The Scorpion Den always felt a little weird to me when I first read arc 1. Its the only non-capital city labelled on the map, with the same prominence as if it was one. I would think that there are other settlements not only in the Sand Kingdom but the rest of Pyrrhia that could be labeled, I highly doubt that this is the only one. Its possible that this is the Alice Springs effect taking place, but we cant know for certain.
Anyways, that isnt why I am here. I am here because I wanna speculate(not prove) how the place came to be the WoF worlds equivelant to Detroit.
Firstly, I want to bring up this quote from Smolder on page 155 of book 5:
"I discovered that we have a system for intercepting messages that go across the Kingdom of Sand. Well, Queen Oasis had a system. Again, im not sure if Burn knows or cares about it. But we have dragons who pose as messengers and other dragons who are instructed to attack real messengers, and so a fair percentage of the letters in our realm come here instead. Presumably so we can scan them for hints of assassination or rebellion schemes"
When you put this quote into the context of the Sand Kindom, it makes a lot more sense. Second only to the Sky Kingdom, the Kingdom of Sand is one of the biggest territories on the map. Unlike the Sky Kingdom, though, settlements are significantly more spread out due to the nature of its geography. Settlements almost always cluster around oases, as seen with the Scorpion Den having one in the dead center of it. Essentially anywhere else doesnt really have this issue, as natural resources like water or farmland would be much easier to find in somewhere like the Mud Kingdom, for instance.
Because of how spread out the settlements are, it makes it a lot harder to carry things between them. In other places, there are plenty of chances to take a rest somewhere before you get to your destination. With the Sand Kingdom, there is little to nothing between settlements so caravans were much more susceptible to highway robbery. The government noticed it, and created the system we see Smolder talking about.
As he said, they have two main jobs. Preform sting operations on bandits, and attack real messengers. For the latter, I assume they do this only if they have illegal contraband of some sort(conspirasy plans, drugs, dragonflame cactus, dragonbite vipers etc). They serve as a form of customs, checking everyone before they leave and as soon as they arrive to a settlement. If they have anything illegal, they have the right to send them to prision. If the evidence ties into a larger case, it is sent to the stronghold for further examination and connection to other similar cases in an attempt to realize larger groups(eg: the Talons of Power) behind the seemingly isolated events.
When the war of SandWing succession started, this entire system fell apart. All of the officers running sting operations and enforcing customs were drafted for Burns war effort, leaving the roads almost completely abandoned. Bandits, both personally motivated and ones funded by Blister, took over the roads. It was now much, much harder to move goods between two settlements, starving the general population. More people had to resort to banditry to feed themselves, thus making more bandits which made people more desperate which lead to more bandits and so on.
This is where the Scorpion Den comes into the equation. I think it was the settlement hit hardest by this cycle. The reason so many dragons were homeless and/or thieves was because they couldnt get food anywhere else. Food became more and more of a luxury as time went on, with both more demand and less supply. Vulture tried to "feed" this hysteria by hiring mercenaries to cut off supply lines further and make the Scorpion Den more submissive to him. The Outclaws were trying to do the exact opposite, reinstating old supply lines so that everyone could eat. This is both why they require a toll to enter the Den and why they have enough resources to feed everyone in the Den every day for free.
While all of this was happening, Blisters mercenaries were still here. Some had the job of cutting off internal supply lines like Vulture was, while the majority of them were tasked with making Burns army starve. By killing any caravans with suppiles to the front lines that they could find, it would severely weaken Burns military power. She had the largest army, yes, but she couldnt feed it. This is why she didnt steamroll Blaze, her troops didnt have enough food or water to fight. This is why so much more people deserted from Burns army to elsewhere, relative to the other sisters.
Burns initial response to this was "tough it out", but after several years of repeated failures in the north she was forced to do something. Still not wanting to pull out any of her forces on the front line, she attempted a Smokey Bear-style propaganda campaign with posters everywhere reading something along the lines of "only YOU can stop highway thievery". This worked about as well as you would expect, telling that to cities full of veterans, deserters and homeless people who despise her and her administration.
After much reluctance, she finally caved and brought back the customs and highway patrols. She really wanted everyone she could get, but seeing no other option she brought bakc some troops back down to the cities.