Central banks are thinking about digital money as a counter to cryptocurrencies from private providers. If you are wondering if the thaler is a new cryptocurrency like Bitcoin, Litecoin or Ethereum, the answer to that question is yes and no. Yes, because it is digital cash. No, because the thalers are not mined. Instead, users exchange their local currency for the thalers in an electronic currency exchange. That’s why the GNU Thaler is not a currency in its own right.
The 4 central components of the GNU Thaler
- Digital purse (wallet) as an app or web extension
- Software for banks to issue the digital currency and process the transactions
- Software for merchants to receive the payments
- Software to verify the transactions
Study: Banks can issue GNU
The new payment system was developed with the collaboration of the Bern University of Applied Sciences in Biel (BFH). Head of the project is Prof. Dr. Christian Grothoff, lecturer for computer science at the BFH. Also on the project team are Thomas Moser, a board member of the Swiss National Bank (SNB) and cryptologist David Chaum. The study now published “How a Central Bank Can Issue a Digital Currency” shows: Banks can issue cryptocurrencies quickly and efficiently while respecting data security, regulatory requirements and environmental protection.
GNU digital money can combine these advantages
- Anonymous online payment process for the buyer.
- Low energy consumption in creating the talers.
- No fluctuations in value, as there is no separate currency.
- Prevention of money laundering and tax evasion due to visibility of the seller.
- High data security by integration of the central bank.
The central bank learns the name and account number of the seller at GNU and can track the payment for tax purposes, for example.Prof. Dr. Christian Grothoff, lecturer at the BFH and head of the GNU project
What does the name GNU-Taler mean?
GNU stands for “GNU is not Unix”. It is an operating system that uses Free Software. The system consists of GNU packages (programs released by the GNU project) and Free Software released by third parties. The Thaler is one of many packages that have been developed within the framework of GNU. The programming of the payment system is done by Taler Systems SA. Users are allowed to perform the following actions with the software:
GNU is pronounced the same as the African antelope, to whose genus the wildebeest belong. The heraldic animal of the GNU project is also an image of a wildebeest. The word thaler fits well with a payment system and is meant to remind users of a historical silver coin from Central Europe. However, the word is short for the English term Taxable Anonymous Libre Economic Reserves. The translation is Taxable Anonymous Free Economic Reserve.
Transparent credits – money laundering not possible
This shows a big difference to classic cryptocurrencies like Bitcoins. When paying with Bitcoins, the buyer and seller remain anonymous. Tax investigators can track the funds with difficulty. With the GNU Thaler of the Bern University of Applied Sciences, the buyer also remains anonymous. The seller, on the other hand, has the thaler credited to his normal bank account in local currency. The seller cannot disguise the crediting. Therefore, the sale is subject to the usual taxes and money laundering and tax evasion can be prevented.
No anonymity for sellers
While the buyer remains anonymous, the identity of the seller is different. When a consumer pays with the talers, the seller is not credited with any talers. Instead, for a purchase price of, say, 25 euros, the app transfers the corresponding number of digital talers to the central bank. Each payment transaction receives a unique identification number. The app also sends this number to the bank. The central bank checks whether the coins have already been issued once. If they are one-time issued thalers, the seller receives a credit of 25 euros on his bank account. “The central bank learns the name and account number of the seller and can track the payment for tax purposes or other reasons,” explains Christian Grothoff.
How does the payment process work with GNU?
To pay with digital talers, you first need to download the Taler Wallet to your smartphone. For example, if you want to exchange 50 euros for thalers, these processes will then take place:
- The Taler app creates 50 digital GNU coins as tokens.
- The app debits your bank account with 50 euros and sends the tokens together with self-generated serial numbers to the central bank.
- After payment, the central bank digitally signs the tokens. The bank does not learn the serial numbers generated by the Taler app in the process. However, it guarantees that each coin is only issued once.
- The central bank sends the digital coins to your cell phone and you can pay with them.
The purchase of the thalers takes place entirely via the consumer’s smartphone. All data is stored only on the cell phone and the user can freely dispose of it. The central bank does not learn the name of the buyer. “The thalers offer the same data protection as cash,” explains Christian Grothoff.
What are the advantages of the GNU Thaler?
More and more consumers are paying for their purchases without cash. When you pay for your online purchases with a card, the credit card providers and the house bank see your personal data. Platforms like Amazon, Apple, Google or Facebook also recognize what you buy and when. They use your data to send you targeted advertising. The use of GNU Thaler, on the other hand, ensures an anonymous payment process without registration. Furthermore there are almost no costs for you.
Environmentally friendly and cheap
Users sometimes pay high fees for using a credit card. Some providers charge for ordering a second or replacement card and for shipping. Providers use energy and various raw materials to produce the cards. The talers, on the other hand, are produced online and consume only 1-10 kilobytes. Including computing time, bandwidth and storage, a transaction in talers costs only $0.0001.
Conclusion: the electronic payment system developed in Switzerland allows buyers to pay their bills anonymously and cheaply digitally.
GNU: Without blockchain and mining
Moreover, it is not a new currency. Therefore, no new coins need to be mined and a blockchain is not used. This ensures data security and privacy. In addition, there are no price fluctuations and the thalers retain their value.
Here’s an overview of the benefits for consumers:
- Anonymous payment system
- No registration of buyers necessary
- Great data security and data protection as a basic setting
- No exchange rate risk, as no new currency
What are the disadvantages?
The biggest disadvantage of GNU talers is that they can hardly be used at the moment. The University of Applied Sciences Bern has so far only converted one snack vending machine to payment with talers. The vending machine has been in use since the end of 2019 at various congresses, forums and at the FHB’s Department of Technology and Computer Science.
FAQ – Frequently asked questions
The thaler is digital cash. It is not a new currency, but an exchange of national currency for thalers. Consumers can make anonymous purchases with the money. By involving the central bank or another bank, the thaler guarantees high data security. The seller does not remain anonymous. This prevents money laundering and tax evasion.
With the Taler you can shop anonymously. As a buyer, you do not need to register or create a customer account. Your purchases cannot be tracked. The Taler thus combines the anonymity of cash with the advantages of an online payment process, such as low costs and secure payment.
As the Taler is still under development, you can only pay with the digital cash at a snack vending machine at the Department of Technology and Information Technology at the Bern University of Applied Sciences in Biel so far. The vending machine serves as a test object to improve the use of the Taler and extend it to other areas.