Smart cities are gaining popularity throughout the world as various governments strive to create them. The inhabitants for whom these urban utopias are designed and the systems, networks, and gadgets that enable their safe, secure, and efficient functioning have a very defined connection in these urban utopias. Most significantly, they will be based on a completely new financial technology infrastructure. That allows micropayments to flow via financial “plumbing” in the same way that other vital utilities (water, energy, data, etc.) do.
A smart city’s main goal is to use cutting-edge technologies to optimise civic services and boost economic growth. Smart cities strive to enhance operational efficiency. As well as accomplish sustainability goals such as energy efficiency and limited resource management. And, most importantly, improve the lives of their residents.
Singapore, Dubai, and Oslo are examples of early-stage yet potential smart cities. Sensors are being utilised to collect digital data on traffic flow and pedestrian activity in Singapore, one of the world’s most densely populated cities. Then agencies receive the data subsequently for analysis. With the goal of determining the best course of action for real-time flow redirection. As well as policy and planning enhancements. The use of smart home technology to solve challenges such as waste management and energy efficiency are two other areas of attention.
As a result, accurate and trustworthy data gathering from connected devices is important. And incentivizing people to contribute this data from their gadgets is the best approach to attract active involvement. Clearly, some fundamental principles such as digital identification, personal privacy, and permission to data sharing must be in place. In order to protect people’s safety and well-being, but that will be the subject of a future essay.
Sustainable infrastructure, Environmental, Social, and Governance (ESG) considerations are critical
A smart city owes it to its inhabitants to run and report on sustainable infrastructure. As well as include Environmental, Social, and Governance (ESG) considerations into its planning. Implementing incentive systems to encourage beneficial behaviour will almost certainly be critical in solving the most pressing environmental, social, and economic challenges that those cities’ residents confront. Indeed, as cities execute the Paris Agreement’s 2050 Climate Targets, such incentive programs might be critical in assisting cities in reducing emissions. As well as moving toward a carbon-neutral future.
Fully integrated smart cities are still a few years away. However, using incentivization systems based on the capacity to transmit small quantities of value, or micropayments, might hasten the development of smart cities. Simply said, micropayments are real-time transactions for very tiny amounts of money. Generally, fractions of a penny performed as a user or device interact with a system or process. The spread of COVID-19 check-in and tracking systems is a recent example of this.
We aren’t now receiving compensation for signing into public places. But if we were, there may be a higher degree of compliance. A payments infrastructure that enables micropayments would assist any smart city program. That needs the gathering of data for processing by the city’s analytical systems. And reacts with community behavioural “nudging” via a reward. All people and their gadgets are effectively transformed into “city data prosumers (producers and consumers)”. Who are paid in real-time with micropayments for their involvement.
Smart cities require public support
Incentives will be at the heart of all successful smart cities. Most people are in favour of technological development to better the quality of their lives. Nonetheless, the recent abuse of personal data by centralised “Big Tech” platforms has definitely created public reluctance to participate in technology-driven data collection.
Data breaches are on the rise in the midst of the COVID-19 epidemic. In the healthcare business alone, confirmed data breaches surged by 58% in 2020. Web application breaches increased overall between 2019 and 2020, according to the same research. Citizens’ worries about how their data is utilised when adopting smart city technologies must be addressed. If participation in them is desirable.
As a result, public acceptance of smart cities will require consent-focused and trust-building incentivization systems. Behavioural incentivization may provide a smoothly functioning and safe city if implemented appropriately. With citizen privacy integrated into the system design. Citizens might be gently prodded to respond in a positive way, for as by promoting road safety or garbage recycling. Micropayments may take place instantly and in real-time for obeying varying speed restrictions, rewarding youngsters for crossing the street safely. Or as a gamified incentive for properly disposing of various forms of garbage in these scenarios.
Infrastructure based on decentralised devices
The sensors and gadgets embedded into the fabric of smart cities (and their people) will be crucial. The city’s eyes, ears, and hands will connect to the Internet of Things (IoT) devices. Automatically gathering data on everything. From traffic flow to environmental variables, weather, supply chain tracking, and city resource management (water, energy, waste, etc.). This information will be usable to educate and adjust policy. As well as to make real-time decisions to keep the city’s services running properly.
The need for automated and device-to-device micropayments will rise as new high-speed networks like 5G and LoRaWAN are under deployment. As well as the utilisation of linked IoT devices for vital services and utilities. Electric cars that pay tolls as they pass, drones that pay tolls automatically, and IoT network gateway providers that receive compensation by the devices they enable within their range are all examples of use cases. Scale, speed, and security, as well as delegated authority backed by digital identification, are the main requirements for these mesh networks of devices.
The current payment infrastructure cannot support tens of billions of always-connected IoT devices. The smart city’s incentivization mechanisms and general integrity are dependent on the underlying infrastructure, which connects numerous data points, devices, and stakeholders to one another. Many of these systems, including financial services, supply chains, interoperable identification systems, and new decentralised economic models, will rely on distributed ledger technology as its fundamental network layer. Furthermore, because no one centralised body controls access to the data ledgers and repositories at the heart of the smart city, corruption is almost impossible.
Next-generation DLTs are on the horizon to handle extremely high throughput without sacrificing security
First-generation distributed ledger technologies, or DLTs, couldn’t scale to meet these demands without sacrificing security or decentralisation, but next-generation DLTs are on the horizon that can handle extremely high throughput without sacrificing security and, hence, trust.
Smart cities, hypothetically, may need a new form of financial “plumbing” to support all of their services, which is most likely to take place on distributed ledgers. Because public DLTs function on native token economies or cryptocurrencies, we must examine the sort of digital money they will employ. We read a lot about cryptocurrencies, stablecoins, and digital currencies issued by central banks (CBDCs). It’s also possible that certain smart cities will have their own CityCoin currency. However, a new form of currency, machine money, may be crucial.
Financial officials in Germany are publicly contemplating the development of a new form of currency, euro-denominated machine money, to assist their “Industry 4.0” plans. That’s a digital currency, but it’s designed for the ultra-fast transactions that mobile devices demand. This would avoid the complexities of “wholesale” CBDCs suggested for national financial institutions, as well as the entirely offline, wallet-based needs of a “retail” CBDC counterpart of digital currency. This “machine money” for smart cities would be simpler. Because the transactions will be just tokenized central bank money transfers. And it’s possible that you’ll only be able to connect to a financial institution on a sporadic basis. The architecture for these must be resistant to cyber-attacks, network outages, and device failures, but it will likely require less governmental oversight.
The financial arteries of all-new ‘smart’ cities
These may appear to be improbable ideas. Yet smart cities are currently under planning, development, and implementation all over the world. And they must all take sustainability and environmental concerns into account. As the world’s population grows and we attempt to address and adapt to issues such as climate change, food security, renewable energy transition, and financial inclusion, technology will become increasingly important in urban planning and development.
From the improvements of current urban centres like Dubai, Beijing, and Singapore to enormous new cities in Africa, there is a lot going on in the world of urban development. Micropayments will very certainly be usable as part of reward-based incentive systems. To encourage and steer citizen behaviour toward an optimal operational balance and verifiable sustainability results. Fast and secure DLT-based financial infrastructure, similar to pipelines, cables, and fibre optics used by other utilities, will be installed to achieve this. Having the ability to accept micropayments as the commercial and behavioural lifeblood of all future cities.