I think it's cool, in fact I made one sorta like it for my 6th grade science fair! My father was using Eddy Current Brakes on some machines he was building and I had asked how they worked to stop a spinning disc without touching it. He explained it to me and I got the idea to use that in my science fair project. Mind you I did not have neodymium magnets or LEDs, so mine was considerably more bulk, ugly and less effective. But watch the video closely. They NEVER show the light without the wheel turning. That's because with no batteries, the light will go dark every time you stop. Not so great in urban settings and I think their statement about "never" having to worry about lights on your kid's bikes is a little over zealous.
And although they do highlight that it is "frictionless", that does not mean there is no energy transferred, there is. The magnets acting on the rims to capture energy from eddy currents is indeed going to be imparting a retarding force on the rim, just like the Eddy Current Brake system. I could feel it on mine. What makes it viable now is the high energy to lumen ratio of the LEDs because it would keep the effort from the peddler low. I would consider also coupling it with a slow discharge cap so that at least it could stay illuminated for a minute of so when at a stop light.
"Dear future generations: Please accept our apologies. We were rolling drunk on petroleum."
— Kilgore Trout (via Kurt Vonnegut)
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