What Are CityCoins, and How Can They Help Cities Embrace Web3?

This story comes out of PubDAO, a decentralized news wire for Web3 content.

CityCoins is a grassroots and open-source protocol, built on the Stacks blockchain by a loose collective of developers, that provides a framework for municipal crypto assets. These tokens represent speculative stakes in cities as they begin developing blockchain-based applications, using its CityCoin protocol as a foundation.

The CityCoin protocol has already been deployed twice: It launched MiamiCoin on August 3rd, followed by NYCCoin on November 10. As of now, both protocols are identical, each serving as a source of revenue for its particular city and for its token holders.

Though the CityCoin protocol is a generic template, the way it’s been used illustrates its varied applications. In the case of NYCCoin, the protocol involves two crypto assets: STX and NYC. In sync with the Stacks blockchain, which has a block time of approximately ten minutes, a new issuance of NYCCoin is minted every block. Investors bid in STX for a chance to win a given issuance, and the winner is determined by random number generation, with each bidder’s odds being proportional to their amount of STX bid.

For example, if on a given block Alice bids 25 STX, Bob bids 25 STX, and Charlie bids 50 STX, Charle would have a 50% chance of winning that block’s issuance of NYCCoin.

Once Charlie has NYCCoin, he is able to “stack” it by depositing it into one of the contracts of the CityCoin protocol. He would do this in order to receive a portion of future STX bids.

That’s the heart of the CityCoin protocol: 30% of STX bids go to the city’s wallet, and 70% goes to those who are stacking NYCCoin (As shown in Diagram 2). MiamiCoin functions in the same way. Moreover, one can similarly stack STX to earn BTC yield, seeing as the Stacks blockchain is integrated with Bitcoin.

While both assets have been endorsed by their cities’ mayors, only Miami’s city commission has formally accepted the MiamiCoin revenue into its budget, which has generated tens of million dollars worth of STX for Miami. Mayor Suarez stated that they will be waiting six months before utilizing this revenue stream, in order to observe and understand its activity before relying on it.

“We could use it for roads, parks, regional resilience — the idea is [MiamiCoin users] are making an investment in the quality of the city’s future,” said Miami’s Chief Information Officer, Michael Sarasti. (Sarasti recently appeared on an episode of Built on Bitcoin to discuss the Miami project.)

The next cities intended to receive the CityCoin protocol are Austin, TX, and San Francisco, CA. Patrick Stanley, one of the founders of CityCoins, speculated that “every startup city will have its own CityCoin within two years in the United States.”

Others in the community are also assessing the future of the protocol. When asked about prospective applications of CityCoins, Stacks developer and Syvita Guild member @Bowtiedmooneeb said that “Any integration with city services has the potential to really fuel CityCoin’s growth. We are currently exploring onboarding local Miami businesses to purchase Stacksboard ad space with MiamiCoin and display locally through Bitfari.”

A healthy ecosystem of applications and use cases needs to emerge for a citycoin’s utility to grow beyond just STX yield, which is highly variable. One freshly conceived project, The CityCoiner, seeks to become a community-run information hub and media outlet geared toward CityCoin news, educating investors and public officials alike.

Such possibilities of municipal utility include favorable public transit costs for CityCoin holders via some potential MTA-integrated blockchain app, favorable pricing for public workspaces, or BTC yield generation for city residents. The latter idea has been suggested by Mayor Suarez himself.

While the prospects are exciting for how CityCoins and similar projects impact civic engagement and municipal funding, much of this success depends on the activity of blockchain developers who integrate these assets, building up their utility. Seeing as the learning curve is steep, and the territory uncharted, it may be for the best that city governments bide their time and study these protocols closely before jumping in.

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Disclaimer: The author of this article is an investor in NYCCoin and MiamiCoin, but is not a paid developer of Stacks or CityCoins

It should also be noted that the pre-existing “NewYorkCoin” has nothing to do with CityCoins, and should not be confused with NYCCoin.