Much has been written, and explained, about the vision for the Freeos Economic System in its entirety. The whitepaper, and most of our articles emphasise the second main phase of the system, that we call the Governance dApp, or Governance Phase. The Governance Phase is the phase where participants burn FREEOS tokens to gain annual access to vote on economic parameters, and earn a yearly FREEOS income for their stewardship.
But little has been written about the first phase — the AirClaim.
REMINDER: The AirClaim is launching on Midnight, UTC 0:00 — February 14th, 2022! Go to https://app.freeos.io for a countdown until the launch.
So what is this AirClaim? What are the core elements and features of this AirClaim, and what is their purpose? How does it differ from an airdrop? And how does it fit into the rollout for the fully-featured Freeos Economic System?
The AirClaim in a Nutshell
The AirClaim is essentially a user-driven, weekly claiming process that earns the participant an increasing amount of Points that can be minted into FREEOS tokens each week — for 25 weeks.
It is designed to kickstart the economy of the Freeos Economic System, by widely distributing an equal share of Points, which can be minted into FREEOS tokens at each participant’s discretion.
Users log into the Internet Computer hosted dApp using the Proton wallet and press the “claim” button, sign the translation and receive non-transferable Points, that can be minted into freely transferable FREEOS tokens.
Then come back a week later, and repeat the process.
Once the AirClaim is over, it will transition to the Governance dApp where participants can vote on economic parameters in the Freeos Economic System to steward and earn further FREEOS tokens weekly.
The Elements of the AirClaim
For many, verified, participants who start from Day 1, engaging with the AirClaim has the potential to be a very simple process:
- Sign-in & Register
- Claim POINTs
- Come back in a week and repeat step #2 (until 25 weeks have passed)
Additionally there are some extra things that a participant may wish to do.
- Unlock POINTs (this depends on whether there are any “locked” POINTs, which depends on the open market price of FREEOS. More on this below.)
- Convert POINTs to FREEOS (this is a decision each participant needs to make on their own. This mints FREEOS tokens, which may be a taxable event, depending on the jurisdiction of the participant. More on this below.)
NOTE: For many of the KYC verified participants who come in early AND claim every week, this is as simple as it needs to be.
For other participants (depending on how late they came into the AirClaim, and whether they verified using the Proton wallet KYC procedure), the procedure may look like this:
- Sign-in & Register
- Stake XUSDC (price depends on number of users & verification status. More on this in this handy guide here)
- Claim POINTs
- Come back in a week and repeat step #3 (until 25 weeks have passed)
Each week of the AirClaim increases the amount of POINTs received via claiming until week 25.
Participants will be required to hold half of their earnings, so they can be assured they have enough to pay the Mint Fee in the Governance Phase. This holding requirement (which counts FREEOS and/or POINTs), also provides some early demand for the FREEOS token by latecomers and those that miss a number of weeks (iterations).
The end goal, for a participant who consistently claimed from the start, would be 10,000 POINTs, which can be converted to FREEOS at the participant’s discretion.
Since 5,000 FREEOS/POINTs are recommended for having enough to pay the minimum Mint Fee in the Governance Phase (to earn an ongoing income through participation in Freeos), this is enough for each participant to save for the needed, upcoming Mint Fee, and to have some left over (to sell, give away, etc.).
All About the POINTs
In the AirClaim, the participants are not claiming FREEOS, they are claiming POINTs.
And these POINTs can be either locked or unlocked, depending on the open market price of FREEOS.
Essentially, the market price is pulled from exchanges (from Proton Swap, Alcor Exchange etc.). The market price is checked against $0.0167 USD per FREEOS token — which represents the base locking threshold value in the Freeos Economic System.
If the market price is equal, or greater, than the base locking threshold, the system is in “good times”. In good times, the full amount of POINTs expected this iteration (week) will be awarded to the participant.
If the market price is below the base locking threshold, the system is in “bad times” and temporarily locks some of the POINTs. The amount of POINTs locked correlates to the percentage the market price is below the base locking threshold.
For instance, if the open market price of FREEOS equals $0.01 USD, there is, roughly, a 40% difference compared to the base locking threshold.
So, if the open market price of FREEOS equals $0.01 USD in week 5, then 40% of the POINTs will be locked, and 60% will be freely convertible POINTs.
Since week 5’s AirClaim rewards are 200 POINTs in total, this means the participant will have 80 POINTs locked, and 120 POINTs free to be convertible to FREEOS tokens.
This helps lower the amount of FREEOS in circulating supply, a dynamic which commonly helps support a healthy token price.
Any unlocked POINTs can be converted to FREEOS at each participant’s discretion. POINTs cannot be transferred, and therefore bought or sold. They can be converted, but this is a one-way procedure. This has some potential, depending on tax jurisdictions around the world (always check with your local tax authorities!!!), to help manage taxable events.
Converting a number of illiquid POINTs to liquid FREEOS may be commonly enacted for some participants only when there are enough accumulated to pay accountants and taxes.
Additionally, researchers and other interested parties may potentially participate in the system and never convert POINTs — hopefully without worrying about tax implications (again this will require some local tax advice).
With POINTs, the hope and intention is that it gives participants some actual choices.
HODLing Requirements
For some participants, who either came in very late to the AirClaim, or who have missed some weeks of claiming, they may need to purchase some FREEOS tokens to simply hold in their wallet, in order to claim (POINTs will also count towards this total).
This FREEOS holding requirement is to ensure that most users receive enough FREEOS tokens by the end of the AirClaim to easily enter the Governance Phase.
It also creates some early, basic demand for the FREEOS tokens on the open market to start the Freeos economic engines humming.
If a participant comes in late, he/she may need a number of FREEOS tokens to simply be held, in order to claim. The easiest way for most to gain these tokens is to purchase from an exchange.
Consider the following table that outlines the POINTs gained and the Holding Requirements per iteration (week):
If a new participant comes in at iteration/week 10, the holding requirement will be 900 FREEOS tokens. This participant may purchase some FREEOS tokens from the exchange.
If base locking threshold of $0.0167 holds, this may be around the equivalent of $15 USD.
NOTE: this base locking thresholdis an experimental aspect of this new economy and the actual market conditions may be vastly different. Take this as an example to understand the system only.
What might motivate a participant to pay $15 to enter the AirClaim late?
This theoretical participant might consider that the remaining 15 weeks would earn an additional 8,200 FREEOS tokens.
And this also is more than the 5,000 FREEOS required to enter the Governance Phase, where participants should be earning approximately 1,000 FREEOS per week (depending mostly on how the participants vote the issuance). Essentially, this 5,000 FREEOS can further earn approximately 52,000 FREEOS a year.
And by having some participants come in late, and potentially interested to purchase the FREEOS to enter the AirClaim — even for just the final weeks — there is potential for some early demand for FREEOS tokens to exist. Depending on how many POINTs are locked, and how many FREEOS are converted and sold, will factor into the supply and demand equation that typically sets prices of tokens on the open market.
A Stake in the Game
Some of the participants may be required to stake some XUSDC as collateral depending on a few factors such as:
- Came late. Staking requirements increase as more users enter the AirClaim as a soft cap on the circulating supply.
- Not verified. Staking requirements are higher for non verified users.
- Unknown origins. Accounts that were not created through the Proton wallet have the strongest and steepest staking requirements. This is to mitigate against bots.
Most early users will have low staking requirements. Especially for users that are able to do the KYC through the Proton wallet — these users may not have to pay a staking requirement at all!
Staking, in the AirClaim, is simply collateral. A user can get it back, but to prevent exploits, the stake will be returned only in the next iteration (max = 1 week).
Staking exists for two primary reasons:
- Mitigation against bots and duplicate accounts by putting financial friction. This is important for a democratic, equitable system.
- To put a soft cap on the number of users entering the system — as the staking requirements increase as more users participate in the AirClaim. This only affects new users. Participants who have already staked, do not need to update their stake (unless they have unstaked, and wish to return).
For more details on staking, and how the system works, see our handy staking (and holding) guide here.
Not Just an Airdrop
From what has been already written, it might be clear that this is more than just a typical airdrop of tokens.
And there are good reasons why this has been structured this way.
The Freeos Economic System has one particular core principle — that user activity mints the tokens.
FreeDAO doesn’t pre-mint tokens and distribute them. It is actually the opposite.
Participants mint tokens, and when they do so, their actions also mint tokens for FreeDAO — to cover research and development — to help bring about the fully-featured Freeos Economic System and its many technical, design and economic innovations. The amount FreeDAO gets minted tapers down towards a +7% addition of the mint as more participants are added, with higher values with low participants to help ensure there’s enough in FreeDAO’s treasury to continue development.
This user-driven minting concept becomes important later, because the voting mechanisms of the Governance Phase will also mint the tokens. From the beginning and forevermore, the actions of the participants mint the tokens.
So to be true to this principle from the start, the AirClaim also needed to be structured to be a mechanism that mints tokens based on user activity. This is much more involved than simply minting a number of tokens and distributing them to the team, investors and community.
Towards Governance, and Beyond
The AirClaim paves the way for the final Freeos Economic System in the Governance Phase.
- It sets the user-driven minting. This is critical, as a foundation, to be a democratic form of money by the people, for the people.
- It includes the logic for verified, and unverified accounts. This is critical for equitable democracy on the blockchain where one person has one vote and fair allotment of tokens.
- It includes the idea of a base locking threshold, and the mechanisms for locking, and unlocking POINTs. This will be extended, and driven by community vote to raise the locking threshold above the base value (although the $0.0167 USD price will remain the bare minimum).
- It includes the conversion of the POINTs, to liquid and transferable FREEOS tokens. This is important to fully ensure the users mint the tokens, and have some ability to manage taxable events — in jurisdictions where this may apply.
- It provides each user with more than enough FREEOS tokens required for the minimum Mint Fee of the Governance dApp. This is important because it allows each AirClaim participant to save up for a sustainable ongoing access to the fully featured FREEOS system, while also allowing some tokens to appear on the market, allowing others to join in also. It may also help set and establish the price of the FREEOS token.
- It sets one week iterations. This is important because the Governance Phase will last for one week, which should give participants more than enough time to vote and make sensible decisions on the economic parameters. It also establishes the rhythm and habit of a weekly cycle.
- It includes the mechanism to mint POINTs for FreeDAO for a sustainable development revenue stream. This is important to reach the fully featured system and for FreeDAO to continue creating tools of collaboration and freedom.
On the last point, it is good to set the stage and be transparent on how FreeDAO receives its revenues, both in the AirClaim Phase and the Governance Phase.
To help ensure FreeDAO has revenue to sustain development in the early stage of the project, a decreasing multiplier is set in the AirClaim Phase.
The more participants join, the smaller the multiplier becomes — by thresholds — until it reaches the +7% of the mint that will be firmly set in the Governance Phase and ongoing.
NOTE: This is written “+7%”, because it represents calculating 7% of the existing mint, then minting this amount in addition to the original mint. This means it is not reducing the participants’ expected amount as FreeDAO is receiving an additional mint separately.
The multiplier exists to help ensure that, even if the AirClaim’s participant numbers are fewer than expected, FreeDAO has some FREEOS tokens it can use for funding (any sold will be through a slow release unlocking contract to further protect the FREEOS price).
During the AirClaim, the multiplier thresholds are as follows:
Once the AirClaim is over, no matter what the final threshold and multipliers were last set in the AirClaim, the Governance dApp multiplier immediately becomes fixed at +7% forevermore.
These figures, shown in the table, were the result of a careful balancing act of finding thresholds and multipliers that gave FreeDAO a modest, yet scrappy, development budget while being conscious and careful of the early circulating supply.
The intent of this is to provide a sustainable budget that has a low likelihood of starving the project. We are conscious of the problems that can result from projects being spoiled from ICO riches, as well as projects struggling due to underfunding. These figures have been balanced to try to walk a middle ground that keeps us fighting fresh — or “hungry and foolish”.
These funds fuel the further development of the Freeos Economic System — and provides funding for FreeDAO to launch fully as a pure DAO, with a unique governance structure (that we’ve covered in a 3-part series starting here).
FreeDAO is set with the mission to create tools of collaboration and freedom. We believe that Voluntary Cooperation is a key component of true, sustainable freedom that serves the widest good and that blockchain has the potential to create strong, lasting systems that can help the entire planet align resources, vision and will in an efficient, yet accountable manner.
Freeos is the economic heart that will allow this vision to move forward and we’re excited to grow this project with the growing community that is already enthusiastically becoming a part of this new type of economic system.
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.
