to encourage companies to do this, but we can go further and let government services also operate in this way. A simple example is to allow existing public parking spaces to be used free of charge only for those who hold at least a certain amount of tokens. This will achieve several goals simultaneously:

• Create motivation to hold tokens and maintain their value.
• Create incentives specifically for residents to hold tokens, rather than other non-aligned distant investors. In addition, the effectiveness of this incentive is for everyone, so it encourages widely distributed holdings.
• Create economic alliances (cities become more attractive -> more people want to park -> tokens are more valuable). Unlike own houses, this will be consistent with the entire town, not just a very specific location in the town.
• Encourage the sustainable use of resources: This will reduce the use of parking spaces (although people without tokens can still pay if they really need them), and support the desire of many local governments to open up more space on the road to be more pedestrian friendly. Alternatively, restaurants can be allowed to lock tokens through the same mechanism and require parking spaces for outdoor seating.

But in order to avoid improper incentives and avoid over-reliance on a particular idea, it is extremely important to have multiple possible sources of income. A good gold mine is zoning, which can bring value to urban symbols and at the same time try new governance concepts. If you hold at least Y tokens, then you can vote a second time on the fees that nearby landowners must pay to bypass zoning restrictions. This method based on mixed market + direct democracy will be more effective than the current overly cumbersome licensing procedures, and the cost itself will become another source of government revenue. More generally, any of the ideas in the next section can be combined with city tokens to provide city token holders with more places to use them.

Experiment #2: A more radical and participatory form of governance

This is the radical market concept, such as Huberger tax, second voting, and second financing. I have put forward some ideas in the above chapters, but you don’t need to have dedicated city tokens to implement them. Some governments’ limited use of secondary voting and funds has already taken place, such as the Colorado Democratic Party, and experiments that have not yet received government support, such as Gitcoin’s Boulder Downtown Stimulus project. But we can do more!

One obvious place where these ideas have long-term value is to encourage developers to improve the aesthetics of the buildings they are building (see here , here , here, and here for some recent examples of professionals arguing about modern architectural aesthetics) . Haborg tax and other mechanisms can be used to overhaul zoning rules, and blockchain can be used to manage such mechanisms in a more reliable and efficient manner.

Another idea that is more feasible in the short term is to subsidize local businesses, similar to the Boulder Downtown Stimulus plan, but on a larger scale and longer lasting. Companies have always produced a variety of positive externalities in local communities, and these externalities can be rewarded more effectively. Local news can get a second investment to revive a long-struggling industry. The pricing of advertisements can be set based on real-time voting of people’s appreciation of each particular advertisement, thereby encouraging more originality and creativity.

More democratic feedback (and maybe even retroactive democratic feedback!) may generate better incentives in all these areas. The 21st century digital democracy achieved through real-time online quadratic voting and financing may do better than 20th century democracy.

in conclusion

There are many ideas worth trying in cities, both cities and new cities can try. Of course, the advantage of a new city is that no existing residents have existing expectations about how things should be done; however, in modern times, the concept of creating a new city itself is relatively untested. Perhaps the multi-billion dollar pool of funds in the hands of those who are keen to try new things and projects can help us tide over the difficulties. But even so, in the foreseeable future, existing cities may still be where most people live, and existing cities can also use these ideas.

Blockchain is very useful in the more gradual and radical ideas presented here, even if the city government has an inherent “trust” nature. Running any new or existing mechanisms on the chain allows the public to easily verify that everything complies with the rules. The public chain is better: The existing infrastructure allows users to independently verify what is happening, and its benefits far outweigh the losses caused by transaction fees, which are expected to drop rapidly due to roolup and sharding soon. If strong privacy is required, blockchain can be combined with zero-knowledge encryption to provide privacy and security at the same time.

The main trap that the government should avoid is sacrificing options too quickly. An existing city may fall into the trap of launching a bad city token instead of taking slower action and launching a good token. A new city may fall into this trap by selling too much land, sacrificing all the benefits to a small group of early adopters.

It is ideal to start with a self-sufficient experiment and proceed slowly with truly irreversible actions. But at the same time, it is also important to seize the opportunity first. The city has many things that can and should be improved, and there are many opportunities. Despite the challenges, the era of encrypted cities has arrived.

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