Page 24 - U4SSC Blockchain for smart sustainable cities

Blockchain technology still faces several challenges. The most cited and discussed challenge is the high
level of energy consumption. The proof-of-work consensus algorithm has proven to be a critical component
in establishing trust in the Bitcoin network. However, managing data via blockchain can be an energy-
intensive process. Data contained in a PoW blockchain exist in many copies. The computational resources
required to calculate, transmit, store and update information typically grow in proportion to its size. The
more participants there are in a blockchain, the more energy it consumes. As a result, this mining process
encourages a large number of computer rigs to be connected to the network at all times, in order to
maximize the chance of obtaining the reward from successful mining. In 2019, the energy consumption
of cryptocurrency was estimated to be 73.17 TWh, which is comparable to the power consumption of
Austria. Another energy-related issue is the energy source that is being used to power blockchain activities.
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It is a well-known fact that coal-fired power generation is the single largest source of carbon emissions. If
blockchain is to be scaled up for city and community applications, it must be made more efficient and less
energy-intensive. One way to do it is to switch to using renewable energy to power the blockchain.

While energy consumption is one of the significant barriers to large deployments, a wide range of technical
and legal barriers hinder a broader application and scale-up. Blockchain interfaces are too complex and
inconsistent for mainstream adoption. The user interface is designed differently depending on the capability
and purpose of the blockchain. Without a standardized interface, citizens would have to learn and relearn
how to operate each blockchain application individually. This poses a significant challenge for cities and
communities considering the development and delivery of blockchain-based social services.

Blockchain performance is also relatively weak and costly. The data of every block must be replicated in
every node for every transaction, which is a time-consuming and energy-intensive process (particularly in
the case of PoW). Therefore, blockchain does not scale well with applications that require a large volume
of metadata to operate, which would include the majority of city services.

There is a lack of interoperability and regulation in blockchain applications. Many blockchain networks exist
in many different formats. As more participants are looking into leveraging blockchain for different purposes,
a diverse set of blockchain projects has emerged. Each of these projects uses different terminologies, coding
languages, consensus algorithms and privacy measures. There is currently no standard that would enable
them to interact with one another, and with other existing applications or digital platforms.

In order to fully harness the potential of blockchain for cities and communities, a new study that focuses
on blockchain’s operational and energy efficiency is required. International groups such as the Focus Group
on Artificial Intelligence and other Emerging Technologies (FG-AI4EE) have already taken the first step to
identifying the environmental requirements of blockchain. Established in May 2020, ITU-T Study Group 20
on IoT and Smart Cities and Communities (SG20), focuses on the development of standards that leverage
IoT to address urban challenges in the 20th century. As a part of the work carried out by SG20, it has
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approved several standards on end-to-end architectures for IoT, the interoperability of IoT applications
and management of datasets across different verticals in the IoT ecosystem. More recently, it has also
initiated standardization work on blockchain within the IoT domain. In this context, SG20 has developed
one standard on “Framework of blockchain of things as decentralized service platform” and is working on
six additional standards (blockchain-based IoT communication architecture, blockchain framework for IoT,
blockchain-based data management, blockchain-based data exchange, blockchain for data processing and
management, and reference architecture of blockchain-based unified KPI data management).

14 U4SSC: Blockchain for smart sustainable cities