The world is becoming increasingly urbanized. By 2050, an estimated 66% of the global population will live in cities. Every day, 1.3 million people migrate to urban areas, and by 2060, the global building stock is expected to double — equivalent to adding another New York City every month from now until then, as noted in the 2019 Bill and Melinda Gates Foundation annual letter.
Currently, cities occupy just 2% of the Earth’s land but consume over two-thirds of the world’s energy and generate more than 70% of global CO₂ emissions. The scale of resource consumption driven by urban growth is staggering — yet so is the opportunity to build cities in unprecedented ways. These future cities can be designed from the ground up to be interconnected, sustainable, and responsive to the needs of every individual.
"A smart city is a place that uses digital and communication technologies to improve the efficiency of traditional networks and services for the benefit of its residents and businesses. Smart cities are not just about using ICT to better manage resources and reduce emissions." ~ European Innovation Partnership on Smart Cities and Communities
The Current Landscape of Smart Cities
Smart cities integrate information and communication technologies (ICT) into urban systems, enabling sensors to collect data and expand communication across city infrastructures. The primary goal is to enhance citizens’ quality of life, reduce waste, control costs, and improve resource efficiency.
Today, there are 25 billion smart and connected devices worldwide — a number projected to reach 75 billion by 2025. Each device, equipped with sensors, continuously gathers and transmits data. These Internet of Things (IoT) devices bridge the digital and physical worlds by merging communication technology with real-world machines. IoT is transforming how individuals, communities, cities, and nations connect, interact, and exchange data.
From data privacy and ownership to peer-to-peer energy trading and integrated mobility, from predictive maintenance to digital healthcare and e-governance, the potential applications are vast. The vision for smart cities includes seamless collaboration between IoT, distributed ledger technology (DLT), and artificial intelligence (AI). While still in early development stages, these technologies are poised to become ubiquitous in urban life within the coming decade.
👉 Discover how decentralized technology powers next-gen urban innovation
Despite diverse approaches, all smart cities share a common objective: leveraging technology to improve urban living experiences.
What Will Smart Cities Look Like?
Smart cities are fundamentally efficient. By combining data collection, AI-powered pattern recognition, and networked sensor communication, they enable transformative capabilities:
Eliminate redundancies
Optimize traffic flow
Automate temperature and lighting control
Reduce waste
Enhance current and future infrastructure
Empower governments with data-driven decision-making
Embedded sensors adjust lighting and heating based on room occupancy — turning off when no one is present. Streetlights equipped with motion detectors activate only when needed. Autonomous vehicles and robotic systems will populate public spaces, dynamically responding to human needs. Traffic signals will adapt in real time to congestion patterns, smoothing traffic flow and improving road safety.
The data generated from these systems will reveal long-term urban trends. Urban planners and entrepreneurs can analyze behavioral patterns to further refine city services and infrastructure.
A critical enabler of this transformation is distributed ledger technology (DLT), blockchain, and AI. Through immutable, peer-to-peer networks, city activities can be verified — and in some cases, monetized. Residents and businesses will pay for services consumed, incentivizing efficiency and adoption of renewable solutions.
Governments also stand to benefit: citizen-centric digital services that respect privacy will emerge; optimized transport systems will free up infrastructure capacity; smart public bins could even automate waste collection. These are just a few examples of what’s possible with well-executed, data-driven governance.
With DLT, digital governance becomes streamlined. Payments, tax filings, permit applications, or service requests can be conducted transparently, immutably, privately, instantly — without manual intervention. Systems can scale without bureaucratic overhead, freeing funds for other public investments.
Even in advanced smart cities, sensor deployment is accelerating. Researchers estimate that by 2020, 50 billion sensor-equipped objects were already generating trillions in economic impact — a figure that continues to grow.
Key Challenges in Smart City Development
The vision described above is compelling — but turning it into reality presents significant challenges. One of the most critical is the human factor. Several smart city initiatives have failed because they focused solely on technology and government functions.
True smart cities must improve residents’ lives — not just collect raw data or serve as showcases for high-tech concepts. Clarity of purpose and accountability in tech deployment are essential. Without a clear point-to-point strategy, projects risk becoming endless money sinks.
Another major hurdle is financial sustainability. Many cities develop detailed smart city plans — often using them as marketing tools to attract businesses or revitalize neighborhoods. However, if most of the budget is consumed by debt servicing or legacy infrastructure maintenance, little remains for meaningful innovation.
Breaking Down Data Silos with Interoperable Systems
Every industry today faces unprecedented transformation as computing and automation converge in new ways. Machines now have the potential to enrich lives and elevate global living standards — but challenges remain.
Legacy organizational hierarchies resist change; even secure systems face vulnerabilities; data privacy concerns grow louder. Existing regulations were designed for human-managed systems and must evolve to keep pace with technological change. Citizens too must adapt — embracing a world with less direct human interaction but greater personal responsibility.
A key technical barrier is data fragmentation. Data is often trapped in isolated silos rather than shared in open IoT and DLT environments. For true innovation, data must be verifiable in distributed systems, and devices must communicate seamlessly across platforms.
To unlock the full potential of human-centered smart cities, DLT networks must meet several core requirements:
- Permissionless Access
Open to all users without centralized control — enabling anyone to create an address and interact securely within a public utility framework. - Zero-Fee Architecture
Eliminates transaction costs, ensuring sustainable business models focused on improving citizen services. - Open-Source Development
Ensures transparency, long-term scalability, and decentralized control over public-interest systems. - High Throughput Capacity
Supports billions of IoT transactions by optimizing latency and data organization for massive-scale communication. - Low Energy Consumption
Enables edge devices — sensors and actuators — to participate sustainably even with limited power sources or infrastructure.
IoT cannot be built by any single organization or nation. It requires collaboration across industries and applications. Devices need secure, interoperable ways to exchange information — which is where DLT and IOTA come in.
👉 Explore how zero-fee microtransactions enable machine economies
IOTA: A Superior Approach for Smart Cities
Founded in Germany in 2017, the IOTA Foundation is a global leader in distributed ledger technology (DLT) for IoT, smart cities, and intelligent industries. As of mid-2019, its team spanned over 25 countries, supported by the IOTA Tangle protocol and a growing ecosystem of partners.
The IOTA Tangle is a secure data communication protocol that enables feeless microtransactions — ideal for IoT environments. It provides a single source of truth for data integrity and trust, aiming to become the backbone of a hyper-connected world where machines interact autonomously.
Unlike traditional blockchain systems that rely on miners, validators, or transaction fees, IOTA uses a unique consensus mechanism: each transaction validates two previous ones through a lightweight proof-of-work process. This eliminates fees while enhancing scalability and throughput — crucial for environments with billions of constantly communicating devices.
Built on a Directed Acyclic Graph (DAG), the Tangle allows the network itself to determine transaction approval without centralized oversight. This architecture offers superior speed and interoperability — making it ideal for machine-to-machine (M2M) communication across diverse applications.
Building a New Economy on Digital Trust
In hyper-connected environments, rapid advancements in real-time M2M interactions and distributed intelligence are fueling new data-driven business models. With IOTA’s zero-fee microtransactions, real-time data streams can be monetized efficiently.
New digital infrastructures now extend into data marketplaces — enabling secure exchange and trading of information across connected assets. The IoT economy is no longer theoretical; it's emerging in real-world deployments across energy, mobility, real estate, and urban infrastructure.
However, this potential hinges on establishing a new framework for digital trust — addressing cybersecurity risks, ensuring data integrity, and respecting electronic privacy in decentralized environments.
IOTA contributes by providing a secure, zero-fee communication layer tailored for IoT/M2M ecosystems — forming a trusted foundation upon which data monetization can thrive.
Energy Sector Applications
IOTA enables real-time tracking and trading of energy between solar rooftops, buildings, EVs, and batteries — balancing supply and demand in decentralized, cost-effective ways.
Through the EU-funded +CityxChange project (Horizon 2020), IOTA collaborates with 11 companies (including ABB and Statkraft), nine SMEs, three nonprofits (including IOTA), two universities, and seven European cities to develop positive-energy urban districts. Pilot projects are underway in Trondheim, Limerick, Alba Iulia, Pisek, Sesto, Smolyan, and Võru — testing IOTA-powered digital infrastructure for distributed energy markets and mobility-as-a-service platforms.
"Smart infrastructure based on distributed systems like IOTA can help create self-sufficient microgrids that evolve into city-wide networks. DLT reduces grid investment costs while easing integration of renewable energy — delivering new value to citizens." ~ Bernhard Kvaal, Senior Project Manager, TrønderEnergi
Real Estate Innovation
IoT is revolutionizing how buildings are designed, operated, monitored, and maintained. Data from structures, systems, and occupants are integrated into unified ecosystems — improving facility management through traceability and microtransactions.
Digital twins — virtual replicas of physical assets — can now be developed with lifecycle tracking via distributed ledgers. IOTA ensures data integrity when information comes from multiple IoT sources and is stored across different organizations.
In Trondheim’s +CityxChange pilot, Entra’s POWERHOUSE Brattørkaia — one of the world’s most energy-efficient buildings — uses IOTA to track its energy footprint in real time.
"ENGIE Lab CSAI has developed proofs-of-concept using DLT and AI for next-gen facility management. Deploying these tools in cutting-edge sustainable buildings like Powerhouse offers real-world innovation opportunities. Its high level of digitization supports digital twin implementation — placing it at the forefront of future energy optimization services." ~ Philippe Calvez, R&D Director, ENGIE Lab CSAI
Urban Digital Infrastructure
Smart cities require reliable, secure, interoperable digital foundations that bridge citizens, hardware, and digital entities — creating trusted data marketplaces. This infrastructure should evolve through public-private partnerships, aligning with GDPR principles while maximizing societal value.
"Most smart city pilots focus on simple ecosystem components — trust is rarely addressed. In human-driven systems, trust relies on interpersonal relationships. But in an IoT ecosystem with billions of entities exchanging data via smart contracts? Authentication, access control, and accountability will make or break the system. At Energinet, we're developing digital trust frameworks for smart meter data access and distributed grid services. No single entity can build this alone — great solutions come from cross-sector partnerships centered on citizens." ~ André Bryde Alnor, Innovation Lead, Energinet
Co-Creating the Future with IOTA
As devices become smarter and more connected, new business models emerge across industries. IOTA fosters inclusive collaboration among organizations worldwide — pooling knowledge and scaling innovations.
City testbeds often serve as launchpads for IOTA’s real-world applications. Local partners — including regulators — work together to solve region-specific challenges while building regulatory capacity for broader adoption.
Lessons learned in one city can be replicated elsewhere — creating opportunities for co-creation across regions.
👉 See how global testbeds are shaping tomorrow’s smart cities
The Brattørkaia Testbed in Trondheim
The Brattørkaia site hosts Entra’s POWERHOUSE Brattørkaia — a flagship demonstration of intelligent green architecture. A mini-grid project led by TrønderEnergi runs parallel to +CityxChange developments.
In August 2019, IOTA partnered with ENGIE Lab, Jaguar Land Rover, and Entra to showcase “sustainable energy traceability” using DLT. A working group formed in 2018 explored energy-saving use cases with partners including Energinet and Enexis.
"We’re interested in two things," said Ase Lunde, Director of Digitalization & Business Development at Entra. "Powerhouse generates more energy than it uses — how can neighbors best utilize that surplus? And how do we pay for it? As buildings like this integrate more deeply with networks, secure data sharing becomes essential."
Silja Rønningsen from +CityxChange added: "We’re testing how positive-energy cities can improve quality of life through digital services. Our goal is to share learnings across Europe so we can learn faster together."
Trianel emphasized collaborative innovation: "Cross-company co-creation is in our DNA. Being part of the IOTA community allows us to explore new tech with diverse partners — accelerating prototyping far beyond closed innovation models."
Lessons Learned: Principles for Success
Insights from ongoing IOTA projects offer guidance for others building smart city solutions:
Identify Meaningful Problems
Use systems thinking to explore challenges within broader contexts. Observe directly on-site. Determine whether DLT is truly the right solution — sometimes it isn’t.
Embrace Open Innovation
No single organization can solve complex urban challenges alone. Assemble proactive partners around shared goals with clear commitments.
Apply Ecosystem Thinking
Instead of starting with a minimum viable product (MVP), design a minimum viable ecosystem (MVE) — a coalition of trusted partners with complementary skills ready to collaborate.
Take Action
Experiment early with small-scale pilots using lean methodologies. Test assumptions iteratively. Scale only after validating results through real-world experience.
The Road Ahead
Smart cities depend on seamless communication and connectivity. The technologies discussed here are on the verge of reshaping how we live — making cities more connected, sustainable, and responsive than ever before.
IOTA plays a pivotal role as an open-source technology provider and innovation catalyst. Real-world implementations across sectors signal the beginning of new business models that generate societal value.
IOTA’s mission remains clear: to cultivate shared knowledge and unite stakeholders around scalable, interoperable, secure digital infrastructure for future smart cities.
About IOTA
The IOTA Foundation is a global non-profit headquartered in Germany. Its mission is to support research and development of new distributed ledger technologies — including the IOTA Tangle protocol — while fostering ecosystem growth through standardization.
IOTA Tangle goes beyond blockchain by offering the world’s first scalable, feeless, fully decentralized DLT. It solves three core blockchain limitations: high fees, poor scalability, and centralization risks.
As an open-source protocol, IOTA connects human and machine economies through secure data transfer, feeless microtransactions, and device access control.
Core Objectives:
- Advance research on foundational protocols benefiting the IoT economy.
- Develop production-ready software for community use.
- Educate stakeholders on emerging technologies.
- Drive standardization for widespread adoption.
Frequently Asked Questions (FAQ)
Q: What makes IOTA different from blockchain?
A: Unlike blockchain, IOTA uses a DAG-based Tangle structure that eliminates miners and transaction fees while enabling high scalability and true decentralization — ideal for IoT environments.
Q: How does IOTA support smart city development?
A: IOTA enables secure data sharing, feeless machine payments, digital identity management, and trusted digital infrastructure across energy grids, transport systems, buildings, and public services.
Q: Can individuals participate in the IOTA network?
A: Yes — IOTA is permissionless and open-source. Anyone can run a node or build applications on its protocol without gatekeepers or fees.
Q: Is IOTA secure against cyber threats?
A: The Tangle’s distributed architecture resists single points of failure. Combined with cryptographic security features tailored for IoT devices, it offers robust protection against common cyber risks.
Q: What industries benefit most from IOTA technology?
A: Energy (peer-to-peer trading), mobility (autonomous payments), real estate (digital twins), supply chain (traceability), and public sector (digital governance) are key beneficiaries.
Q: Are there real-world examples of IOTA in use today?
A: Yes — projects like +CityxChange in Europe demonstrate live implementations in energy management, sustainable buildings (e.g., Powerhouse Brattørkaia), mobility platforms, and smart grid integration.