FreedomCoin: Just another word for nothing left to lose?

By David Gerard

Cryptocurrency started as "electronic peer-to-peer cash" that would free us all from our financial system oppressors! But since it was based on economics that don't work, it failed miserably as currency. The transaction clog from mid-2015 was bad enough, and the $55 average fees in the recent bubble shook off even the merchants who were doing okay with it.

Now it's apparently a store of value (that loses 85% in a year), or a ridiculously expensive timestamping system, or something. (Don't say "child porn," OK. That definitely wasn't part of Satoshi's vision, even if it's now literally part of Satoshi's Vision.)

But it has a tiny use case as a brittle and clunky payment system that normal people only use when they want to buy important things, such as drugs, and the men with guns stop them from using actual cash money. (Yeah yeah, there's a slight remittances case too, even if conversions tend to eat any savings. And it's nice to have channels for exchange out of the view of the eye of Sauron. Even if they're not very big ones.)

It turns out guns themselves are one of those things that you can't buy easily with actual cash money, or with credit—bankers and everyone else who touch the business are under pressure from gun control advocates (per Decrypt passim).

What sort of people have come forth to bring about the dream of buying guns easily? The fabulously successful entrepreneurs of ICOx Innovations! With their extensive track record of really cool ... promises. The people who will surely bring you KodakOne and KodakCoin, one day soon.

FreedomCoin has a name calculated to appeal to Second Amendment-respecting personal weaponry enthusiasts. But its "freedom" is minimal. Think of FreedomCoin as a plan—remember that none of this exists yet— for a stablecoin, backed by actual dollars. The idea is for it to be a currency option on GunBroker.com, an eBay-like site for guns; the site doesn't sell the guns, it just matches buyers and sellers.

ICOx has engaged something called BitRail to develop this new stablecoin system, from scratch. Customers will buy FreedomCoins on BitRail—bank deposit only, please, no credit cards—to ensurer a "more secure payment platform. They can then send the tokens to sellers, who will, we are told, be able to turn the FreedomCoins back into actual money. GunBroker's press release says "Users will be able to exchange their FreedomCoin for a set amount of U.S. dollars at any time"—but  the press release from BitRail, which will presumably do the actual exchanging, notably doesn't.  It only talks about users purchasing the coins, not about redeeming them for actual money.

Substitute money is a super-risky field of endeavor. ICOx and BitRail are painfully aware of this, and stress repeatedly how compliant they plan to be with every conceivable law and regulation. This is the 180-degree opposite of the fiery, inchoate and contradictory anarcho-capitalist dream of cryptocurrency—but it is a reasonable first step in surviving first contact with the real world, and not promptly becoming the next Liberty Reserve.

BitRail have also made noises about "buyer protections" to credit card standards. This is famously not a feature of cryptocurrencies, which are notorious for their greatest feature—irreversibility— and the panoply of Sorry-For-Your-Loss events that this implies, in theory and practice.

GunBroker calls FreedomCoin an "exclusive cryptocurrency," BitRail says "compliant cryptocurrencies" and ICOx says "cryptocurrency and blockchain-enabled infrastructure" ... but it sounds very like FreedomCoins are a centralized database entry—like frequent flyer miles, Quadriga Bucks, or a loyalty program, rather than anything the slightest bit "crypto" in practice. Still, press-release levels of "cryptocurrency" are evidently worth a mention in literally all the crypto blogs. [Ed. Like this one.]

The other big problem with FreedomCoin is that ICOx is most notable for its track record of non-achievement. The KodakCoin ICO failed hard, and it reportedly stiffed not only its contractors, but its original partner, WENN Media. Since ICOx was founded in December 2017, the only two companies in its press releases are KodakOne and BitRail — despite it claiming a "pipeline of opportunities" in its press release for a public listing in December.

The other, other big problem is that regulators have noticed that stablecoins exist—and have a number of concerns. The Texas Department of Banking issued Supervisory Memo 1037 last month, which includes rules on "sovereign-backed stablecoins." Texas considers these things enough like "money" that you need a Texas money-transmitter license to even touch them—and, I’m no lawyer, but the wording looks broad enough to possibly include a marketplace such as GunBroker.

We contacted GunBroker, BitRail and ICOx with all the obvious questions. GunBroker referred us to BitRail; Bitrail was "unavailable due to travel conflicts," and ICOx didn't answer. (This is normal for crypto press releases, where the person who knows anything always happens to be on Mars this month.) We'll be delighted to update if they want to drop us a line.

In the meantime, technical and other execution-oriented concerns aside, whether FreedomCoin works depends on just how hard the conventional system is pressured on gun purchases—and whether the system is too dumb to tell that something else is being used as a substitute currency for restricted goods. I'd assume the system's seen every trick you can think of before, though.

Hype is cheap in the crypto space. There are any number of chancers who will sell you promises and never come through. But when it comes to a scheme that would make it even easier to buy guns in the U.S., that's a good thing.

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