By Risto Karjalainen, COO Streamr

With a Ph.D. in Decision Sciences from the Wharton School of the University of Pennsylvania, Karjalainen previously worked as a Quant and Portfolio Manager with JP Morgan and Merrill Lynch before immersing himself into the world of real-time data and decentralized computing and co-founding Streamr, the decentralized peer-to-peer data sharing protocol.

Smart cities are one of the most hyped concepts in recent years. Smart traffic lights, intelligent street lamps, clever rubbish bins, and networks of various types of sensors are something we've come to expect any day now.

Is it any surprise that our cities are growing up and getting smarter? Particularly when we measure the number of connected devices; Gartner estimates that 3.3 billion connected ‘Things’ will be in place in smart cities by the end of 2018, about 190% growth from 2015. The United Nations estimates that 6.6 billion people (or 66% of all people) will live in cities by 2050, which makes it likely that these trends will continue for quite some time.

But what makes a city smart? And while we’re on the topic, what is a smart city, anyway? Is it a city with lots of sensors? Or is it a city with lots of new services based on sensor and geolocation data? Is it a place with the potential for spontaneity, discovery, and easy socializing? Or is it a city with democratic grassroots participation in city governance? Is it, perhaps, a city where all of the above holds true and more?

Let's put these questions on hold for a minute.

For now, let’s take a step back and make the obvious point that the information technology underlying a city has evolved immensely over the past few decades. As Anthony Townsend so well describes in his vision of smart cities[1], there has always been a symbiotic relationship between cities and information processing. Writing was invented, in good part, to keep track of commerce and governance in the cities that emerged in the Middle East and elsewhere some six thousand years ago. Later we learned how to communicate over long distances, first via carrier pigeons, then by the telegraph, and later with landline telephones, and later again over radio frequencies.

Cities of all sizes generate immense amounts of data every instant, and the amount of the data will increase substantially as sensor and communication technology evolves. We continuously and effortlessly exchange data with each other and with the various support systems around us in the city. We process and refine the data into information that helps us make decisions, access services, or simply navigate our urban environment. The means of communication and calculation already exist in our smartphones, communication protocols, sensor hardware, affordable communication bandwidth, and social media networks.

From the 1950’s onwards, cities were built around cars; now smart cities are being built around data and information. The important issues relate to what data is available, who owns it, who controls it, who extracts the value in the data, and perhaps most importantly, how do we enable the data to work for the common good in making cities smart?

So again, let’s ask ourselves, what makes a city smart? In my mind, a smart city is much more than an area of urban habitation with lots of hardware, transportation, communications, and other infrastructure in place. A city is a place where people of all ages and from all walks of life play, work, socialize, buy goods and services, educate themselves, raise families, and access arts, sports, entertainment and culture in its many forms and in close proximity to each other. Indeed, most of the good things that cities offer could not exist without the sufficient mass of people, concentrated buying power, and technology.

These days cities are becoming increasingly open to the concept of sharing. Starting with Airbnb, now we share cars, rides, and bicycles, even basketballs and handbags can also be shared, at least in China.

The obvious next step is to share data, and all the better if you can monetize data in the same way that you can monetize your spare bedroom or the spare handbag. As with physical items or habitable spaces, sharing works best in places where there's lots of supply, think of sensor and device data, and lots of demand, companies, and individuals who want to create or access new services.

As with any good or commodity, sharing data is based on trust. You need confidence that the data is shared on your terms, and that you will be duly rewarded. In a smart city with millions of citizens, companies, and connected devices, you typically do not know the person -- or more often a machine or a piece of software -- that you share your data with. But there is a solution to the trust problem. The raison d'être of the blockchain is to provide a protocol for trustless transactions. You do not need to trust the counterparty when you share your data. You can effectively tokenize an item of data (or a sequence of data points), and be assured that you get paid.

There is another good reason why sharing and decentralization are important. Cities are messy, disorganized, dynamic and collaborative networks of people. We are naturally a sociable species, and never more so than in vibrant cities. And a top-down approach to creating smart cities will not work. You need innovation and experimentation, and you won't get there without disruptive startups, eager developers, bold entrepreneurs and technically fluent tinkerers. The energy will bubble from the bottom up. City governments can help in providing infrastructure, access to open data, and incentives for innovation and collaboration, but creating and sustaining the community is vital.

Finally, you need decentralization to make a smart city robust and resilient. When you engage in pilot projects on a limited scale, a centralized or cloud-based solution probably works just fine. But with the coming ubiquity of sensors and connected devices, the technological challenges in coping with immense data volumes and bandwidth requirements will increase by orders of magnitude. A city can be smart but extremely fragile. The more centralized communication networks, electricity and power generation and distribution are, the more vulnerable a city is to sabotage, cyber attacks, and physical interference. This is why things like mesh networks and peer-to-peer communication protocols will emerge, with the capability to automatically reroute data flows and to gracefully survive and recover if any part of the network goes down.

While decentralization is the key, there is still a big role for the industry in all of this. Having the right technology is crucial, be it sensor or communications hardware, networking devices, or software protocols. And often you simply need the sheer corporate manpower in building and maintaining platforms, software, and hardware. But tech alone will not make cities smart; it’s imperative that ‘the smartness’ grows organically. The progress is messy, mistakes will be made, code is open source, and ideas will be shared.

In the end, smart cities provide a huge business opportunity -- let's not muck it up. Let's admit that data and computational power are no longer in the control of Google, Microsoft, Apple, and other big enterprises and cloud service providers. The emergence of the blockchain and programmable money -- Ethereum, in other words -- has shown that there's another way of establishing trust and of harnessing the power of decentralized computation, decentralized data, and the urban tech community. We cannot have truly smart cities until we have truly decentralized data infrastructure in place.

[1]REF: Anthony Townsend, “Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia”, W. W. Norton & Company, Inc., 2013

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.