CityCoin: Helpful cryptocurrency or the Latest Scam?
CityCoin is a new cryptocurrency project which is quickly sweeping the nation. First, it was endorsed by New York City, then Miami, and now there are rumors that Austin, Texas is next on the list.
But is CityCoin really all that great? Or is it just the next altcoin scam? Read on to find out!
What is CityCoin?
CityCoin is a cryptocurrency that is mined via a staking process that generates rewards for the miners and for the city that the coin is being staked for. The entire process is run on Stacks or STX, which is a second-layer solution that allows smart contracts to be executed on the Bitcoin blockchain.
CityCoin is mined by users forwarding STX tokens to a specified smart contract on the Stacks protocol. This money is then divided, 70% of it going to the stackers of the coin, while the other 30% is sent to a city wallet that the mayor of that city can access to make improvements or sponsor programs. The miner who processes the transactions is rewarded with STX tokens as well.
You can become a stacker of CityCoin by staking your STX in a pool in the CityCoin dapp. These coins must be locked into the protocol for a certain number of weeks or months (referred to as rewards cycles) before the user can receive any reward. If you would like to do either of these things, you will need a Stacks wallet as well as STX which can currently only be purchased on the OKCoin exchange.
Who Invented CityCoin?
It is critical to know that CityCoin was not funded or founded by the government. Rather it was invented by Patrick Stanley, who is the lead behind the project. The CityCoin project is nonprofit.
As for how cities are selected, users can head to the CityCoin’s website and vote for the city they would like to have a coin next. Once at least 20 users are interested and ready to donate, a wallet address will be set up for that city. When the 20 donations come through, that city will officially be a CityCoin city.
Why Was CityCoin Invented?
CityCoin was invented as an alternative to taxes, as the money received would be used to fund public services, but the people would support it voluntarily. Of course, they would get a portion back for volunteering money, but much of an investment in CityCoin is just that, a donation to the city.
While a decentralized tax system based on donations does sound nice, CityCoin is much too small of a project to make any big claims yet. To give you an idea the city of Miami required an operating budget of $1,165,516,000 in 2021. Meaning that you would need over 3x that amount to be sent via STX to the Miami CityCoin protocol in order to afford to continue running the city. If you think citizens will make that level of donations to a blockchain protocol you’ve got a rude awakening coming.
Is CityCoin a Scam?
If this protocol sounds a little familiar to you, as it should, this is no surprise as CityCoin sounds like an elaborate pyramid scheme. Basically, you have to send money to get money or stake money to get money and this money comes from people sending more money to the protocol.
We aren’t the only ones that think CityCoin is an elaborate pyramid scheme. Across the web, many independent believers in cryptocurrency are calling out the project for what it is—a scam. Now the creators of the coin claim there will be more uses for the coin in the future beyond the current “send money, get money” set up. But as of the writing of this article, almost a full year after the launch of the project in the summer of 2021, no such thing has materialized.
The only positive of this project is that the money is going to the government, well, 30% anyway and the Miami Mayor did tweet that he was given $5.25 million from the Miami CityCoin project. So if you would like to make an expensive and fractional donation to a city, CityCoin is the way to accomplish that.
Unfortunately, this brings up one more problem. And that’s the fact that if you really believed in the government or a certain mayor, why you wouldn’t just donate them money in the first place? The answer here is obvious because the people donating are in it for personal financial gain only. They only want to donate to the city when they will get 70% back from future monies invested, not because they actually want to help the city.
Now high-level ranking officials can donate money as they see fit (without having to claim it on official documents as required by law for political donations) while also getting a portion back for themselves. Basically, CityCoin is coming across as large-scale political corruption via cryptocurrency. So unless you’re a politician that may benefit from this coin, we recommend staying far away from the CityCoin project of any city.
Is CityCoin Legal?
Besides just asking whether or not it is a scam, you should also ensure CityCoin is legal before you invest. As of the writing of this article, the SEC has not approved CityCoin.
Many cryptocurrency enthusiasts suspect that the SEC will eventually shut down the CityCoin project because it meets the definition of an unregistered security using the Howey test put out by the SEC. Thus it is likely only a matter of time before the project is halted in its tracks and taken to court like the Ripple project.
Overall, in our opinion, CityCoin is most likely a scam and it will likely be shut down by the SEC in the coming years. Therefore as cool as a project as it may be, you’re better off saving your money and investing it in a project that won’t steal your hard-earned dollars. Not sure what that project may be? We highly recommend that all new investors start with an investment in Bitcoin and skip the altcoin world altogether.