- Freicoin introduces the concept of a small holding fee, called demurrage, to virtual currencies. Currency owners automatically pay this fee. This promotes currency circulation and encourages sustainable investments. This fee, 5% per year, re-enters the economy through miners who use a large portion of it to pay for operating costs.
Hm.
Assuming against all odds it manages to exist along side of or displace bitcoin, why would one not convert one's freicoins into some other currency to avoid the holding cost? It seems that this strategy could only work as designed if there were a good reason not to pull out what you want to save.
You would convert your money, and then spend it to avoid the fee. Look what's happening with Bitcoins right now, the higher the price surges, the less of a useful currency it becomes, and the more of an investment commodity it becomes. It's one of the problems with Bitcoin. The more the price surges, the less useful it is to spend because people want to hold onto it, and when the price falls, you don't want to hold onto it. If the dollar was fluctuating that badly it would be chaos. I think what Freicoin is trying to do is implement a mechanism to prevent what is happening to bitcoin from happening to it. It becomes a currency you want to USE, not a currency you want to sit on and hoard like bitcoin.