Taler Bullion

Money can be backed with precious metals. Classics are gold or silver, modern additions are platinum and palladium. Taler Bullion makes it easy to pay with them, or save them, in the form of digital coins to represent the ownership of the underlying value.

The trade in precious metals has standardised monetary symbols in ISO 4217, namely the letter X followed by the chemical symbol letters:

• XAU for gold
• XAG for silver
• XPT for platinum
• XPD for palladium

Systems have been built with accounts that hold a balance in physical gold and other metals, respecting the rules given below. Payments were enabled, but mostly within the confines of the payment system. Taler Bullion wants to break out of those confines, and bring back an international gold standard.

It is worth noting that Gresham's law describes behaviour of people who rather take gold than spend it. But any country in deep inflation is an excellent opportunity for using gold for daily payments, for instance through credit cards or Taler Bullion.

Taler Bullion

The definition of a Taler Bullion unit matches the ISO 4217 definitions. This means highly refined metals, at a weight of one troy ounce or 31.10348 grams of the respective precious metal.

Consumer purchases can be made in any amount desired. They are best shown in the precious metal weight, which can easily be translated in grams or kilos or whatever the customer likes. Translation to another currency could be shown as well, but is no more than an indication; the trades in Taler Bullion are made in precious metal weight units.

When traded on an exchange (such as with the FIX protocol), the units are XAU and so on, and this relates by definition to a troy ounce. Gold bars and coins have a fixed weight, and this weight in troy ounces would define the quantity of the trade.

Note that the entire thinking of Taler Bullion uses another currency than the dominant currency in a territory. The system can stand on its own, and those who consider it that way will not feel much confusion using it, but will consider it as a separate trading environment with its own uses.

Conditions

The conditions for Taler Bullion are tried conditions for gold storage and trading. They have been used in the past for payment systems:

• Digital gold must be 100% backed in physical gold
• Digital gold is a title to the physical gold — meaning, the underlying value is not on a digital gold system's balance where it would be subjected to counterparty risks (such as bankruptcy)
• Physical gold is owned by customers, not service administrators
• Physical gold stores must be safe, guaranteed, insured

The same goes with other precious metals. We will not keep repeating that, but what we say for gold applies to other precious metals too, throughout this page.

Swapping Gold Bars

Digital gold systems are usually administration offices for account holders, and they take care of having at least as much gold available for accounts as customers have stored in them. They charge fees for gold sales and purchases, and usually a fee for insured storage. The actual storage is delegated to large vault operators.

Inasfar as digital gold systems have overlapping vault operators, they can ask those operators to move a gold bar from one pallet to another. This should be a relatively low-cost operation, not involving transport outside a safe perimeter and only involving security-trained personnel.

This mechanism may be used for larger transfers of gold between digital gold payment systems. This addresses the situation that might arise when there is a constant outflow from one digital gold system into another.

Trust Relations

Two digital gold systems with full backing in physical gold in safe storage have a shared value, and this might be swapped at (almost) zero cost. What is needed is a check of business operational procedures to put that to use.

When the metals are managed under comparable conditions, in terms of ownership and protection, or when any differences can be overcome by such things as insurance, then one system can trust the stored metal in the other as though it were its own gold. This creates a relation where one system trusts the other.

Based on trust in another system, it would be possible for a trusting digital gold system to have an account with the trusted digital gold system, and when payments are made from a customer of one account to a customer of the other system. The customer would experience the payment when the real transactions are between a customer and its gold system on each end, but either both or none.

Usually such trust relations would be mutual, but it is also possible for a slightly less stringent systeem to store a bar of gold with a more stringent one to create a one-sided dependency to enable bidirectional exchange.

Minting Taler Bullion

Currency tokens for Taler Bullion can be created by parties who keep the related gold in fully backed reserve. As part of integration in this system, the minting party must have open accounting systems where the reservation and continued availability of the gold can be verified at all times. Furthermore, there is the obligation to keep the gold off of the balance of the reserving party.

In terms of the GNU Taler system, this is the role of an exchange provider. Strict auditing must be enforced, with open inspection as need be, that the full reserve and not-on-balance rules are not broken.

TODO: Fees for storage/insurance/...?

Claiming Gold

Digital gold systems are professional gold traders. They generally ship the metals to customers, and also buy and sell while exchanging for other currencies at their spot price against gold. This gives options for claiming delivery of gold, or for swapping it for a more temporary form of money.

Taler Bullion is not about trading gold against other currencies, and not even about trading precious metals among one another. The value behind Taler Bullion is exactly the face value of the Taler Bullion currency. It is, after all, a fully backed currency. The other swaps count as foreign-currency exchange, and are conducted at dynamic rates.

Claims on the underlying value of Taler Bullion can at least be done at the digital gold systems that issued it. However, based on trust relations between digital gold systems, and the ability to trade in Gold Bullion with the mechanisms above, make it possible for digital gold systems to accept one another's currencies and trade it for gold. If not for any reason, than at least because foreign-currency exchanges are a source of income.

Note the importance in all this of knowing that Taler Bullion can be claimed in spite of the livelihood of the digital gold system. This simplifies the trust in other businesses in the same branch. And it leads to reliable claims when crossing over to other digital gold systems.