Freeos Tokenomics: Part 1 —Distribution Dynamics
In some ways, Freeos is simple: come in, vote using sliders and check boxes once a week, and voila! You earn crypto!
But under the hood there’s a complex set of economic dynamics helping to create a system and a currency stewarded and generated by all of us.
In Part 1 of this series, we will talk about the distribution mechanics of the FREEOS token, and how some of the mechanisms may drive some compelling economic dynamics to occur.
The story of Freeos starts with the AirClaim and the very first FREEOS tokens minted by the participants.
Unlike many modern cryptocurrencies, FREEOS tokens aren’t pre-minted and distributed. Instead, they are minted by each user depending on how many non-transferable Points they have earned, and claimed each week.
Think of Points as points in a game, or hours put into a job that cannot be transferred to another person. Once these Points are earned, they can be used to mint liquid, exchangeable FREEOS tokens at the participant’s discretion—provided the mint fee is paid.
Participants can also decide, instead, to mint FREEBI tokens, which do not have any mint fee requirement—however FREEBI tokens can ONLY be transferred to other, registered and verified Freeos participants. Thus FREEBI tokens are internal tokens only and cannot escape the Freeos Economic System.
Dynamics at Play
With Points, FREEBI and FREEOS tokens distributed in the system, and with slightly different rules in the AirClaim Phase compared to the Governance Phase—a number of dynamics are expected to play out.
Using the above diagram, let’s visit each of the numbered items to paint a picture how these dynamics work.
- AirClaim Earnings: The AirClaim distributes a limited amount of Points, for a limited time. These Points can be used to mint FREEOS without requiring any Mint Fee. The AirClaim limits the amount of Points/FREEOS earned through the exponentially increasing staking requirements AND the fixed duration of 25 weeks. This distributes the initial FREEOS tokens in the market through a wide distribution event.
- Governance Earnings: Although participants will not have a staking requirement in the Goverance Phase to earn Points, they will need to be verified. Points can be converted—without fee—to mint the limited-use FREEBI tokens OR a participant may decide to pay the Mint Fee to mint FREEOS tokens instead that are freely exchangeable like any other cryptocurrency. Participants may also use FREEBI to mint FREEOS tokens, provided the mint fee is prepaid upfront.
- The Mint Fee will allow willing participants to take their earned Points and mint FREEOS tokens—provided they pay an upfront Mint Fee (with the rate determined by community vote). The tokens used to pay the Mint Fee either are held by the Freeos Reserve Pool (with FREEOS being burned), or the Freeos Liquidity Pool to provide additional support for a liquid market.
- Some of the AirClaim participants may sell part of their initial FREEOS tokens to the open market (eg. exchanges, DEXs). This provides the source for any FREEOS tokens required in the system: for latecomers to the AirClaim to pay the holding requirement OR for Governance participants who need FREEOS to pay the mint fee to turn their Points/FREEBI into further FREEOS tokens.
- Additionally, some of the Governance participants may also wish to sell part of their initial FREEOS tokens to the open market. Again, this provides other participants who need FREEOS to pay the mint fee to turn their Points/FREEBI into further FREEOS tokens.
- Typically the mint fee will often come from purchasing cryptocurrency from the open market (eg. exchanges, DEXs), including the FREEOS tokens sold by some of the AirClaim participants, or by the Governance participants who decided to mint FREEOS tokens.
This may lead to a number of compelling dynamics to have an opportunity to emerge:
- The limited FREEOS from the AirClaim participants may be in demand due to the larger group of Governance participants wanting some FREEOS to pay the mint fee—to mint all of their latest Points/FREEBI obtained into FREEOS.
- Since using Points to mint FREEOS/FREEBI may be a taxable event in various jurisdictions, there may be many participants delaying such an event until they are ready—this could slow down the increase to the circulating supply of FREEOS.
- Since FREEBI has no mint fee, but is not transferable outside the system, a large supply of FREEBI might have limited impact on the perceived, or actual, supply of FREEOS. If the demand for FREEOS can meet, or exceed, the supply of liquid, circulating FREEOS, there is potential for the price to be healthy.
- FREEBI may be perceived as having a slight discount compared to FREEOS in value (since only the amount of the mint fee should be the difference between them). If so, internal markets between Freeos participants selling services, and goods between individuals, and sole-traders may occur using FREEBI.
- Businesses and markets may wish to attract Freeos participants to their businesses once it is known that a sizable amount of Freeos participants live in their area (or represent a sizeable share of a targeted, online market). Some business-oriented individuals may even wish to earn large amounts of FREEBI for their sales efforts — deciding to convert to FREEOS when a liquid, freely-exchangeable, cryptocurrency is required. Thus FREEOS and FREEBI could be used by businesses and sole-traders for marketing purposes to attract new business. These potential dynamics may be magnified if a healthy price of FREEOS is maintained.
- FREEBI, since no mint fee is required, may be useful for sending remittances to overseas family. This may be particularly useful for families living in wealthier nations that wish to send FREEBI to overseas family members who might benefit more from it.
- Since the Mint Fee, paid in FREEOS, can be voted by the community to be burned—any increased demand to mint FREEOS tokens may result in reducing the circulating supply.
With the Freeos Economic System, the ways that Points, FREEBI and FREEOS are distributed, and how they interrelate to each other, has potential to create dynamics that make Freeos more attractive than a simple, inflationary crypto-UBI possessing few means of supporting rich supply & demand mechanisms.
Like taxes in a floating fiat system, or like the ongoing costs required to maintain Bitcoin mining operations, the Freeos Economic System has the Mint Fee as an ongoing purchase pressure to provide a base-level use case for the currency. Additionally, other market-forces may develop over time to provide use cases far beyond the base-level mint fee.
Merchants, knowing that a sizable group of Freeos participants exist, can then decide to onboard FREEOS (or for smaller sole traders, FREEBI) to attract further customers. Such dynamics, once proven successful, may then encourage consistent, sustainable usage of FREEOS as payment systems. In small villages, this may be FREEBI, making it possible for people who cannot obtain the mint fee to pass this burden to the shop owners, instead.
This is only a part of the tokenomics supporting the Freeos Economic System, and we’ll be explaining further concepts in this ongoing series.