Open Letter to the City of Berkeley, California: Why a Steem Smart Media Token (SMT) is a Wiser Choice Than a Cryptocurrency Bond or ICO
Note for Steem readers: Recently, I sent the following letter after becoming aware of the City of Berkeley's plans to launch its own cryptocurrency and tie it with a bond offering. In my opinion, such a plan simply creates more debt. I explain in the letter how a Steem Smart Media Token (SMT) could be a better choice.
Berkeley is not unique in considering a cryptocurrency, since governments like Estonia, Venezuela, Seoul, and Lafayette, Louisiana have all considered the idea in some form (and there seem to be more such news stories almost every day). While many Steem users are suspicious about governments in general, I believe that citizens and direct democracy would be clear winners if municipal governments let their communities take a more active role and take more charge of their own funding priorities by using a cryptocurrency. This is a great use case for SMTs and I hope to explore more such use cases in the near future. -DP
The mayor speaks at a unity rally in Berkeley. Source: CBS/KPIX.
The Open Letter
To: The Honorable Jesse Arreguin and Members of the Berkeley City Council
Dear Mayor Arreguin and Members of the City Council,
Thank you for allowing me to address the City of Berkeley’s plans to utilize a cryptocurrency. My name is Tom and I use the screen handle @donkeypong on the Steem blockchain. Though you may not have heard of Steem or its flagship site Steemit.com, the Steem blockchain currently processes about half of all cryptocurrency transactions, many more than Bitcoin or Ethereum.
Source: Blocktivity.info.
First, let me summarize what I understand of Berkeley’s cryptocurrency plans and explain why I think the cryptocurrency bond idea is deeply flawed. Second, I’d like to explain how using a Smart Media Token (SMT) from Steem would be a wiser choice, enabling the city to save a great deal of money and hopefully achieve a more vibrant, participatory community of Berkeley residents. Finally, I will invite you to contact the developers at Steemit, who stand ready to answer any questions and help get you started in launching a Berkeley SMT in the coming months.
Berkeley’s Reported Interest in Cryptocurrency
Early this year, several media outlets reported that the City of Berkeley was considering a cryptocurrency ICO in place of a bond offering. As I understand this situation, the city needs money to support affordable housing plans. The cost of living in the Bay Area is high and funding from the federal government for such programs has been reduced.
While cities generally use municipal bonds to raise money for projects, bond offerings are extremely expensive and come with hassle and fees. They are not practical for smaller projects. So the city hopes to tokenize the bond and sell off small pieces of it to the community or to investors.
As Coindesk.com reported, “The project's backers hope that by selling the micro-bond tokens, they will eventually be able to fund affordable housing projects, but they plan to start with smaller ventures, such as purchasing an ambulance for a fire station.”
Cryptocurrency ICO: The Wrong Tool for this Job
An ICO is a not the right idea here, for several reasons. First, there are potential regulatory hurdles. In the United States, the Securities and Exchange Commission (SEC) has made noises about ICOs needing more regulation, which has cooled the market for them somewhat. An offering for investors runs the risk of the token being labeled as a security.
As a former Securities and Exchange Commission (SEC) lawyer remarked, quoted in the San Francisco Chronicle regarding Berkeley’s plans: “There are tremendous security ramifications, and they should expect an unbelievable amount of regulatory scrutiny. Whatever they do will be under the microscope of the SEC.”
Other governments have discussed issuing asset-backed cryptocurrencies. Estonia is considering a crypto that would have several different potential uses, one of them being pegged to the Euro. Venezuela used a quasi-cryptocurrency backed by oil reserves. Many other governments from Seoul, Korea to Lafayette, Louisiana are looking at cryptos as well.
Berkeley apparently would like to back its crypto with the bond somehow, or merely chop up the bond and tokenize each segment of it. But in the end, those are just smart contracts with some sort of collateral attached, collateral which could raise the eyebrows of regulators in the areas of securities, commodities, and financial instruments. Meanwhile, the collateral becomes a constraint when the truth is that Berkeley doesn’t need collateral to create a cryptocurrency.
Sorry, buddy. You're not what they need just now.
Why not eliminate the bond? The bond is a sanitized way to explain this instrument to the public, but it is constraining when better possibilities exist.
The remaining issue with Berkeley selling its cryptocurrency is that it’s simply creating more debt. That may mean little when municipal governments are accustomed to continuous cycles of borrowing more money. But those bills come due at some point, with interest. For a city that’s already in debt with unfunded pensions and other obligations, the ICO would be another tool to borrow money.
Berkeley has never shied away from being a trendsetter. What the city needs is a more revolutionary approach. What if a municipal government like Berkeley could create a cryptocurrency that DOES NOT incur a new debt because it is creating new value instead?
Yes, there is a better solution. It requires you to think bigger. In two steps, I will show you how a Steem Smart Media Token (SMT) can solve Berkeley’s problems.
Smart Media Tokens site: https://smt.steem.io/
Step 1: Get the Community Online
The City of Berkeley needs an online presence. I’m not talking about a website, which it has. I’m talking about bringing its community together through an online portal. In particular, I’m thinking of something like the site Nextdoor, where residents of a particular city or neighborhood and come together, interact, and read and write posts (“Free concert in the park this weekend”, “Does anyone know a good babysitter?”, “Warning: phone scam for seniors”). Facebook groups can accomplish something similar. Creating a portal to serve a similar function is not rocket science.
A screenshot from Nextdoor.com, showing that people in certain neighborhoods can connect with others nearby in an online community, similar to a local Facebook group.
An alternative would be to build the Berkeley community on Steemit.com or another Steem powered site. It will take a few months for the full community features to become available, but the city can start building it beforehand. And using Steemit.com would save you the trouble of operating your own site; you simply would manage a community of Berkeley residents in an online Steemit-based community.
A concert in Berkeley. Source: Berkeleyside.com
Step 2: Launch an SMT
Instead of creating a new own cryptocurrency, launch a Smart Media Token (SMT) on Steem. The barriers of entry are much lower with an SMT than for one’s own cryptocurrency. Berkeley could save itself the trouble of running and maintaining its own blockchain; let Steem handle that and Berkeley can customize its SMT’s parameters.
Airdrop it to the city’s residents by giving a fixed quantity to each household that registers with a verified identity on the city’s community portal. Enable the SMT on the site and put an airdropped deposit in each resident’s account. Because there is no ICO and no investors, the securities concerns should nearly disappear (though I am not making any legal judgments here and encourage you to consult legal counsel for verification).
Berkeley City Council. Source: Daily Californian.
The Berkeley City Council can decide on its priorities with feedback from the community. These could include the Affordable Housing idea that some city leaders want to fund. If the city needs a new fire truck or a new baseball field at one of its parks, all of these priorities can be put before the community directly. Post these priorities online and give residents an opportunity to vote on which of them are most important (prioritizing the list).
As they vote, they will be ranking priorities AND allocating funds to each of them.
Berkeley High School students rallying. Source: Bay Area News Group.
A Vibrant Community and No New Debt Obligations
Over time, without incurring any further debt, the affordable housing (or any other priorities the city residents want to fund) will get funded via peoples’ votes allocating value to them. At the same time, residents will be able to vote for one another’s posts as well, providing incentives for people to consider what is best for their city and share information with their neighbors. In the end, maybe more residents will be able to afford housing not only because the city has micro-funded it, but also because they have earned more money through their own postings in the online community.
Encourage local businesses to accept this SMT for products and services, perhaps giving them a tax break or some incentive when they do so. In the history of the United States, local currencies have played a big role in many regions. The more people use and accept this SMT as a currency, the greater will be its stable and lasting value.
Berkshares from Massachussetts, one of the most widely used local currencies in the United States.
Berkeley Farmers Market. Creative Commons via Flickr.com by Jay Cross.
Berkeley is a socially conscious city; its residents and businesses would no doubt embrace a local currency that operated by and for the people of the community. Such adoption would provide additional scale for the city’s SMT, which would be solving multiple problems at once. This token is designed to support and enrich the city’s residents, not borrow more money that their children will have to pay back in the future.
I urge the City of Berkeley to consider creating an SMT. To see a practical use case for Steem, please visit the Steemit.com site. For questions and to learn more about SMTs, please contact [email protected]. Thank you and best wishes.
Sincerely, Tom @donkeypong
Sources:
https://www.coindesk.com/us-city-plans-to-sell-tokenized-bonds-in-initial-community-offering/
https://www.forbes.com/sites/rachelwolfson/2018/02/27/city-of-berkeley-plans-to-launch-an-ico-and-cryptocurrency-to-fund-affordable-housing/#6f413a887838
https://www.technologyreview.com/s/610442/berkeley-ca-is-considering-an-ico-unlike-any-other/
http://www.foxandhoundsdaily.com/2018/02/berkeley-blockchain-pensions/
https://qz.com/1160396/estonias-planning-an-ico-for-estcoins-despite-mario-draghis-warning/
https://theconversation.com/dont-be-fooled-venezuelas-petro-is-not-really-a-cryptocurrency-92310
https://www.sfchronicle.com/bayarea/article/Berkeley-s-plan-to-make-its-own-cryptocurrency-12705057.php
Link to the Steem SMT info site: https://smt.steem.io
This is the type of outreach that the Steem community needs more of. Imagine how many people would be introduced to the Steem ecosystem if Berkeley were to adopt an SMT!
This is an exceptional and easy-to-understand letter that could be used as a template for everyone to send to their local council members!
Exactly. I'd like to work toward more templates and form letters and talking points that we can all use to crowdsource some of this work.
Yeah, if one were to modify this post a little, it could be used a template for many to use.
Crowdsource the work and use the power of Steem to reward them for their contributions. I think this idea has some potential.
That idea played in my head too after i read @donkeypong's open letter! Though that would have constitute some form of blatant plagiarism if without his prior consent.
Imagine if any institute at all were to adopt an SMT!! Schools can bootstrap an online community through the use of SMT as a "science project" (I believe the internet was invented in a similar fashion), national/international NGO can adopt its use. Local community forums can adopt SMT and use ChainBB-like templates.
They dont even need to adopt it. Just the mere mention of SMT may get people curious on what it's about and eventually dive the Steem blockchain rabbit-hole.
All of this is of course talk however... I really wish (and hopefully strive) to have the outreach capability that @donkeypong has...
I love it, here's my response.
Let me know what you think.
https://staging.busy.org/@markeverlasting/my-response-to-donkeypong-s-open-letter-to-the-city-of-berkeley-ca
Nice article and thanks for posting it. I've voted and commented there.
Simply wonderful, I hope your letter can reach the mayor. The way in which a SMT could improve a community is very interesting, i have never thought about it.
The ICO system has not helped the citizens of my country. As a Venezuelan I have not received benefits nor the situation of the country has improved despite the fact that a lot of money was raised with the PETRO.
At the beginning I thought that your explanation was going to be a little complex but I think it's simple and it goes to the point.
I also think it was great that you showed the graph about the transactions, although the bitcoin network moves more volume, Steemit is the one with most transactions per day.
Well, I sent it to the mayor also and mentioned that I'd post it here. So I hope they read it. Venezuela's experiment is not really a true crypto project, but I understand what they are trying to do. It would be better to find ways to help the people there, since I know you are going through a very difficult time.
Sometimes, because of the success of cryptocurrencies as a financial instrument, people tend to forget about its volatility as well as the expensive nature of the control and management of the blockchain technology itself.
It would be better for Berkeley to get a Steem Smart Media Token instead of launching a new blockchain. Steem is well poised to be of service to them. If we take the @ned's message two months ago about SMT, then it is something that would soon be a regular part of the steem blockchain. To be able to enjoy all the features that you, @donkeypong, have mentioned; transaction speed, community members being able to share information on the steem blockchain is something worth having.
They can even do voting on the blockchain both for pushing ideas forward as well as electing officials into office. Using the steem blockchain is a win-win plan for Berkeley
I also, looking at it from the steem blockchain angle, considering it a big benefit for both the blockchain technology as well as for steem to have a community with shared ideals, a political identity and financial vision come on the blockchain to exist. It opens the doors for more innovative usage of blockchain technology as well as give the technology more eligibility in the financial world.
I hope the people at Berkeley choose wisely. Awesome things are happening all around.
Very thoughtful and thorough comment. Thank you. What I've come to believe is that SMT projects need to grow quickly enough or have an existing community to ensure that they have enough economic scale. I think it could work in this implementation if people give it a chance.
yes indeed. If it is implemented as proposed, there will definitely be communities built around SMT, even already existing communities will cash in on the opportunity not to talk of steem blockchained powered projects like busy.org, Dlive, esteem, etc.
Creating room for diversification of interests and unique financial instruments built around the basic uniqueness of the steem blockchain is something that should be pursued and implemented as soon as possible. There is so much to be gained.
yes indeed. If it is implemented as proposed, there will definitely be communities built around SMT, even already existing communities will cash in on the opportunity not to talk of steem blockchained powered projects like busy.org, Dlive, esteem, etc.
Creating room for diversification of interests and unique financial instruments built around the basic uniqueness of the steem blockchain is something that should be pursued and implemented as soon as possible. There is so much to be gained.
SMT is really one of the great implementation in steem blockchain, it helps the individuals and the organization issuing their own token that are powered by steem blockchain, it's not only benefit the community but it also benefit the steem token to make it more valuable in a larger scale.
Yeah! I agree with you.
Awww, amazing! I don't know why but I'm deeply in love with cryptocurrencies (if you hadn't guessed by my name). I love this move and I hope that Berkeley gvt. will take a look at this and consider it seriously.
Not only because it is convenient for the many reasons that you explain in your letter (some of which actually amazed me, since I didn't know a lot of what you mentioned, surprising my Steemian heart with its ignorance and giving me new reasons to start researching), but because any official take in the matter, especially by a city in the US, would give the Steem blockchain the validity that it needs.
I think that this might be what we're missing. Big parties joining in our cozy living-room meeting and bringing some BBQ. Then everyone will know about us and we'll probably go to the moon by the end of the year :)
<3
If one or two of these municipal governments are visionary enough or crazy enough to try this, it could open up a whole new sector for SMTs.
You are right... People who do not want to participate in the communal process could also sell their influence.
THE BIG QUESTION IS: when will SMTs be released????
Hadn’t thought of this but governance tokens might be a better use of smt than media! Maybe they should be gmt. Or maybe we should specialize a group of tokens as gmt after smt starts to be adopted!
This kind of information that I really need to influence our government and investor in Indonesia to understand more about Steem and SMIT. I know this is about the future investment but this is much better, and I also believe that ICO is good but it will not help that much the society especially where corrupt is still habits and I have so much doubts in it. I dont want people to get fooled again and again, we need a breakthrough that really consistent toward the changes for a better world and future.
Thanks so much!
Berkley. that is where my path to the cryptocurrency began. I acquired my first crytocoin gridcoins via BOINC (Berkeley Open Infrastructure for Network Computing).
Ah yes, BOINC is a great project. I think it helped people understand some of the possibilities.
Wooow mind blowing sir @donkeypong if this letter will be open not just in berkeley but to all countries and cities and let those leaders know about steemit and if all will be give time to adopt and accept the importance of SMT in every area, tgis will be one step solution to overcome unemployment, and if everyone will be given airdrop as a good start then that will be great. In this form we can avoid people to be lazy instead they can be creative in all areas they belong with. Everyone can write, teach them how to post and if everyone will u.v each other as a support what a sustainable life they will have. Which i hope and wish every country here on steemit or community will do,which i know some already does but i guess not all doing it right or great. Sometimes i feel its unfair like the support that they intend to give is not given equally but only to those who they knew and lime already. Sad to say before our "bayanihan" give us u.v but all of a sudden many i knew was not given any more support. I don't complained for maybe they changed their value of core maybe u.v will be given only to those who wrote long blog and very good content but what about us who just wrote poems, and short post are we are not qualified anymore? I dont know if "bayanihan" really check Filipinos in steemit because the last time i check they u.v and resteemed some and i knew they u.v few poetry bloggers maybe its only there choice whom they like. How i wish they have curator in every category like arts, music, poetry, photography and they will do their job to help us small bloggers and be notices for our effort .
Hope sir @donkeypong you can create open letters for us here in the Philippines especially directly to Sen. Manny Pacquiao for he also planning to launch his own PAC token. Looking forward for that sir for we wanted Sen. Manny will know about SMT and how steemit works. We will resteem and post it in other social media site to let him know about this great community, and hope to convinced him about steemit and he is agood potential investor in the future. Looking forward to that sir @donkeypong for u are a great power to write and you explained so good. When that time comes we will call you to talk about steemit to sen. Manny Pacquiao cross finger hahaha. God bless sir.