What do you give a middle-aged pop star who seemingly has everything? If you are the government of Senegal, you give him permission to build his own city. You also give him the go-ahead to power the economy of that city entirely with cryptocurrency. Sound far-fetched? It's not. Akon (Aliaune Damala Bouga Time Puru Nacka Lu Lu Lu Badara Akon Thiam), the 46-year-old Senegalese American singer and producer has been working on plans to build Akon City for several years.
He just received government clearance to begin working on the project utilizing some 2,000 acres of land just outside of Dakar. Once Akon City is ready to begin receiving visitors, it will be marketed as a sustainable ecotourism destination.
Powering Akon City's economy will be Akon's very own cryptocurrency, known as Akoin. Cointelegraph reports that Akoin will be "at the center of transactional life" and likely the only currency tourists will be able to spend inside the city. However, that remains to be seen. Indeed, a lot of what Akon promises with his new city remains to be seen.
Crypto's sustainability problem
Sustainability and environmental friendliness are the name of the game in Akon City. The singer and his partners absolutely want the city to be a model of sustainability throughout Africa. As such, the city will focus on sustainability in everything from renewable energy to transportation. And yet, there seems to be a slight problem: cryptocurrency has a sustainability problem.
If you know anything about Bitcoin, you know that mining it requires tremendous energy resources. According to the Bitcoin Energy Consumption Index, Bitcoin miners consume more than 51 TWh of electricity every year. Electric consumption is expected to jump above 73 TWh annually in the very near future.
If those numbers do not mean much to you, try this one: the amount of power consumed while processing just a single Bitcoin transaction is enough to power 22 American homes for a single day. Now do you understand the scale we are talking about here?
All of the cryptocurrency mining going on in the world right now consumes a ton of electricity. Producing that electricity consumes natural resources like oil and gas. It also produces CO2 when those fossil fuels are burned. This does not work well when your goal is to be as environmentally friendly and sustainable as possible.
Akon City is destined to become Africa's first certified Leadership in Energy and Environmental Design (LEED) city. Still, no one is quite sure how Akoin will power the city's economy without hampering efforts to be eco-friendly and sustainable.
The carbon credit solution
There is no way to get around the excessive power needs that come with cryptocurrency mining. The nature of blockchain simply demands too much raw computing power. Having said that, environmental activists have proposed a way of making cryptocurrencies more sustainable. They propose offsetting crypto's energy consumption with carbon credits.
A carbon credit is essentially a permit allowing a business to produce so much carbon dioxide. The credits are purchased from issuing agencies who then ostensibly turn around and use the money to offset carbon emissions by planting trees, investing in renewable energy, etc. Carbon credits and offsets are not mandatory anywhere in the world yet, but that might change in the future.
Imagine Akon City buying a massive amount of carbon credits in order to have permission to run the city on Akoin. They could use some of the money raised by those credits to fund their own renewable energy solutions. Though it would be circular investing, it would allow the city to say that its cryptocurrency is more sustainable than, say, Bitcoin.
The city could also sell any excess credits it did not need, increasing revenue that could be put into infrastructure and services. All the while, Akoin would be the currency that makes the city run. Tourists planning a visit would purchase Akoin on a cryptocurrency exchange, spend whatever they want in the city, then convert whatever remains back to fiat or another crypto.
The question is whether or not carbon credits would be enough to offset all of the unsustainable activities going on in Akon City. It is a legitimate question that will have no answer until the city is up and running. But knowing what we know about the laws of physics, chemistry and human behavior, there is reason to believe that Akon City will not be as sustainable and eco-friendly as its planners hope.
Daily life with Akoin
For the remainder of this post, we will set aside Akon City's environmental and sustainable goals and concentrate only on daily life with Akoin. This is an important exercise inasmuch as the world is inevitably heading in the direction of totally eliminating all cash. At some point, we will all be conducting our daily business exclusively with digital currencies.
You may be of the opinion that the future belongs to private cryptocurrencies like Bitcoin. On the other hand, you might be sold on the idea of central bank distributed currencies replacing what we now know as fiat. What the digital currencies of the future look like is less important than the fact that we will all be using them sooner or later. There is fast coming a day when cash is extinct.
If Akon City has enough infrastructure and buildings in place to start welcoming tourists five years from now, they could very well be the first legally recognized municipality with an economy that runs entirely on cryptocurrency. Let us imagine what that might be like.
A wallet on your phone
The first thing you need if you intend to transact business with cryptocurrency is a wallet. No, not a leather wallet embossed with your initials. You need a digital wallet capable of holding your digital coins. Those of us who possess Bitcoin even now do so with digital wallets. Some Bitcoin holders use online wallets while others keep their wallets on their computers or mobile devices.
In Akon City, wallets will be utilized on cell phones. There doesn't seem to be any way around it. A digital wallet will have to be mobile to enable you to pay for things at various merchants around town. You cannot very well carry your laptop computer everywhere you go, so that leaves your phone.
It is theoretically possible that city planners could come up with a purpose-built hardware device similar to a USB flash drive but doing so seems completely unnecessary when smartphones will do the job adequately enough. Thus, it is highly likely that the phone will become the payment vehicle of necessity in Akon City.
Pay by swiping
Imagine you are lucky enough to be hired as an Akon City employee. You get paid in Akoin every two weeks. When it's time to buy something at a local store, making payment is as simple as swiping your phone. You are not fumbling around trying to retrieve a plastic card or count coins at the cash register.
Truth be told, you might not even have to swipe your phone to pay. You might just have to hold your phone close to a payment terminal so that the two can communicate with one another. The terminal would initiate a transaction requesting your phone push coin from your wallet to the merchant's. The entire thing takes less than a second.
You may decide to help a family member who is facing tough financial times. Rather than handing that family member cash or writing a check, you pull out your phone and transfer some Akoin to his wallet. He immediately has access to the money. He doesn't have to go to the bank or run down to his local MoneyGram outlet.
No more chargebacks
Akoin payments will also be quite different from the merchant's perspective. For example, merchants will no longer be subject to chargebacks and the expense that comes with them. Why? Because chargebacks are impossible with immutable cryptocurrencies. Immutability is one of the hallmarks of cryptocurrency security.
The principle of immutability dictates that transactions, once verified and added to the blockchain, cannot be modified or deleted. A verified transaction becomes a permanent transaction that will forever remain in the record. That means there can be no chargebacks even if customers are unhappy and are demanding a refund.
Needless to say that eliminating chargebacks is a huge benefit to merchants. Under our current financial system, merchants are always at a disadvantage when embroiled in disputes with customers. Their disadvantage is the result of credit card companies and payment processors taking the customer's side regardless of who is right or wrong. Customers get their money back and merchants get the privilege of paying a fee for the chargeback.
Eliminating chargebacks levels the playing field for merchants. Because they do not have credit card companies and payment processors standing over their shoulders and forcing them to offer a refund, merchants are free to work with each unhappy customer on an individual basis. This allows them to find creative ways to solve problems without suffering economic loss.
Completion of Akon City is expected to take between 50 and 100 years. Akon himself is unlikely to live long enough to see it finished. Once fully operational, the city should be a shining example of what future cities will look like. At the heart of it all will be an economy powered by cryptocurrency. That is pretty amazing.