Can I mint my own land ownership token? Obviously not, which means there's still a centralised authority on who owns what.
The game client could just change how it interprets address 0x32c12... as a plot of land and point it somewhere entirely different. This is still completely centralised!
The client for the game still has to explicitly only acknowledge a set of NFTs. Why do you even need the blockchain when the client already has a hardcoded list of NFTs it's willing to accept?
An SQL database, some APIs for trading, and the same set of things you can buy solve the problem infinitely more efficiently.
I'm not talking about a video game. I'm talking about real-life land.
The answer to your first question is in the name. The city would run via a DAO and there will be some sort of democratic process that governs the city. Ran on the blockchain.
Using the blockchain is important for a few reasons:
1. Infrastructure. Minting NFTs is an easy process and transferring ownership via an NFT transaction is super simple. The blockchain is the SQL database and it's already there ready to use.
2. Transparency. If I sell you my land via NFT then it's easy for others to verify. Same thing with the DAO that manages the city. People can see what the DAO is doing because it's all on the blockchain. People can raise a red flag if something looks wrong.
3. Efficiency. Running all of this via software is much more efficient than normal government processes and a higher level of automation is possible. Yes you could do this via SQL database but you sacrifice the above two points.
I'm more interested in things like CityDAO where you can buy land and get a city-minted NFT that represents land ownership.