How Freicoin works
In Freicoin, currency is produced through a process called “mining”, the execution of tasks required to keep the network running and secure. Every Freicoin client is capable of performing these tasks, but in practice mining is the domain of computer enthusiasts and IT professionals with tuned top-level hardware. New currency is created in strictly limited amounts according to certain math algorithms implemented in the Freicoin client. The total amount of currency in circulation will smoothly increase for approximately 3 years following launch, until it stabilizes at 100 million coins.
During the 3-year initial distribution, part of the newly created currency is given to the miners in proportion to their contribution, starting at 30% of new coins (on launch) and decreasing to 5% (at the point of stabilization). While the network is small and young, it needs more care and attention than when it’s become mature. The remaining currency is distributed through the Freicoin Foundation, a non-profit organization aiming to promote Freicoin and support a sustainable world. 80% of the total will be distributed through the Foundation.
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.