Reasons Behind the Failure of Many Crypto Cities

Despite numerous initiatives to create “crypto cities” relying on blockchain technology, most efforts have not succeeded, and crypto leaders believe they understand the reasons behind these failures.

A notable recent project was Akon City, envisioned by Senegalese-American artist Akon. Announced in 2018, it aimed to be a $6 billion smart city with a cryptocurrency-based economy, but was officially scrapped in July.

Satoshi Island, a venture launched in 2021 to purchase an entire island near Vanuatu, aimed to establish a community for crypto professionals in a blockchain-based economy. Its last update was in July, with ongoing efforts to set up essential services and secure licensing agreements with island stakeholders.

There were once ambitious plans to develop a blockchain-powered city called Puertopia at the Roosevelt Roads Naval Base in Ceiba, announced in 2018, but there have been no significant updates for years.

Crypto cities are tackling the wrong issues

In an interview with Cointelegraph, Ari Redbord, global head of policy and government affairs at blockchain intelligence firm TRM Labs, pointed out that many crypto city experiments fail due to their focus on unrealistic goals.

Several projects envision constructing an entire city from the ground up that relies on a blockchain economy, funded by tokens, and fully self-sufficient from the broader society.

Redbord argued that a more viable opportunity lies in updating existing economies—incorporating artificial intelligence to analyze risks, detect fraud, promote smarter decision-making, and using blockchains to provide a trust framework that guarantees transparency and accountability.

“The concept of a crypto city is already being realized. It’s about enhancing our current systems. As institutional adoption increases and governments establish clearer rules, the financial infrastructure is transitioning on-chain,” he stated.

“Every city will evolve into a crypto city, driven not by ideology but by technology — creating faster, safer, and more transparent methods for transferring value.”

A purely crypto city is feasible but difficult

Kadan Stadelmann, chief technology officer of the blockchain platform Komodo, explained to Cointelegraph that self-governing cities utilizing cryptographic and decentralized systems could exist in unregulated areas, like international waters.

Success, he believes, hinges on employing blockchain to ensure transparency, security, and flexibility across various sectors, including energy and food.

This would necessitate deep commitment and a unified vision from residents who must be prepared to forgo modern conveniences until full implementation is achieved.

However, such initiatives would face additional challenges, including governmental attempts to impose taxes and enforce local laws, and they could also be vulnerable to external threats.

“Even if someone acquires an island, how would they respond if pirates arrive? There’s no police force or military on the island. There’s no hospital, either. A sovereign city significantly amplifies these risks,” Stadelmann remarked.

“The vast resources of crypto might be better utilized to enhance the world we already inhabit.”

A better approach: Special crypto zones within modern cities

Vladislav Ginzburg, founder and CEO of blockchain infrastructure platform OneSource, conveyed to Cointelegraph that developing a modern city-state like Dubai with governmental support would be a more feasible option than building anew.