Thousands of different cryptocurrency projects have emerged over the years, and most were started by either individuals or small teams of developers. However, nothing is stopping local governments, be it a town, city, or state, from creating their own cryptocurrencies. One project that hopes to encourage this kind of city-based crypto adoption is CityCoin. Here's the full scoop on this new digital asset type, whether they're a worthy investment, and which cities in America will soon start using their own CityCoin tokens.
What Is A CityCoin?
A CityCoin token is a cryptocurrency designed to help generate crypto revenues for residents and the cities where they live. That's because city governments receive a percentage of all mining activity done by the CityCoin blockchain, something unique to this particular cryptocurrency.
As of June 2022, only three cities in America have their own designated CityCoins: New York's NYCCoin, Miami, Florida's MiamiCoin, and Austin, Texas's AustinCoin. Local politicians like Miami Mayor Francis Suarez and New York City Mayor Eric Adams have been vocal proponents of embracing CityCoins.
So far, we know that the city of Miami alone has accumulated over US$24.7 million in its city wallet thanks to the Miamicoin initiative. Despite this, some cities have turned down the prospect of creating their own CityCoin, which we'll cover later in this article.
How Does CityCoin Work?
Despite being fundamentally derived from Bitcoin (BTC), a blockchain not typically associated with smart contracts, CityCoin is indeed able to support smart contract and decentralised app (Dapp) development. That also means that users can create and buy non-fungible tokens (NFTs), at least in theory.
This is possible because each CityCoin is supported by an intermediary blockchain protocol known as Stacks. This Stacks protocol has been referred to as a "user-owned" internet that's powered by Bitcoin. It enables smart contracts to be financed with and secured using the flagship cryptocurrency, but relatively little has been done on this front so far.
In this way, the Stacks blockchain is able to leverage Bitcoin's value to help encourage smart contracts and Dapps. While each individual CityCoin is built off Stack's infrastructure, the entire process of starting and operating a new CityCoin is up to individual residents of a city.
The only thing Stack does is provide the infrastructure needed to deploy each coin. However, Stack has its own native cryptocurrency, STX, which is involved in the CityCoin mining process.
How Are CityCoins Created?
Creating a CityCoin is a relatively simple process, as new candidate cities are voted on the Stack website. While residents and the broader CityCoin community are encouraged to vote, the actual voting process is open to anyone with an internet connection.
Once a candidate city is narrowed down, the next step is that the city's mayor must support and agree to claim the city's crypto wallet. After that, someone needs to initiate the deployment of a new CityCoin by launching a smart contract on the Stack platform.
The last step after the new smart contract is launched is that 20 participants have to send some STX tokens to activate the mining process.
How Does CityCoin Mining Work?
Like most other cryptocurrencies, CityCoins can be mined. However, there is a lot more controversy surrounding how CityCoin mining works, as the process is much different than any other token.
Prospective CityCoin miners deposit their STX tokens, which can be bought at most exchanges, into a specific CityCoin smart contract for a chance to win mining rewards. With CityCoin, rewards are paid out every time a new block is discovered, which happens approximately every 10 minutes.
At a glance, this sounds similar to proof-of-stake consensus mechanisms like Ethereum (ETH), where validators stake their tokens to earn rewards. The difference is that with CityCoin, you are not able to withdraw your STX once deposited. Additionally, mining rewards are not split between miners; only one participant wins the entire sum, and the chance of winning depends on how much STX you contribute.
Is CityCoins Controversial?
What makes CityCoins controversial is that its method of mining is closer to a lottery or raffle than anything else. Just as buying more lottery tickets increases your chance of winning the jackpot, contributing more STX tokens into a smart contract increases your chances of winning the mining rewards, which are paid out in a jackpot-style reward cycle.
In contrast, everyone else who didn't win in this block cycle simply lost their investments. This is radically different from almost every other form of cryptocurrency mining. You're not using your computing power to solve a complex mathematical equation, as Bitcoin mining does. You're instead participating in a kind of lottery game.
The only difference is that 70% of the STX tokens contributed are committed to the mining pool that goes to the winning miner. The remaining 30% of contributions go to the host city's crypto wallet.
Cities like Miami and New York have already collected millions of dollars in proceeds thanks to CityCoins, even though there isn't much other utility to using these tokens at the moment.
NYCCoin And MiamiCoin Price Predictions For 2022
Most cryptocurrencies have fallen dramatically in price amidst this broader selloff in 2022. However, two of the most popular CityCoins, NYCCoin and MiamiCoin, have exhibited extreme volatility and have lost almost all of their value compared to 2021.
NYCCoin is down to US$0.0006 as of 24 June 2022, a drop of more than 88% since the same time in 2021. MiamiCoin fared even worse. It's down to US$0.001 compared to 2021's high of around US$0.05, a loss of approximately 98%.
While thousands of altcoins have popped up amidst the massive crypto bull run that preceded this crash, it's expected that many will end up disappearing as the speculative excitement dies down. The chances seem extremely slim that any CityCoin will stage a comeback in 2022.
What Is The Future Of CityCoins?
The idea of a decentralised cryptocurrency for your local town or city sounds fantastic on paper. But like many ideas that try to implement blockchain technology, CityCoins seems to struggle to turn its vision into reality.
While cities like Miami and New York have collected millions of dollars in proceeds, there still isn't much practical utility to using a CityCoin at the moment. It's not surprising that other cities, like Philadelphia, have outright refused to create their own CityCoins due to their volatile nature and sensitivity to inflation.
Combined with the current concerns about CityCoin mining, which resembles more of a lottery system than traditional mining methods, as well as the collapse in most CityCoin prices, there's a lot of scepticism surrounding the project.
FXCM Research Team
FXCM Research Team consists of a number of FXCM's Market and Product Specialists.
Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.
Retrieved 24 Jun 2022 https://docs.citycoins.co/
Retrieved 24 Jun 2022 https://www.citycoins.co/post/why-citycoins-is-powered-by-stacks
Retrieved 24 Jun 2022 https://www.citycoins.co/about
Retrieved 24 Jun 2022 https://www.citycoins.co/citycoins-faq
Retrieved 24 Jun 2022 https://www.wired.co.uk/article/miami-crypto-miamicoin
Retrieved 24 Jun 2022 https://coinmarketcap.com/currencies/nyccoin/