Berkeley, California has a long history of getting ahead on social movements. The city's latest idea would capitalize — literally — on the wild popularity of blockchain technology by using it to raise funds for public projects. The plan would essentially allow people to make city investments on the blockchain.
According to MIT Technology Review, the idea comes from Berkeley city council member Ben Bartlett, who wants to create an "initial community offering" that would allow investors to purchase municipal bonds secured by a blockchain-based, smart-contract system.
Municipal bonds work much like other bonds — in practical terms, you loan the bond issuer a chunk of money in the form of a bond, and the issuer then pays you interest until the bond matures and you get back the money you loaned. In this case, your loan would go towards projects like building schools or updating city infrastructure.
Bartlett wants to change the current system for issuing municipal bonds, which is already a $3.8 trillion market, Bloomberg reports. Yet these bonds have become so expensive to issue (thanks to an array of banking middlemen) that they're useless for anything but the largest of city projects.
Bloomberg reports that the opportunity to make investments on the blockchain would be better for investors, who would get their stake in municipal bonds without markups from middlemen. It would also be better for cities, which wouldn't need lawyers, advisers, and standardized documents usually needed to mediate the bond's sale — all of that would be replaced by digital smart contracts.
The city isn't quite ready to implement this system yet, as it must figure out if voters would have to approve the money needed to get it started, and decide what projects would be financed through it. But Bartlett already has put forward some ideas that will likely resonate with voters: he has suggested that the funds could go towards affordable housing, which is in short supply thanks to rising costs in the San Francisco area.
"We thought we’d get creative and figure out a way to finance our needs to take care of our people," Bartlett told Bloomberg.
If this program is a success in Berkeley, it could entice other cities, states, and, ultimately, countries into investigating ways to integrate the blockchain into financial and government structures. The is technology could bring a new level of security and transparency to multiple facets of our society.
Disclaimer: Several members of the Futurism team, including the editors of this piece, are personal investors in a number of cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.