Now that the Freeos AirClaim code has been successfully tested, audited, gone through the recent Beta Test, (the Beta Test was deployed on Proton and the Internet Computer) our development team has been busy at work preparing for the Governance Phase.
NOTE: The launch of the AirClaim is not affected by any work on the Governance Phase. The AirClaim is ready to launch technically, it just needs some legal, compliance and jurisdiction work to finalise.
The Governance Phase is planned to launch after the end of the 25 week AirClaim Phase and represents the truly democratic phase of the Freeos project.
The team has been busy preparing the systems design, technical architecture, data modelling and even some prototyping of features already.
There have even been some notable updates to how the entire model works to help ensure Freeos is a stronger economic engine, and allows freer access for all willing participants.
We’ll break down some of the features shown in the chart below.
Registration
The journey starts at the registration process.
For those that experienced the Beta Test, there was a single transaction done at the start to register each user and their “verification status” based on the data in the eosio.proton contract deployed by the Proton Team — this essentially is similar to the registration process in the Governance Phase.
What does registering mean? It essentially is an on-chain way to ensure that an account has been verified — or not — using Proton wallet’s KYC.
Unlike the AirClaim — where we have staking collateral to help mitigate against bots and duplicate accounts — the Governance Phase is very likely to have verification as a mandatory process.
Proton is expected to roll out worldwide KYC and this is critical to ensure one person = one vote. This is critical for an equitable and democratic economy and the system must be more strict to have confidence and trust that a person is a single, real, individual.
Registration also has a key part to play in a later process for transferring tokens freely between existing participants in the system — more on this later.
Weekly Iteration Cycle
The weekly iteration cycle, once a participant is registered, can be broken down as simply:
- 3 Steps of the Voting Process
- Claim Points
- Repeat
There is more that a participant may do — at their own discretion — but this simple cycle is the beating heart of the Freeos Economic System.
Community Sentiment Analysis (CSA)
Once a participant has registered, and a voting iteration (a week) begins, the participants can proceed with a number of survey questions designed to gather data on what the entire community is thinking. This is the first step of the Voting Process.
These questions are called the Community Sentiment Analysis, or CSA, as they are structured to gather and reflect the sentiment of the community as a tool to guide the later voting process.
The answers to these questions are presented in a Dashboard format as a reflection tool so that all participants can align and vote in unison on parameters that best serve the Freeos Economy — which then also serves each individual.
These questions cover three main categories, with a number of individual questions per category.
The three categories are:
- Crypto Economy Sentiment
- Freeos Economy Sentiment
- Priorities
Crypto Economy Sentiment covers questions related to how the wider, crypto economy is, and how it is expected to change in the future, in both positive and negative directions.
Freeos Economy Sentiment has similar questions, but asking about the specific Freeos economic conditions that the participants are directly a part of.
Priorities gathers what the entire Freeos community believes should be the focus of the current iteration’s vote. These are high level questions designed to help the community come to an alignment for the voting part of the process.
None of these questions have any direct effect on any economic parameters. They primarily help mitigate against any Prisoner Dilemma situations that might arise if there was no way to convey group intent.
Partaking in this process is not mandatory, but not participating reduces the amount of points earned (20%) at the end of the iteration.
Vote
This section is the heart of the Freeos democratic economy. This section will be live for the majority of the week and represents the key component.
Here, participants vote on a number of economic parameters that affect the Freeos Economic System such as:
- Issuance of Points
- Mint Fee (for FREEOS and other supported tokens)
- Locking Threshold
- Pool or Burn FREEOS (determines how the Mint Fee is used)
- Reserve Pool Arbitrage
- Allocations (to supportive partners, ngos etc.)
Issuance of Points is a percentage of the maximum weekly issuance rate. The maximum issuance rate is related to a concept called the Conditionally Limited Supply, or CLS.
The CLS is the total amount of theoretical Points representing potential lifetime earnings per registered participant. Each week’s issuance is a slice of this CLS. Participants can vote for a smaller issuance than the maximum allowed allotment in this week’s earnings.
Why might the participants vote for a smaller issuance and earn less this week?
If the participants — after many repeated weeks — observe a downward impact on the price, then the participants may start to be more conservative with the issuance, hoping to support the price per FREEOS token instead.
Perhaps, in typical times, the participants vote for the maximum issuance but when the economy takes a downward turn, the desire to conserve the value of previously earned FREEOS may outweigh the desire to gain maximum Points this week — particularly in an economic downturn.
One can imagine that if citizens of certain, inflationary countries had a direct say in the national inflation rate, some citizens might have made different choices at various points in history. With Freeos — even if the maximum issuance is always the common result — at least the community has this option to vote differently if needed.
The Mint Fee is one of the changes to the system that used to be the “Access Fee”. Instead of having an Access Fee representing entry into the Freeos Economic System, the new design of the Mint Fee now places that fee at the point of minting FREEOS tokens.
This opens up the system to allow verified participants to enter freely and earn Points weekly, while putting off any fees until an individual is ready to make that decision.
Freeos is a system that puts the choice of minting the FREEOS token in their own individual hands, but a price needs to be accounted for to help support a reasonable value of the FREEOS token.
The Mint Fee supports a possibility of a healthy value of the FREEOS token in a similar way that taxes support a national currencies economic base in a floating fiat-based economy (in modern times, this includes the entire world). It is also similar to the sunk costs that Bitcoin miners pay for ongoing electricity, rent and hardware needs turn into a consensual supporting price that the miners are reluctant to sell Bitcoin below.
To be very clear, the Mint Fee is not directly benefiting — or being sent to — any person, nor to any organisation, not even the participants of Freeos.
Instead, the fees are used as part of a wider economic support system of Freeos.
The Mint Fee may be burned, or sent to pools (Reserve or Liquidity) that are accessible to the open market. The smart contracts that govern this process do so without bias to anyone willing to engage with these contracts — even those that have no interest in registering or participating in Freeos at all.
Mint Fees are paid using FREEOS tokens, or other tokens on the Proton chain. The participants vote on the percentage required to pay the fee (6% — 30%) with a corresponding minimum fee to ensure a healthy base price required for the economic support mechanisms.
Each token allowed to pay the Mint Fee can be voted independently. This allows voters choice to encourage certain tokens to be used over others to pay the Mint Fee. This simple vote can result in a variety of different dynamics depending on the current economic state and intention of the community.
For instance, encouraging paying FREEOS for the mint fee may result in burning FREEOS tokens (also dependent on a community vote). This may reflect the desire of the community to pull some FREEOS tokens out of circulation, which may be the healthy choice for the current economic condition.
Conversely, participants may wish to fill the Reserve Pool with wrapped Bitcoin, and vote for a lower Mint Fee in XBTC — growing the Reserve Pool to be used for a future sharp economic downturn.
Voting for all tokens to be at the highest fee may help draw a line in the sand that supports a relatively stable value that the community may be trying to establish for FREEOS.
Any of these possibilities — or more — can be employed simply by having each token’s Mint Fee managed by community vote.
The Locking Threshold has a few similarities — in an overall concept — to Ampleforth’s elastic supply.
But instead of how Ampleforth’s elastic supply works directly on the native AMPL token, the Locking Threshold works only — and temporarily — on the Points allotted to each active participant.
What does this mean exactly?
Well, simply put, a percentage of Points are awarded — but temporarily locked — if they fall below a certain price threshold. This Locking Threshold price value is voted by the community.
This is another way the community can help work together as a unit to make a strong stand to support a value of the FREEOS token that is commonly agreed upon. The community must be willing to have a portion of their points frozen temporarily for a period of time if the open market goes below that agreed-upon-price.
A portion of points may be unlocked if the Locking Threshold is reached — or exceeded. Consecutive weeks of reaching (or exceeding) this Locking Threshold increases the percentage that is unlocked per week — eventually releasing all that might have been locked.
Of course, the community may wish to lower the threshold, if they are impatient and desire — en masse — to receive the full allotment of Points (and also may help to quickly free up locked points).
The Locking Threshold vote is a tool that the community may learn to skillfully use to establish and manage healthy, sustainable (and ideally stable) earnings. This may allow Freeos to be a type of reliable, supplementary income. A type of self-governed UBI.
Voting to Pool or Burn FREEOS is a binary vote that decides whether the Mint Fee is used to support the burning of FREEOS tokens, or whether the FREEOS tokens are paired to tokens in the Reserve Pool to be sent to third-party decentralised exchanges to create liquidity pairs.
This choice has an effect on whether the Reserve Pool can be voted upon — or not. Choosing to “Pool” means that Mint Fees are used for providing token pairs to Liquidity Pools. Since this use of tokens for Liquidity Pools conflicts with the usage of tokens for the Reserve Pool, this binary decision has an effect on whether, or not, the user can signal a percentage of the Reserve Pool to be released.
The Reserve Pool gathers the non-FREEOS tokens used in the Mint Fee. These tokens can be voted to be released when a certain minimum value is reached (based on percentage of FREEOS market cap).
When the participants vote for a portion of this Reserve Pool to be released, the smart contract allows anyone to purchase these tokens for a discounted price compared to the open market value in FREEOS tokens — creating an arbitrage opportunity. The only catch — these Reserve Pool tokens need to be paid for using FREEOS tokens. Any FREEOS tokens paid are immediately burned and taken out of circulation.
An elastic, bonding curve reduces the discount as more of these tokens are sold giving first time buyers the opportunity to obtain the best arbitrage opportunity.
This mechanism is expected to be used in times of steep economic downturn, and the skillful use of this vote may help keep the price of FREEOS relatively stable in such an event.
Allocations to supportive partners are voted by Top 3 preference by individual participants. These votes are weighed, and when the vote is processed, an additional +3% of the Issuance is further minted and awarded to the accounts of these partners.
Partners will be initially added by FreeDAO, and will be chosen for strong, overlapping alignment with the mission of FreeDAO to support commons, cooperation and freedom around the world.
Later, as FreeDAO develops its own governance structure, a way for the community to propose, or remove, partners and vote on updating the list will be worked on.
This has a strong win-win nature to it.
Non-profit organizations added to this list gain potential earnings of FREEOS and additional exposure to their cause.
They may encourage their members to join Freeos, which adds strong potential for a healthy group of giving-oriented, aligned, participants to join the community. Of course, these new members are likely to vote for the partner that they already long-supported.
Having good, strong, aligned partners — as well as supporters with a strong, existing economic base and existing willingness to give — helps ensure that the Freeos system is also well-supported. This may be key as Freeos expands and endeavours to be a foundational force for positive economic freedom around the world.
As with the surveys (CSA), partaking in this process is not mandatory, but not participating reduces the amount of points earned at the end of the iteration. With voting, 50% of the points earned will be for engaging in this key process.
Ratify Vote
This is a simple “yes/no” vote that takes the final results and puts it up for one final ratification. This vote can only be done by those that have participated in the actual vote preceding this.
So why include this? The purpose of this vote is an emergency brake in case the community had voted for some very optimistic parameters in a long stretch of good economic times, just before a sudden drop in the market.
Since such bullish, optimistic parameters may negatively magnify any sharp market drop, this final vote could be used to back out. Participants may take a weekly loss in points earned, but may wish to reestablish a new vote the next week (iteration) so as to protect any FREEOS tokens held.
So, even if seldom used, such a vote may come in very handy.
As with the prior steps, partaking in this process is not mandatory, but failing to participate reduces the amount of points earned at the end of the iteration. The difference with the other steps, is that ratifying the vote can only be done if the participant has voted—to ensure that only those who participated in actual voting have the decision-making powers.
With ratifying the vote, 30% of the points earned will be for engaging in this process.
Claim Points
Once the vote is ratified, participants who were active in this week’s cycle may claim their allotment of Points as earnings.
This is incentivised democracy at work and is one of the beautiful ideas in Freeos. To keep a healthy, sustained interest in democracy, why not tie it directly to economic outcomes?
Participants will have at least another iteration to claim their points. This length of time may be extended an iteration or few depending on our technical team’s investigations on smart contract RAM usage.
Even though Points will have no recorded market value, and cannot be transferred, sold, or exchanged, they can be used to mint FREEOS tokens — which brings us to our next section.
Mint FREEOS
Once a participant earns and accumulates Points, it might be desirable to use these Points to mint some shiny, new FREEOS tokens. After all, FREEOS is a real, freely exchangeable cryptocurrency that can be transacted and used on the open market.
As mentioned prior, minting FREEOS tokens will require a Mint Fee, in addition to the corresponding Points. A participant may choose any of the tokens supported by the Freeos Economic System — including FREEOS of course.
There will be a minimum fee — so minting 1 FREEOS at a time will not be possible. This minimum fee algorithmically corresponds to the Mint Fee percentage voted by the community.
But once this Mint Fee has been paid, and Points used, FREEOS tokens may be minted into existence by the participant at their own discretion. Just be aware that this may be a taxable event in your jurisdiction. Checking in with your local tax authorities is advised.
Any Mint Fee paid will be automatically sent to be used by either the Liquidity Pool or the Reserve Pool, depending on the community vote at the time of paying the Mint Fee.
Mint FREEBI
This is one of the new updates alluded to at the start of this article.
After some insights and observations from the recent Beta Test, it was realised that the concept of Points (and user-driven-minting) opened up a possibility of having a unique class of tokens in our system — one that could be transferred ONLY amongst verified, registered users of Freeos.
This token could be excluded from any Mint Fee, allowing a walled-garden, internal economy to exist. This economy would be peer-to-peer and limited, as this new type of token would not be able to exist outside the Freeos Economic System.
It would likely be impossible–or at least extremely improbable and impractical — for this new token to be listed on any exchange as the only way to transfer it would be to be a verified individual.
But families could send it as a remittance. Small communities could use it as a local currency for simple, peer-to-peer transactions. Donations could be made with this currency freely.
It would match the original intentions to support a Universal Basic Income without burden, or additional fees.
Since any usage of this new token would reduce the need to mint additional FREEOS into circulation, it may even help support a healthier price for the fully liquid FREEOS token.
Our working title for this coin is FREEBI. As mentioned, there would be no Mint Fee needed—just Points. However, if one wishes to convert FREEBI to FREEOS, the same Mint Fee would be required.
Reserve Pool and Liquidity Pools
The voting section of this article covered how the Reserve Pool can be used as a way for the community to steward Freeos through downturns in the wider economy.
The tokens in the Reserve Pool come from non-FREEOS tokens paid in the Mint Fees, but these tokens may sometimes be used to fund the Liquidity Pools when the vote has been set to be “Pool” instead of “Burn”.
When the community votes to “Pool” the Mint Fee tokens, FREEOS is not burned and instead automatically (through smart contract logic) is paired with tokens from the Reserve Pool, creating Liquidity Pairs that can be sent to Decentralised Exchanges.
This allows the community to support a healthier market with more depth — often important to ensure sustainable economic activity can occur.
Since the mechanisms of the Reserve Pool and Liquidity Pool is quite different, but uses some of the same tokens, the vote restricts participants from submitting a vote for both releasing the Reserve Pool AND choosing “Pool” at the same time.
Summary
The Governance Phase represents the fundamental model for the Freeos Economic System designed to provide enough tools for the community to steward and self-govern the economy towards success.
One clear realisation is that the decision to award Points provided a new way of thinking of the economic system that has opened up many potential benefits and possibilities.
Points led to the idea of a 2nd, limited-but-more-accessible currency (FREEBI) that could be used internally and to support local economies.
The concept of Points may also help participants manage their personal tax responsibilities wisely (again, check with your local tax authorities), and has allowed the design to put the economic responsibility of minting currency in each individual’s hands.
Freeos is not an authority given “hand-out”. It is a self-governed, cooperative, “hand-in-hand-out”. Freeos is flipping the script.
Another realisation is that eliminating the old “Access Fee” concept allows Freeos to be far less restrictive to join.
The only conditions to earn Points, and FREEBI, is to undergo Proton’s verification process successfully and to participate in the weekly voting cycle.
Five minutes of verification and a few steps that take minutes a few times a week is all that is needed to vote and earn at this basic level.
Understanding of the depth and nuance of the system will come in time. This was true for many in our Beta Test that came to understand the system quickly through repeated tries.
We’re excited to move into this next development stage to prepare the full vision and functionality of this new type of self-governed economic system. And we’re also just as excited to have an amazing, dedicated community that has been supporting us immensely along the way.
For more on Freeos, please check our webpage for more info, or join us in our Telegram Community where you may ask more questions about how Freeos is intended to work.
