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Tuesday, April 16, 2024

MiamiCoin Is Crashing, but It Won’t Go Away

On a sweltering Tuesday last August, a new cryptocurrency was born. Called MiamiCoin, it was styled as a way for the crypto-savvy to support the Magic City, and maybe earn some cryptocurrency in the process. A tongue-twisting press release said that MiamiCoins were “programmable city-based tokens that unlock a new community-driven revenue stream for local governments while bringing collaborative technology to its citizens and ecosystem of stakeholders.”

In reality, you can do two things with MiamiCoin: mine it and stack it. The cryptocurrency, created by the Delaware-registered business CityCoins, has a circular life cycle. To get some, you need to buy another cryptocurrency token called Stacks—currently priced at about $1 per unit—and use it to bid for MiamiCoin. Only one lucky bidder, or “miner,” can get MiamiCoins every 10 minutes; losers get nothing but the feeling of having lost their Stacks. Whoever wins MiamiCoins can sell them for $0.0015 each as of Tuesday on Okcoin, the only exchange that accepts them. Or they can park them (or “stack” them, in crypto parlance), to receive periodic rewards in Stacks tokens. Those Stacks rewards come straight from the wallets of more people bidding (and losing) for MiamiCoins. Stacks can, in turn, be stacked to earn Bitcoin rewards.

Michael E. Bloomberg, a visiting researcher at Cornell University's Urban Tech Hub who has served on the board of the Massachusetts local currency venture BerkShares, compares MiamiCoin to a raffle. “You put in a certain kind of resource, and you get out something else,” he says. “If you win the raffle you get rewarded in a coin that has no use.”

MiamiCoins have no utility within their eponymous city: You cannot pay taxes, buy a bus ticket, or rent a flat in Miami with them, even if proponents say that use cases will be created over time. That is not to say that MiamiCoin is randomly christened, the way many other coins have opportunistically been named after dog breeds or viral TV series. While 70 percent of all Stacks spent by miners vying for MiamiCoin goes to stackers, the remaining 30 percent goes to a cryptocurrency wallet earmarked for use by the city’s government. CityCoins frames that as a way to express one’s support for the city and help it fund valuable projects.

As of April 26, Miami’s wallet contains over $13 million in Stacks. “A CityCoin is automatically generating revenue that can be pushed back into the city itself,” says Patrick Stanley, a Los Angeles–based technologist who was part of Stacks’ core team until 2020 and is now CityCoins’ main representative. The nonprofit is supported by crypto-mining communities Syvita Guild, Z1, DoubleUp, Freehold, and the Stacks Community.

Stanley says that MiamiCoin’s mining method is not dissimilar to other standard ways of minting cryptocurrency, where various parties vie with each other to upkeep a decentralized system, committing various resources to the effort. “Just like in bitcoin [mining] you spend electricity, with CityCoins you spend cryptocurrency.”

Cryptocurrency projects rely on the skillful leverage of incentives. One popular technique is to use celebrity endorsement to encourage people to engage with a new cryptocurrency. In a way, CityCoins is doing the same: It's not a government-led project for the city of Miami, but shortly after launch in June 2021, it earned praise from the city’s crypto-pilled mayor Francis Suarez, who tweeted about the first coin being “of course” in Miami. In a Washington Post interview in September, Suarez went as far as saying that the scheme could make it possible to “run a government without the citizens having to pay taxes.” Confusingly, Suarez later told CoinDesk that MiamiCoin might one day be used to pay taxes in the city. Following a vote by city commissioners, in February the government of Miami cashed $5.25 million out of its wallet—classified as a donation from CityCoins—which will be destined to a rental assistance fund.

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In media appearances, Bloomberg has compared this mechanism to “a bribe” to inveigle publicity-hungry mayors into endorsing what he considers “an unregulated lottery.” In a message on CityCoins’ own Discord server, he wrote that those who stand most to profit are the people behind Stacks, whose tokens are essential to mine MiamiCoin, and he takes exception with government officials playing along with that.  “Accepting the money is encouraging participation,” Bloomberg says. “Should the city take a grant from this kind of source? It's a gray area.” 

Stanley disaffirm’s these comments, saying that neither he nor his organization have benefitted from these projects. The government of Miami did not reply to a request for comment. A person familiar with the government’s discussions around MiamiCoin says that the city’s attorneys vetted the initiative and ensured that accepting the donation was legal under city and state laws.

CityCoins has kept expanding since its splashy Miami debut. In November 2021, it kicked off NYCCoin, an identical project for New York City. Stanley had pitched the idea to then mayor-elect Eric Adams—also a crypto believer—during a Zoom meeting of his transition team’s technology unit, on November 5. Bloomberg, who was on the call as a member of Adams’ transition team, says that an attendee compared Stanley’s presentation to an “SNL skit.” “When someone finally asked, ‘Well, what can you do with it?’ [Stanley] said, ‘We're working on that but right now there's a great NFT art market in Miami that uses MiamiCoin,” Bloomberg says. “And then when we were running out of time, he showed us the coin’s branding and color palette.” Adams tweeted enthusiastically about NYCCoin a few days later. The office of Mayor Adams did not reply to multiple requests for comment.

An AustinCoin is also in the works, while a proposed Philadelphia iteration was recently nixed by the local government.

Yet, the main problem remains: As of today, all of these coins are purposeless. Miners are burning piles of crypto cash to receive assets that might never have any application whatsoever, in Miami or anywhere else. That, in turn, is affecting their prices. In September 2021, MiamiCoin was worth around 6 cents—since February, its value has been tanking. That is not going down well with some MiamiCoin miners. On CityCoins' Discord, several people have voiced their discontent, with some reporting losses of 90 percent or higher, and one user named SARIJAPIJA pithily reporting, “Lost all My money whit [MiamiCoin], tnx guys.” Even Suarez, mere days after Miami received the millions as a donation, toned down his early enthusiasm, telling the Miami Herald that he did not know whether the cryptocurrency was “going to work or not,” given that “innovation doesn’t always work.”

Stanley says that such impatience is misplaced, as the project will take “years” to fully play out. “People do expect things to move at the speed of crypto,” he says. “One of the things that does not move at the speed of crypto is government.” He says that although it might sound odd to launch a coin before it has any application, it is more effective to have techies and users come up with uses for an existing coin. “Almost all tokens pretty much start off as a hallucination, starting off with Bitcoin,” he says. Stanley points out that 300 developers signed up for a MiamiCoin workshop that CityCoins is holding jointly with Miami Dade College in May as a sign of interest for the future of the project. “If you didn't have a coin, those projects wouldn't exist—they're not going to exist in anticipation of a coin,” Stanley says. “So that's the first thing, and you can use the coin for developing applications specific to a city.”

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The person familiar with the Miami government says that the city is unlikely to play a major part in giving the token a raison d'être. That is partly down to technicalities, such as the fact that the city cannot hold crypto on its balance sheet. But in general, the person says, the city government sees MiamiCoin as a community-driven project.

This week, to address the unrest among its supporters, CityCoins held a vote to change the rate at which it allows people to create new MiamiCoins and NYCCoins, a deflationary move aimed at boosting the price. More important, Stanley says, the change will also allow networks to support a voting system, allowing token-holders to put forward and support proposals on how the funds donated to a city might be used.

“We're in the very beginning stages of setting up the checks and balances,” he says. He says that even if the token-holders might vote for earmarking the city wallet’s fund for a certain project, the government and maybe the citizens of each city would have a say in that process.

He also hopes that adding these voting privileges would attract more people who actually live in the cities associated with the coins.

That is not a minor point: It is likely most MiamiCoins—or, for that matter, NYCCoins—are not held by residents. The organization that has so far produced most CityCoins, a “mining pool” named Syvita Mining, was founded by a British 15-year-old going by the pseudonym of Asteria, who had previously also worked on Stacks. In February, the organization joined Stacks’ startup accelerator, and Asteria was replaced by Syvita’s current CEO, an Austin-based former finance professional who goes by the name BowTieMooneeb.

BowtieMooneeb says that the about 1,000 people who are partaking in Syvita's mining pool by investing a minimum of 40 Stacks are “all over the place.”

“They're geographically distributed,” he says. BowTieMooneeb says that Syvita’s revenue comes from a 1 percent fee on the pool’s MiamiCoin and NYCCoin outputs. The popularity of both coins has dropped among miners. But he feels optimistic about the project’s future. “Certainly cities, they're incentivized to create utility for their tokens," he says, "because if the value of their CityCoin does well, then that means more revenue delivered to their city treasury.” 


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