Freicoin: Occupy's online currency for the 99 per cent

Jacob Aron, technology reporter

(Image: MANTEL/SIPA/Rex Features)

The Occupy movement rails against the richest 1 per cent and the banks that support them, while supporters of the online currency Bitcoin want to do away with banks all together. So perhaps it's only natural that the two have come together to create Freicoin, a currency controlled by the general public rather than central banks that makes it impossible for the rich to hoard cash.

Bitcoin users run peer-to-peer software that handles transactions and keeps the currency secure, receiving small transaction fees in exchange for their computer time. Freicoin, created by NASA engineers Mark Friedenbach and Matt Everingham and photographer Aaron Blumenshine, uses a version of the Bitcoin software with one key difference - all account balances are charged a 4.4 per cent annual fee, which is distributed to all of those running the software.

The upshot is that it becomes very expensive to store large amounts of cash - $1 million would be eroded to less than $800,000 in just five years. Those who have regular income and expenditures would see little change though, as money enters and leaves their accounts too regularly to be reduced by much. The rich then have a choice - turn your Freicoin into a tangible asset such as gold or real estate and risk theft or other accidents, or loan out your money at low interest rates to the 99 per cent.

Friedenbach and colleagues have been working on a prototype of Freicoin over the past year and are now hoping to crowdfund money - in US dollars - to fund development of the full system.

Charging people to store money is not a new idea though. Economists call it demurrage and it was used locally in both Austria and the US during the 1930s. Of course, convincing the rich to adopt such a system will be difficult, as there is no benefit to them and significant costs.

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