Smart cities are slowly gaining attention worldwide as they are becoming desirable places in many countries. In these urban utopias there is a very clear relationship between the citizens with whom they were built and the systems, networks and devices that enable them to operate safely and efficiently. Most importantly, they are built on a brand new financial technology infrastructure that supports the flow of micropayments over the financial “plumbing” much like other major utilities (water, energy, data, etc.) flow through pipes and cables and fiber optic cables.

The main goal of a smart city is to optimize city functions and promote economic growth through the use of advanced technologies. Smart cities want to increase operational efficiency, achieve sustainability goals such as energy efficiency and scarcity of resources and, above all, improve people’s lives.

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The early but promising smart cities include Singapore, Dubai and Oslo. In Singapore, one of the most populous cities in the world, sensors are used to collect digital data on traffic flow and pedestrian activity. The data is then sent to the agencies for analysis in order to determine appropriate measures both in relation to real-time power diversion and political and planning improvements. Other focal points are the use of smart home technologies to address topics such as waste management and energy efficiency.

Therefore, it is very important to collect accurate and reliable data from connected devices, and it is very important to actively involve city dwellers in making this data available through the device. Obviously there are some very basic concepts that also need to be established to ensure the safety and wellbeing of citizens, such as:

Smart cities have a responsibility to their citizens to operate and report on sustainable infrastructure and to integrate environmental, social and governance elements (ESG) into their design. Implementing incentive plans to promote positive behavior is likely to play an essential role in addressing the main environmental, social and economic problems faced by people in these cities. Indeed, in meeting the UN’s 2050 climate goals under the Paris Agreement, cities can play an important role in helping cities reduce greenhouse gas emissions and achieve a carbon-neutral future.

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While smart cities with fully integrated services are still a few years away, the use of incentive systems based on the ability to transfer small amounts – or micropayments – can accelerate the process of creating a smart city. In simple terms, micropayments are transactions for very small values, often fractions of a coin, that are executed in real time while a user or device is actively interacting with the system or process. A thematic example of this is the spread of COVID-19 test and tracking processes. We’re not currently rewarded for logging into public facilities, but we would likely have a higher level of compliance if we did. Any smart city initiative that requires data collection for processing by the city’s analytics system, which responds by “raising” community behavior through rewards, will benefit from a payments infrastructure that supports micropayments. In fact, all citizens and their devices will become “city data users (producers and consumers)” and will be rewarded with real-time micropayments for their participation.

Smart cities need public support

Successful smart cities will focus on incentives. While people in general can support technological advancement to improve their quality of life, the misuse of personal data by centralized “big tech” platforms in recent years has certainly led the public to gather technology-oriented information.

In the midst of the COVID-19 pandemic, data breaches are on the rise. Confirmed data breaches in the healthcare industry alone increased 58% in 2020. According to the same report, web application data breaches doubled overall in 2019 2020. Smart city initiatives need to address these privacy and data security issues or their participation will be hampered by residents’ concerns about the way their data is used in the application of technology.

Related: Smart cities are the future, but they could threaten privacy

Hence, incentive systems that focus on consent and build trust are needed to encourage public acceptance of smart cities. When done right and citizen privacy built into the system design, incentive behaviors can ensure a smooth and safe city. Kind incentives can be given to citizens to encourage them to respond in a particularly beneficial way, such as promoting road safety or recycling waste. In these examples, micro-payments could be instant and real-time to meet variable speed limits, reward children for crossing the street in a safe place, or as a playful reward for correctly disposing of different types of waste.

Decentralized device-based infrastructure

Smart cities (and their citizens) will rely on sensors and devices built into their fabric. Connected Internet of Things (IoT) devices will be the eyes, eyes and hands of the city, automatically collecting data on everything from traffic movements and environmental factors to weather, supply chain monitoring and urban resource management (water, energy, waste, etc.). )). This data is used to inform and adjust policy as well as real-time decision-making so that the city’s systems function smoothly.

With the introduction of new high-speed networks such as 5G or LoRaWAN and the increasing use of networked IoT devices for essential services and utilities, the need for automated micro-payments and devices is also increasing. Use cases include electric vehicles that automatically pay tolls for transit, automated payments for delivery by drones, or IoT gateway providers that are paid for with the devices they use. The most important requirements for these device networks are size, speed and security, as well as delegated powers, which are underpinned by digital identities.

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The current payment infrastructure cannot support tens of billions of always-connected IoT devices. The underlying infrastructure that connects multiple data points, devices and stakeholders is key to the success of incentive systems and the overall integrity of the smart city. Distributed ledger technology promises to be the underlying network layer for many of these systems that underpin financial services, supply chains, interoperable identity systems, and decentralized economic models. In addition, the decentralized ownership of the ledger and data storage at the core of the Smart City makes corruption almost impossible, since no central authority controls access to the ledger.

First generation distributed ledger technologies (DLTs) cannot meet these needs without compromising security or decentralization, but emerging next generation DLTs can meet very high throughput requirements without compromising security, and therefore trust is essential.

If we assume that smart cities will need a new type of financial “installation” that will support all of their services and will most likely be based on a distributed ledger, we need to consider the digital currency they will use when public DLTs go live. native token economy or cryptocurrency. There have been many articles on cryptocurrencies, stablecoins and central bank digital currencies (CBDCs) and some smart cities may have their own CityCoin currency, but we also need to consider a new currency: machine money.

In Germany, the financial supervisory authorities are openly discussing the creation of a special currency to support their “Industry 4.0” initiatives – computer money denominated in euros is cash – digital but optimized for the super-fast transactions that devices require. This does not require the complexity of the “wholesale” CBDC proposed for national financial institutions or the fully offline, wallet-based requirements of a “retail” CBDC that conforms to fiat money. This smart city of “machine money” will be less complicated because transactions will be easier than …