A narrative has taken root in the realm of blockchain technology, one that champions the gradual transition from centralized control to a decentralized future. Yet this story, often recited by those at the helm, overlooks a fundamental truth about power: Once seized, it is rarely surrendered without a struggle.

This belief that a centralized beginning can smoothly transition to a decentralized ethos is more myth than reality, akin to convincing a child to relinquish their tight grasp on a coveted sweet. The intention here isn’t to cast venture capitalists or early stakeholders as adversaries — it’s to advocate for a balance, for fairness that underpins the very foundation of blockchain.

I often hear, “We will start out centralized, and we will become more decentralized later.” But I believe this is nonsense!

One of the hardest things to give up is power. This notion is vividly illustrated by the French Revolution, a historical event that epitomizes the struggle to redistribute power from an entrenched monarchy to a democratic governance structure.

Despite the promise of liberty, equality and fraternity, the revolution faced immense resistance from those unwilling to cede control, leading to a turbulent period of conflict and transformation. This historical episode serves as a poignant reminder that once power is acquired, relinquishing it is a far more formidable challenge than many anticipate.

The illusion of control

As blockchain ventures flourish, the grip of those in control tightens, with early investors and builders basking in the success their influence has wrought.

Conversely, during tumultuous times, these same figures embark on campaigns of reassurance, painting over cracks while strategically planning their exits. This stark duality reveals a profound flaw in the prevalent “centralize now, decentralize later” mantra, significantly underestimating the seductive allure of power and the inherent challenges in relinquishing it once established.

The promise of distributed authority is at the heart of the blockchain revolution. The reimagining of governance where innovation serves not just the circulation of capital, but empowers and amplifies a multitude of voices (not just those traditionally heard in the corridors of wealth). Yet, a troubling reality overshadows this ideal: A staggering concentration of over 80% of blockchain assets in the hands of a mere 1% of wallets.

Regardless of whether these assets make up projects that aim to fully decentralize or not, the fact of the matter is that early stakeholders and VCs often hold the largest piece of the pie for new blockchains simply because they come in first, when it’s riskiest.

This imbalance transcends mere issues of fairness, striking at the very viability of blockchains as engines of innovation and inclusivity.

It’s a travesty that the vast majority of value creation does not come from this 1%, underscoring a critical disconnect. Those who contribute the most to the ecosystem often have the least say in its direction and the smallest share in its success — those early VCs holding all the tokens do provide impact with their initial investments, but their participation usually stops there. And because the protocol’s governance is based on the ownership of the token, the new builders don’t have the weight to make major decisions by the major token holders.

This stark discrepancy isn’t just unfair; it’s fundamentally counterproductive, eroding the incentive for innovators, developers and community members to pour their energy and creativity into the ecosystem.

By sidelining the very individuals who are the lifeblood of innovation, blockchain ecosystems risk stagnating, as the centralized accumulation of benefits stifles the diverse input and collaboration essential for breakthroughs and resilience.

Such a structure threatens the long-term sustainability and incentive for valuable contributors to remain engaged and invested in these projects. The long-term viability of blockchain technology depends on its ability to foster a genuinely inclusive environment where contributions are recognized and rewarded appropriately, ensuring that all participants have a stake in the ecosystem’s success.

It’s time to start again

Where do we go from here?

I believe that many of the first-generation blockchains, the foundational layers that have been the bedrock of the industry, have veered too far off course. Their structures have solidified around centralization to a point where a return to true decentralization might no longer be feasible.

This isn’t to say they’re doomed for failure; far from it. The potential of blockchain technology is vast, its future inherently multichain, promising a landscape rich with diverse and interconnected networks.

However, we need to start afresh if we want to harness this potential fully. This proposition might seem daunting, yet considering the broader timeline of technological evolution, we’re still in the nascent stages of blockchain development.

The beauty of this space is its foundation in open source principles. Almost all blockchain technologies are open to being studied, modified and repurposed. This openness paves the way for new projects to emerge — i.e, reboots of existing chains, each carrying a distinct mission and fostering a unique culture.

Embarking on this path isn’t merely about technological innovation; it’s about reimagining the ethos that guides blockchain development. By initiating new projects with decentralization as a core principle, we stand a chance to correct the course.

This approach doesn’t merely replicate what came before, but builds upon it, learning from past missteps to create blockchains that are truly from the people, by the people and for the people.

To visualize the potential paths of blockchain, consider two atomic reactions: fusion and fission. A blockchain driven by a diverse, invested community is akin to a fusion reactor. It’s efficient, sustainable and produces a continuous outflow of energy. This model represents a decentralized ecosystem where power and rewards are evenly spread, fostering innovation and participation from all stakeholders. The result is a robust and vibrant network, capable of long-term growth and adaptation.

In contrast, a network dominated by a few mirrors the principles of a fission bomb: initially powerful, but ultimately leading to destruction. This reflects a centralized blockchain ecosystem, where concentrated power leads to rapid gains that are not sustainable over time. Such a structure can stifle innovation and lead to a fragile system, prone to collapse.

This analogy underlines the crucial choice blockchain faces between sustainable growth and short-term gains, emphasizing the need for a decentralized approach to ensure the technology’s long-term viability and success.

Decentralization as a starting point, not just a distant dream

Decentralization must be the cornerstone, not a mere aspiration, of blockchain’s journey. It’s about democratizing power, fostering a community where everyone’s voice matters and every contribution is valued from the outset.

At this pivotal juncture, the trajectory of blockchain hinges on our resolve to anchor it in decentralization from the very beginning. By prioritizing decentralization as our foundational principle, we chart a course toward a future where blockchain serves as a bedrock for equitable growth and democratic engagement.

Let’s seize this opportunity to redefine the landscape, ensuring blockchain remains a tool for empowering the many, not just the few. In doing so, we not only realize the full potential of blockchain technology but also contribute to the creation of a fairer, more inclusive world.

This is not just the path to technological innovation, but a step towards a more equitable and collaborative ecosystem.

We are still early.

But while governments may have good intentions, ambiguous efforts to enable innovative blockchain solutions frequently miss the mark — leading to unintended consequences and attracting fraudulent actors.

Over the last five years, several governments around the world have announced the creation of “New Cities.” Many of these cities will supposedly feature blockchain; but for the most part, details remain vague.

The nonprofit Charter Cities Institute published a detailed map illustrating the proliferation of New Cities earlier this year. This map reveals that more than 45 New Cities are under construction, mostly in the Middle East, Africa, and Southeast Asia, with a total development budget hovering around $6 trillion.

There are definitely clear-cut cases where adopting blockchain technology would improve urbanization; property registries come to mind as the perfect example. 

But many of these city development projects are using blockchain and cryptocurrencies as buzzwords rather than a solution to hype up and lure investors without needing to deliver anything.

Governments may harbor the belief that they can create fertile grounds for innovation by establishing blockchain spaces. But instead of fostering genuine progress, these initiatives often become hotspots for fraudsters wielding blockchain technology as their shield.

Aimlessly waving the blockchain flag

New cities in Saudi Arabia, Egypt and Indonesia highlight the inconsistencies of governments promising to deliver on blockchain and then failing to do so in any tangible way: Perhaps they don’t even know how.

NEOM in Saudi Arabia is the new city with probably the most global attention right now.

With massive funding — totaling $1 trillion from the country’s sovereign wealth fund and additional private capital — NEOM was touted as the next big thing in crypto. NFT websites widely reported on the announcement of NEOM’s $6.4 billion tech fund, stoking community hopes that it would invest in NFTs. Middle Eastern news outlets picked up on this, publishing headlines such as “Saudi Arabia to invest billions in metaverse, blockchain technology.” Arab News rhetorically asked “Will Saudi Arabia become a true trailblazer for blockchain innovation?” YouTubers began using this as evidence that Saudi Arabia, which outright banned cryptocurrencies from banks in 2018, was about to reverse its stance.

My own conferences and events — which attract a crowd with a foot in both New Cities and crypto — began getting flooded with questions about NEOM’s use of these technologies.

Despite this, the city has only confirmed a single blockchain platform, cybersecurity platform Arqit, leaving much of its early expectations shrouded in mystery. NEOM has two dedicated tech venture capital funds, Neom Tech & Digital and Tonomus, but it has yet to disclose any investments related to blockchain as of July 2023, despite targeted investment sectors in virtual and augmented reality, robotics and data analytics.

The significant press attention has spawned dozens of scam-coins that attempted to use NEOM’s name to pump and dump worthless tokens.

NEOM’s official website has warned and emphasized that it has no association with third-party claims of a NEOM cryptocurrency, nor does it intend to offer any at this time. They also confusingly say that NEOM is currently investing in blockchain technology to “power the development of its city” — despite no sign of these investments.

This planning discrepancy between blockchain promises and realities is a recurring theme in these new cities. 

Egypt’s “New Administrative Capital” (NAC) — about 45 kilometers east of Cairo — aims to be an environmentally friendly, high-tech smart city. And Egypt is a country that desperately needs blockchain and cryptocurrency.

For example, one of Egypt’s largest real estate developers told the press that Egypt’s lack of a clear property rights registry would be a major barrier to developing Egypt’s NAC, instead suggesting that the government create a blockchain-powered registry.

The government has responded by taking a schizophrenic stance on whether or not it will deploy blockchain for its new Administrative Capital.

The Egyptian Ministry of Communications and Information Technology announced vague plans explaining that the government will use technologies such as blockchain register property, track carbon, and digitize banking by 2030. Likewise, the US State Department confirmed that the Egyptian Financial Regulatory Authority will regulate how banks use blockchain.

In both instances, few other details have been revealed.

More significantly, the government has helped fund Nile University’s blockchain accelerator — the first blockchain tech accelerator in Egypt. This accelerator explicitly focuses on smart cities, supply chain, and Internet of Things applications, but will not fund any tokenized projects.

Paradoxically, Egypt’s top Islamic scholars have declared cryptocurrencies as “haram.” Since 2018, cryptocurrency has been mostly banned in Egypt. The Egyptian government again strengthened its prohibition in September 2022. This simultaneous push-and-pull approach is counterintuitive.

In Indonesia, Jakarta faces the risk of severe flooding due to climate change — so the government announced a plan to build a new capital city called Nusantara. Nusantara promotes itself as an eco-city, following the UN’s Sustainable Development Goals and plans to build much of its structure on the blockchain.

President Joko Widodo expressed interest in attracting digital nomads and millennials who would use cryptocurrency to purchase stylish apartments in the city, in addition to creating a parallel city in the metaverse which is to feature “land tokenization.” Several unofficial cryptocurrencies and blockchain projects have appeared to facilitate this transition, and at least one has genuine government support.

However, the Indonesian government’s historical inconsistency with blockchain is evident, with a ban on regulated financial firms trading cryptocurrencies, which was followed by state-owned enterprises pushing for the digitalization of banking services and the adoption of cryptocurrency.

This chaotic attitude is further highlighted when police in Bali arrested a small business owner for accepting cryptocurrencies, despite Indonesia having one of the highest cryptocurrency penetration rates in the world, with 17 million Indonesians owning cryptocurrencies.

Fostering genuine innovation

The surest indicator of a bad investment is hype. The more hyped-up a project is, the less likely it is to succeed. By contrast, the least hyped-up projects (or those most grounded in reality) often do the best in the long term.

Prioritizing buzzwords undermines the credibility of real-world applications of blockchain technology in urban development, of which there are many. From securing and decentralizing data sharing across sectors such as property, transport or energy; to facilitating blockchain to be used by local businesses and banking institutions. 

It is crucial to prioritize practicality and tangible results over hype and vague promises.

Innovation arising from New Cities comes from the people within them; when the government accepts that they are merely a catalyst, and not the innovation itself.