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Could blockchain run a city state? Inside Dubai's blockchain-powered future

Plans are taking shape to transform the city and emirate of Dubai into the first blockchain-based government.

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Earlier this year, Dubai announced its intention to turn itself into the first blockchain-powered government in the world by 2020.

These ambitions are part of the emirate's goal of becoming a global business hub, with next-generation technology playing a key role in delivering this vision.

Guide to smart cities in the Arabian Gulf: Why this is a region to watch

With urbanization well above the global average, a young tech-savvy population and a raft of major infrastructure projects, the Gulf region is helping pioneer the smart city model.

Although most blockchain initiatives are still in their early phases, Gartner's annual Hype Cycle for Emerging Technologies report, predicts that in the "long-term... this technology will lead to a reformation of whole industries".

It's an optimism that has spread to multiple businesses, governments and entrepreneurs in Dubai.

In 2016, more than 30 government entities and international companies came together to launch the Global Blockchain Council.

Its members later announced various proof-of-concept projects, covering everything from health records and shipping, to business registrations and efforts to use blockchain technology to try and reduce the spread of conflict diamonds.

Smart secure government

A key reason for adopting blockchain, argues Ahmed Adly, senior cloud computing director at Oracle, is the technology's ability to keep data secure and optimize business decisions.

"By securing data, blockchain can reduce costs associated with fraud, compliance and financial reporting. It also adds an extra level of security for banking, medical records, ownership records, invoices and other assets that contain sensitive information," he tells ZDNet.

Based on distributed ledger technology, blockchain is a framework for sharing, replicating and updating data on a network that comprises thousands of devices, he says.

"It can keep data secure, visible, trackable and tamper-proof, and enables real-time transactions across multiple parties."

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Security aside, other benefits potentially unlocked by this platform include speed and other efficiencies.

According to Smart Dubai, a government entity charged with exploiting smart technologies to "empower, delivery and promote an efficient, seamless, safe and impactful city experience for residents and visitors", Dubai's blockchain strategy could save 25.1 million man hours, akin to 5.5bn dirhams, or $1.5bn, in savings per year.

Much of this enhanced productivity will stem from moving to paperless government, with electronic document processing removing around 100 million paper transactions a year.

"In the next few years, we'll see blockchain reform areas of business such as transactions, value storing, contracting, data management, security, communications and more," Adly predicts.

Blockchain opportunities

ArabianChain Technology CEO Mohammed Alsehli says the blockchain strategy fits with the emirate's goal of becoming a global leader in the smart economy, fueling entrepreneurship and competitiveness.

Founded by Alsehli and Walid Messaoudi in February 2016, ArabianChain, aims "to revolutionize how governments, businesses and people perceive and deal with economy, e-services and digital transformation by leading the way in entrepreneurial thinking and innovation in blockchain technology."

Alsehli's company, which has operations in UAE, Saudi Arabia and Kuwait, recently raised 3m dirhams ($820,000) in capital to support its expansion.

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According the coinmarketcap.com, the market cap for all the crypto currencies and digital assets in 2013 was $1bn, where today it stands at about $94bn, he tells ZDNet.

"That's a tremendous increase in a four-year span. This gives you a glimpse of the rate of adoption and how soon the technology will become commonplace," he says.

Big companies are well aware of its capabilities, and many governments already have a roadmap to meet their objectives through blockchain, according to Alsehli.

Blockchain challenges

But this phenomenal growth presents challenges. Oracle's Ahmed Adly says because the region has only recently adopted blockchain, it still lacks infrastructure to support all the technology's functions.

"Applications such as Internet of Things (IoT) and financial transactions need faster transaction rates that the current infrastructure cannot completely provide," he says.

Blockchain also needs to grow in terms of scalability, privacy and confidentiality.

"We're working toward addressing these challenges to accelerate blockchain's enterprise adoption," he says.

With Dubai home to some of the most advanced technological infrastructure in the world, these concerns are less of an issue for ArabianChain Technology's Mohammed Alsehli, who believes "from an infrastructure point of view, organizations in the MENA region will not require a huge difference in the current infrastructure for blockchain".

What's more pressing, from Alshehli's perspective, is that, with blockchain in its early stages of adoption, there's a lack of the technical skills.

"It will surely take time to build up that knowledge and this will happen when we experiment with the technology," he says.

Moving forward

Adoption of blockchain technology by multiple sectors is essential if it's to be a success.

Oracle's Ahmed Adly says it's imperative that private and public sectors work together to make blockchain the norm.

ArabianChain Technology's Alsehli urges both sectors to "prioritize the services that can be enhanced by the application of this technology".

One reason why this type of partnership is potentially well placed to succeed, Adly suggests, can be found in the way "blockchain can streamline transactions, supply-chain management, and manufacturing. Its distributed network would allow real-time transactions between the two sectors".

Dubai is home to some of the most advanced technological infrastructure in the world.

Image: beatrice preve, Getty Images/iStockphoto

The future

For Alsehli, the nascent nature of this technology presents an opportunity.

"ArabianChain is the first company in the region to develop a public and decentralized platform for smart contracts on Blockchain," he says.

Its next step is launching a digital-asset trading platform in the coming months. It's called Thuraya and is probably the first smart contracts program to harness Arabic.

"By launching this platform, we aim to offer users a reliable experience and eliminate the monopoly in the market, increasing competition and supporting innovation," he says.

"For the long term, our goal is to ensure a smooth transition of Islamic banking solutions and government services to blockchain, in addition to maintaining an impressive list of clients."

Much of Oracle's focus, Ahmed Adly says, involves using blockchain technology to help underpin the continued growth of the Internet of Things.

"Blockchain as a platform could safeguard against one of IoT's biggest threats -- security," he says. "It would also allow IoT devices to participate in business transactions and interconnect in a reliable manner."

The company is also in talks to join Hyperledger, an industry-wide open-source initiative to advance blockchain technology, governed by The Linux Foundation.

"As blockchain adoption increases, we hope to make it a cloud service to benefit's businesses in the Middle East," Adly says.

With native platforms, bold government targets and major multi-nationals all actively working in this space, it's clear that Dubai's blockchain aspirations are being taken seriously. As a result, Dubai's blockchain plans, while still embryonic, may well come to fruition sooner than you might think.

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