Reasons Behind the Failure of Most Crypto Cities

Numerous attempts have emerged over the years to create “crypto cities” — unique zones that utilize blockchain technology — yet most of these initiatives have not succeeded, and crypto leaders believe they understand the reasons behind this.

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

Satoshi Island, a venture aimed at acquiring an entire island near Vanuatu, launched in 2021 with hopes of building a home for crypto professionals within a blockchain ecosystem. Its latest update was in July, revealing ongoing efforts to establish essential services and secure its licensing agreement with the island’s stakeholders.

There were also ambitious plans for a blockchain city named Puertopia at the Roosevelt Roads Naval Base in Ceiba, announced in 2018. However, there have been no significant updates for years.

Crypto cities are solving the wrong problems

Ari Redbord, the global head of policy and government affairs at blockchain intelligence firm TRM Labs, shared with Cointelegraph that many crypto city projects fail due to their focus on unattainable objectives.

Many crypto city endeavors aim to construct an entire urban area from scratch that operates on a blockchain-based economy, funded through tokens, and remains entirely independent from broader societal structures.

However, Redbord argued that a more promising approach would be modernizing existing economies — incorporating artificial intelligence to assess risk, detect fraud, enhance decision-making, and utilizing blockchains to offer the transparency and accountability that people need.

“The concept of a crypto city is already materializing. It revolves around improving the systems we currently depend on. As institutional adoption increases and governments formulate clearer regulations, the world’s financial infrastructure is transitioning onchain,” he stated.

“Every city will become a crypto city, not through ideology but through technology — faster, safer, and more transparent rails for moving value.”

A pure crypto city possible, but challenging

Kadan Stadelmann, the chief technology officer of the blockchain platform Komodo, expressed to Cointelegraph that self-governed cities powered by cryptographic and decentralized systems could materialize in unregulated territories, like international waters.

For success, he posited that blockchain must ensure transparency, security, and adaptability across various sectors, including energy and food.

Moreover, it would necessitate extreme commitment and a centralized vision among the inhabitants, who would need to willingly forgo modern comforts until full implementation.

However, this approach also presents risks, such as challenges from governments seeking taxes and enforcing local laws, and it might leave such territories vulnerable to various threats.

“Even if someone acquires an island, what can they do if a group of pirates shows up? There are no police or military on that island. There’s no hospital either. A sovereign city amplifies these risks significantly,” Stadelmann remarked.

“It could be that crypto’s vast resources are best used to improve the world we’ve already got.”

Better idea: Special crypto zone in a modern city

Vladislav Ginzburg, founder and CEO of the blockchain infrastructure platform OneSource, mentioned to Cointelegraph that a modern city-state like Dubai with government support would be a more feasible option than starting anew.