I am confused by a passage in the wikipedia article Universal $C^*$-algebra, particularly these two sentences
This means that depending on the generators and relations, a universal C*-algebra may not exist. In particular, free C*-algebras do not exist.
My confusion arises in connection with one of the examples offered in the wikipedia article:
The universal C*-algebra generated by a unitary element u has presentation $ \langle u | u^*u = uu^* = 1 \rangle$. By the functional calculus, this C*-algebra is the continuous functions on the unit circle in the complex plane. Any C*-algebra generated by a unitary element is the homomorphic image of this universal C*-algebra
Wouldn't a group generated by a single unitary element be a free group on one generator? If so, how can the article claim there are no free $C^*$-algebras? Perhaps I am misunderstanding their use of the word 'free'. In addition to resolving this confusion, I am also interested in knowing whether there are $C^*$-algebras which admit of unitaries that form a free group? Are they numerous? I am mostly interested in a finite number of unitaries forming a free group, if that makes things any easier. I think one way of doing this would be to take a finite collection of unitaries each having infinite order, and then take the free product of their cyclic groups; but I might be mistaken. Is there any other way finitely generated free groups of unitaries arise?
A free object to a set $X$ in a representable category is an object $A$ together with an inclusion $i:X\to F(A)$ so that for any other map $f:X\to F(B)$ there is a unique morphism $g: A\to B$ so that $F(g)\circ i = f$. (Here $F$ is supposed to be the forgetful functor.)
Notice how all you have is a set of elements, and no relations on these, unlike your example.
For example let $X$ be a two-point set, and suppose you have a free algebra $A$ wrt $X$ with $a_1=i(p_1)\neq i(p_2)=a_2$. You can define a map $f: X\to F(A)$ via $f(p_i)=2a_i$ and then you must have a morphism $g:A\to A$ with $g(a_i)=2a_i$. Now $C^*$ algebra morphisms are contractive, which is incompatible with $g$ unless both $a_1=0=a_2$, which is not allowed.
As to your second question, finding a $C^*$ algebra with unitaries coming from a group $G$, namely $G$ acts via unitaries on $\ell^2(G)$: $$u_g\left(\sum_{h\in G} x_h\,h\right) := \sum_{h\in G} x_h gh.$$ You can verify $u_gu_h=u_{gh}$ and $u_e=\mathbb 1$. Taking the sub-algebra of $C(\ell^2(G))$ generated by the $u_g$ you get a $C^*$ algebra, but it can have a lot more unitaries than just those of the form $u_g$.