While the World Cup is well underway and soccer fans are rooting for their team’s global dominance, there’s a different but equally thrilling competition afoot: the race to reinvent the internet as we know it.
Blockchain is the most disruptive technology since the creation of the World Wide Web. By creating an immutable, decentralized ledger upon which we can transact things of value without the need for intermediaries, it’s created nothing less than the second era of the internet.
But in order for it to take hold, it needs to solve a particular set of big, hairy problems. The first teams to overcome these hurdles—scalability, interoperability, user interfaces, energy consumption, and more—will walk away with much more than bragging rights and considerable riches: They’ll win control of the new digital economy.
In the updated edition of Blockchain Revolution released this month, we offered our analysis of the conditions under which a city or region could take leadership in this race, as Silicon Valley did in the first era of the internet. Here, we have ranked cities by their readiness to transform their economies and lead this technological revolution.
To qualify for this list, regions have to be more than tax havens for the crypto rich. They have to be networked hotbeds of blockchain innovation; have regulatory clarity on use of cryptocurrencies and ICOs (“initial coin offerings,” the crypto world’s equivalent of an IPO); participation from banks and incumbent financial services; corporate and private venture funding; favorable immigration policies; strong higher education; robust energy and internet infrastructure; and enforcement of human rights and rule of law.
Even though that’s quite a list of qualifying factors, it’s a tight race to secure a slot on the blockchain podium.
The sheer scale of the Chinese market lends itself well to blockchain innovation. With such grand initiatives as One Belt One Road, China is dominating the crypto world in spite of its draconian ban of ICOs, closure of crypto exchanges, and its lack of regulatory clarity and oversight.
Still, both government and enterprise in Shanghai have taken to blockchain, with billions going to research and development. Newcomers to the start-up community include Energo Labs, Genaro, VeChain, Viewfin, and ZerOne.IO. Even minor tweaks to China’s regulatory environment would put two or three additional tier-one cities on the top 10.
Japan’s position as a major innovator is not changing anytime soon. However, the Japanese government’s heavy-handed regulatory measures have restricted its blockchain and crypto sectors. If regulators loosen their grip—as they did in issuing licenses to several cryptoexchanges—then blockchain innovation could foster much-needed growth in Japan’s struggling economy.
Most large Japanese firms are over a hundred years old, and few digital conglomerates emerged from Japan during the internet boom, as Alibaba and Tencent did from China. Blockchain presents another kick at the can, and the metropolitan government launched its “Blockchain Business Camp Tokyo” accelerator program to attract foreign start-ups to the city. But in order to advance to the next round, Japan will have to lower the hurdles to entrepreneurialism created by its restrictive immigration system.
The UK boasts 16.7% of all start-up activity, second only to the US. As an international center of commerce and banking, and home to such pioneers as Blockchain.com, London has become a particularly fertile ground for fintech, with regulatory sandboxes for blockchain start-ups in the space. One of the key applications for blockchain—identity management—has become a priority for the British government as it attempts to combat the country’s high rate of identity theft.
On the downside, Brexit will have a profound impact on the community of available talent, and smart leaders in mainland Europe will be looking to capitalize on this disruption.
The Korean public’s roaring enthusiasm for blockchain factors into Seoul’s position on this list. The demand for cryptocurrencies even resulted in a bitcoin price gap known as the “kimchi premium,” and the mayor announced plans to create Seoul’s own cryptocurrency.
A hub for crypto innovation, the city is collaborating with Samsung to develop blockchain solutions for delivering public services. Companies like ICON in enterprise blockchain networks and Zikto in health care are leading efforts to clear some of the higher hurdles to widespread blockchain adoption. Even though ham-fisted efforts to ban ICOs and regulate crypto in Korea have stymied the rapid pace of innovation, we see signs of a more measured approach on the horizon.
None other than Chinese president Xi Jinping recently praised blockchain as having “10 times” the disruptive potential of the internet. The Chinese government appears to see blockchain as an enormous opportunity to improve its infrastructure, reduce tax fraud, and manage its national identity system—though its efforts to create a social credit score for each citizen are Orwellian.
Even so, the opportunities for blockchain to bring transparency to China’s significant gray markets are notable. E-commerce giant JD.com, which is pushing for supply-chain transparency, is launching an accelerator for artificial intelligence and blockchain start-ups such as Bluzelle, CanYa, and Republic Protocol, and Wanda Group joined Hyperledger as its first premier member in China.
5. Toronto-Waterloo corridor
Thanks to its talent pool and start-up ecosystem, Toronto is having its moment in the world spotlight. With arguably the best immigration system and the highest post-secondary education attainment rate of cities on this list, the corridor boasts of an amazing network of tech accelerators and incubators such as MaRS, OneEleven, and Ryerson University’s DMZ. Toronto is home to leading start-ups like Aion, Decentral, Paycase, Polymath, and Shyft.
The Canadian government supports innovation, but largely as a means of transitioning from a purely resource-based economy. Funding goes more to artificial intelligence and quantum computing than to the distributed ledger platforms on which AI and the Internet of Things could run. With a few tweaks to the regulatory environment and more support, Toronto could improve its ranking.
American regulations on private bank accounts bled Switzerland dry for a number of years. In blockchain, Swiss bankers and government officials saw a cure for the country’s financial anemia. The result was the most open and supportive blockchain and crypto regulatory environment in the world.
Near the capital of Zurich, Zug’s “Crypto Valley” has emerged as a hotbed of innovation in the ecosystem. Home to members of the Ethereum development team and start-ups such as Bitcoin Suisse, Shapeshift, and Tezos, Crypto Valley now hosts many of Europe’s largest blockchain and crypto conferences.
More recently, Switzerland’s financial-market supervisory authority has been somewhat tougher on token sales. However, the ministries of education and finance have formed a taskforce to fortify the country’s standing as a global leader in blockchain technology.
3. Silicon Valley
For many in the cryptocurrency community, one of the more exciting prospects of blockchain technology is its ability to disrupt the tech hegemony of Silicon Valley. In particular, blockchain threatens to disrupt those digital conglomerates in the business of collecting and monetizing other people’s data for free.
However, the vast community of talent, network of private capital, and booming start-up culture have made Silicon Valley a leader in the second era of the internet as well as the first. The region is home to some of the giants of the blockchain industry, including Ripple, Coinbase, and the Hyperledger Foundation. Still, the Valley’s ironclad grip on the tech sector may be loosening. We shall see!
While Russians and Canadians wrestle to claim Vitalik Buterin as their own, the wunderkind behind Ethereum has hung his hat in Singapore—a global model for forward-thinking policies and an emerging leader in entrepreneurialism and innovation. Its government has regulated cryptocurrency with a deft hand and created blockchain research networks within its post-secondary institutions.
Its monetary authority partnered with the R3 consortium to test inter-bank payments on a blockchain platform. Singapore’s access to Asian markets and the region’s rapidly growing middle class more than makes up for its relatively small population, and we expect continued growth in the city-state’s blockchain ecosystem.
1. New York City
Given that the first blockchain was a peer-to-peer cash system, no one should be surprised by New York’s leadership in blockchain innovation and enterprise adoption. Wall Street may be bearish about cryptocurrencies, but many of the big banks are heavily invested themselves. The efficiencies to be gained in global payments have proven enticing.
The Big Apple is also home to some of the leading innovators in the blockchain space, from Blockstack and the Winklevosses’s Gemini to ConsenSys and L03 in distributed energy grids. uPort is working on one of blockchain’s most important applications: the self-sovereign digital identity, owned by an individual, not by a digital conglomerate or social media company. In this way, the city is reinventing media, advertising, and the creative industries through blockchain technology.
In such a nascent, rapidly growing industry, we can safely say that this list will look different in a year or even a month—nonetheless the next time the World Cup rolls around in 2022. We therefore welcome your views.
For more information on the ranking criteria and scoring system, please visit here.
This article is part of Quartz Ideas, our home for bold arguments and big thinkers.