Sensible Taler Bullion

Money can be backed with precious metals. Classics are gold or silver, modern additions are platinum and palladium. Sensible 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. The corresponding Taler Bullion currency is expressed in those units, meaning one troy ounce or 31.10348 grams of the respective precious metal at a high level of purity.

Sensible Bullion	ISO 4217	Precious metal
Sensible Gold Bullion	XAU	Gold
Sensible Silver Bullion	XAG	Silver
Sensible Platinum Bullion	XPT	Platinum
Sensible Palladium Bullion	XPD	Palladium

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 everyday payments, for instance via credit cards connected to a gold account, denominated in XAU or another currency, or by directly using XAU as a currency in Sensible Bullion online payments.

Trading with Sensible Bullion takes some getting used to, if it is the first time handling a "foreign" currency besides a nation's default currency. It takes some time to get used to different price levels, as well as different dynamics. The dynamics may be high when an underlying dependency is expressed in a fiat currency, but it can be fairly solid when the underlying dependency is all in the same currency.

Although parties will always exist that exchange between precious metals and fiat currencies, this is not the essence of trading with Taler Bullion. The basic idea is to accept another currency as it is, and get used to its own independent behaviour. That being said, it is quite possible that an exchange provider takes in, say, GNU Taler coins to release others based on the spot exchange ratio at the time of that trade.

Physical Backing

Payment systems tend to store their precious metals in highly secured and insured vaults. Moving this metal is considered an exception. The presence of the precious metals in these vaults is independently audited as a proof of underlying value, and the systems are designed for fully backed accounts. The ownership of the precious metals is off the balance of these payment systems, there is a well-organised handling procedure in case of bankruptcy, and all the payment systems do is keep track of accounts that effectively function as a title of ownership to the metals.

Payment Systems can usually organise physical transfer, but the insurance fees can be high. But given the straightforward exchange of the underlying value, it is also possible for these systems to hold mutual accounts and reduce the passing of value to a few internal bookings.

Mutual Accounts

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

An interesting option between Sensible Bullion payment systems could be the physical exchange of gold bars and gold coins, inasfar as the two systems make use of the same vault provider. The transfers would then be internal, and relatively inexpensive. This can be used to accommodate the growth of one system while another is getting smaller.

Minting Taler Bullion

Currency tokens for Taler Bullion can be created by parties who keep the previous metals in fully backed reserve. The metals are held without current owner, on a construct such as a third-party account as they are also in use with notary officials, lawyers and web-shops.

The GNU Taler component of an Exchange can be implemented as a booking account with full backing, controlled by the third-party account managers. Customers of the payment system can deposit from their account into these accounts, thereby reducing their title on the deposited value, and receiving in return GNU Taler coins in the matching denomination and amount.

These GNU Taler coins can now be spent, essentially in a direction towards trusting payment systems. At some point a recipient may choose to cash out the GNU Taler coins at the original Exchange, and initiate the process of obtaining the title of ownership. This usually means a deposit into the claimer's account for the same precious metal, where any intermediate legs can help to build a payout path from the Exchange to the claimer. As the metal leaves the Exchange, it ends on an account where it expresses the title of ownership on the precious metal.

TODO: Fees for storage/insurance/...? Limitations on claiming times?

Trading with Coins

For end users and merchants, day-to-day spending is done via GNU Taler coins in the desired unit. GNU Taler coins can pay any amount. Trading would set that precise amount. The payment with GNU Taler coins basically transfers the right to claim ownership to the payee, while destroying that possibility for the payer (thereby avoiding double spending). Note that the coins are minted only after the precious metal was transferred into the Exchange's account, where it is available upon claim, but not connected to any current owner; the metal is held in the Exchange on behalf of the current coin holder.

The GNU Taler system can facilitate payments with web engines, QR codes and could also be extended with payment cards of any sort. Be very careful about the use of insecure payment mechanisms such as credit/debit cards though.

FIX Trading

FIX Trading is used to prepare a transaction across a trust relation between payment systems for precious metals. It is not commonly used by end users. FIX Trading serves to strike an agreement and make short-term reservations, so that a value transfer can be made, which should not bounce anymore. This is useful to reliably prepare any transaction, even across multiple legs.

The units XAU, XAG, XPT and XPD can be used as a currency in FIX Trading. Whether you are dealing with a Taler Bullion peer depends on the party you connect to. It is quite possible to mingle Taler Bullion trading with other trading in the same units, but that is outside the scope of this document. Taler Bullion trading can be used to bypass these "outside" trading facilities and their exchange fees, if the purpose is to make 1:1 exchanges of the same precious metal.

Physical transfers between payment systems may also be negogiated over FIX Trading. These would also set a fixed weight on the side selling the bar or coin, and could ask for a min-max range on the buying side, to allow flexible matches.