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The most of the game of beyond sol is centred around cities and the lack of one prevents one from making treaties and while one can still upgrade at other cities, its significantly more difficult to gain allot of wealth at any decent speed and the fleet one can get is greatly restricted due to lack of hangars.
When a city is constructed it will provide you with a free city-center this the main building which all other buildings are constructed off of and claim the surrounding sectors(if possible). They are used as the main base for players and can be assaulted by other cities.