Written: December 3, 2021
Electronic money is not a new idea. The Electronic Fund Transfer Act was passed by the U.S. Congress and signed by President Jimmy Carter 45 years ago (1978). Other forms of electronic money include payment processors, direct deposit, and digital currencies such as Bitcoin. What distinguishes Bitcoin from other electronic money is that it is a cryptocurrency. Cryptocurrencies are a type of digital currency created on an infrastructure that relies on cryptography, decentralization (no central bank), and peer-to-peer networking. Wikipedia listed 47 cryptocurrencies in 2014. Bitcoin, established in 2009, was the first. As of December 3, 2021, coinmarketcap.com listed 15,134 cryptocurrencies trading on 436 exchanges and with a total market cap of $2.6 trillion, 26% of the market cap of gold.
Will Bitcoin replace the dollar, euro, yen, franc, kroner, et al? Possible, but most authorities have been saying it is doubtful, although they are paying much closer attention now. Will Bitcoin dominate as a new method of payment, replacing Western Union, PayPal, credit cards, and various banking services? Also possible but too soon to say yes or no. Bitcoin has all the trappings of the web circa 1995 when more than a few bank and insurance executives told me the Internet was interesting, but they would never connect their company to it. The web lacked good security, had no authentication, was slow, not always reliable, and was missing the many supporting services needed to make it feasible for electronic commerce. The rest is history.
Banks, credit card companies, and money transfer companies do not like Bitcoin because the new digital model threatens the status quo and the billions of fees they earn. Nevertheless, behind the scenes, they are hiring crypto skilled people as fast as possible and investing in startups which may represent the future of finance. For example, Goldman Sachs along with some other U.S. banks are exploring ways to use Bitcoin as collateral for cash loans to institutions.
Crypto activity is frenetic. Many new startups are using crypto currencies to fuel ideas for reinventing how finance, insurance, and other industries work. After China shut down Bitcoin miners, many new ones popped up in the United States. They are focusing on methods to make Bitcoin mining more eco-friendly. An interesting development, which some are calling Web3, suggesting an evolution of the World Wide Web, is enabling American cities to use cryptocurrency to redefine how cities are funded and how they relate to their citizens.
Miami Mayor Francis Suarez is a cryptocurrency enthusiast, and he has outlined his vision to make Miami a global hub for blockchain technology and crypto. Working with CityCoins, a new crypto idea which uses smart contracts on the Bitcoin network, Miami has become the first to create its own cryptocurrency. It is called MiamiCoin.
The process is a bit complicated, but it results in the creation of the MiamiCoin cryptocurrency, which anyone can buy. To alleviate the environmental impact of Bitcoin mining, the mayor has offered energy from the city’s nuclear plants. As of December 2, 2021, MiamiCoin was trading at $0.02064 with a market cap of $40,745,738. The mayor’s idea is to enable Miami citizens to become investors in the city. As part of the crypto mining process, a portion of the value of the MiamiCoin goes into the treasury of the city.
The mayor announced citizens of Miami could soon receive Bitcoin as dividends on the growth of MiamiCoin. In doing so, Miami would become the first city in the United States to give residents crypto as dividends. The distribution will require a clear definition of “Miami People.” Criteria being discussed include residents, taxpayers, voters, or other criteria set by the city. The plan is to create digital wallets for the residents. The city will then deposit the yield from MiamiCoin into the wallets. Authorities are approaching technology companies to help create the digital wallets and a registration and verification system to prevent fraud.
According to mayor Suarez, the revenue generated by MiamiCoin over the past three months equals around $80 million if annualized, potentially covering around one-fifth of Miami’s tax revenue. He was quoted as saying, “You could theoretically at one point pay the entire tax revenue of the city, and the city could be a city that runs without taxes, which I think would be revolutionary.” The mayor is putting his money where his mouth is. He announced he plans to receive his first paycheck in Bitcoin.
CityCoin, the company behind MiamiCoin, announced it has launched a similar token in New York, dubbed the NYCCoin. New York mayor-elect Eric Adams is also a believer in Bitcoin, saying he will take his first three months pay in Bitcoin. As of December 2, 2021, NYCCoin was trading at $0.00005194 with a market cap of $7,467,182.
The CityCoin concept opens many questions about the technology, the partners it requires, and the financial model which returns dividends, just to name a few. The entire idea could go up in a puff of smoke. In my opinion this is the tip of the iceberg of many new ideas we will see evolve from the rise of cryptocurrency. Many will fail, but some will provide disruption to the status quo and introduce some efficient and effective ways to accomplish things.