Demurrage, not freicoin mind you, worked over a very short term in Worgl, and there are questions about whether the success there was sustainable[1]. Demurrage on it's own doesn't operate very differently than the mildly inflationary currencies used in the real world (dollars, euros, etc.). Freicoin on the other hand is promising all sorts of other things.
[1] Quoting at length from:
http://bionicmosquito.blogspot.co.uk/2012/11/more-on-worgl-v...
"So, would this be sustainable? If not, why not?
I believe the activity would not have been sustainable. I believe that once the taxes in arrears were completely paid and once the people paid in advance to the degree they felt sufficient (one year in advance? Five years in advance? I don’t know, but at some point they would stop), the scrip would lose a key part of its attractiveness.
One way a government can ensure the demand for its currency is to demand (or accept) that taxes are paid in the subject currency. The other way is through monopoly legal tender laws. Wörgl obviously could not legislate or enforce monopoly legal tender, so the demand for the scrip could certainly be attributed to the need to pay taxes.
The demand could certainly not be attributed to the demurrage – not when there was the national schilling available – paying interest, and at a one-for-one exchange (setting aside the conversion fee).
Once this tax need was satisfied, what would happen to the desirability of a depreciating-value scrip vs. currency that did not come with a 1% monthly penalty? The answer to me is clear, not that we have to agree. I suspect the depreciating scrip would begin trading at a discount, and sooner than later would be regularly returned to the bank for the national currency, even with the 2% loss. Two percent might be too big a loss when one owes taxes and can satisfy these taxes with the depreciating scrip at full face value. However, when there is no benefit to holding a depreciating currency to the national one, I suspect many would eat the one-time 2% charge to avoid paying the recurring 1% charge.
In my opinion, this is exactly the situation that was immediately in front of Wörgl when the national government put an end to the experiment. Depending on which estimate of taxes in arrears used (see the discrepancy as pointed out in my first article), within one month, but not more than six, all taxes in arrears would have been paid. At that point, I suspect demand for the scrip would have fallen – resulting in the exchange for national currency that I described above."