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AgAu: The Peer-to-Peer, Electronic Money System

Authors:
  • TARCO International | AgAu.io

Abstract

AgAu’s vision is to create a world with an open and reliable electronic peer-to-peer sound money system based on gold and silver. AgAu’s mission is to create a superior form of money enabling more economic freedom for everyone to preserve and enjoy the fruits of their labour.
© AgAu AG, 2020
The Peer-to-Peer, Electronic Money System
V1.0
Last update May 1st, 2020
By Thierry ARYS RUIZ
CEO and Founder, AgAu AG
For more information visit: AgAu.io
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Table of Content
ABSTRACT 3
WHAT IS AGAU? 4
AGAU MISSION AND VISION 4
INTRODUCTION 5
GOLD IS MONEY 8
A MONETARY RESET 10
THE AGAU MONETARY SYSTEM 12
THE GOLD MARKET AND AGAU 14
INTEGRITY OF THE AGAU SYSTEM 17
TECHNICAL FEATURES 17
OVERSIGHT 24
CONCLUSION 26
GET INVOLVED 27
Disclaimer:
This whitepaper provides an overview of the AgAu Project. The non-exhaustive information in this
whitepaper does not encompass all details about AgAu AG and its products or services. This
document does not, in any way, intend to create or put into implicit effect any elements of a
contractual relationship. All rights and duties of all involved parties are exclusively defined by the
General Terms and Conditions (GT&Cs) available at: AgAu.io
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Abstract
AgAu’s mission is to create a superior form of money enabling more
economic freedom
When Satoshi Nakamoto wrote the white paper: “Bitcoin, A Peer-to-peer, Electronic, Cash System”
that is exactly what he created. The anonymous entity unleashed a wave of awakening concerning
what money is. Semantics led us to study the word “cash” as cash is currency or fiat. Gold, on the
other hand, is money. In the spirit of Satoshi Nakamoto, AgAu aims to provide a real alternative to
fiat as initially intended. This is why AgAu ought to be a Peer-to-peer, Electronic, Money System.
By far, precious metals have the longest track record of being a unit of account, medium of
exchange, and store of value. As opposed to Bitcoin, gold has much lower volatility. Historically,
one can argue that the proportional holdings of gold by private and public entities as well as central
banks are the direct result of trade flows and balances between the nations over millennials. If a
monetary reset was to occur the most likely consensus across the world would most probably be
gold.
Unfortunately, most of today’s precious metals are transferred through centralised exchanges in the
form of synthetic products, structured ownership or in a non-allocated form. With Blockchain and
smart contract technology, AgAu can overcome the impracticality of owning pure quality physical
gold and silver and disintermediate points of failure. AgAu allows the electronic direct ownership
and transfer of physical and allocated LBMA Good Delivery quality gold and silver secured by Swiss
private property laws. In other words, AgAu is the purest and most efficient form to bring back a
real gold standard where the ownership of the money resides directly with the user.
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What is AgAu?
AgAu’s name is derived from the merger of the two atomic symbols “Ag” (for Silver) and “Au” (for
Gold). AgAu has built an advanced technology on the Ethereum Blockchain to issue stable ERC20
compatible tokens. Each AgAu token is backed 1 to 1 and represents 1 gram of allocated Good
Delivery standard LBMA (London Bullion Market Association) quality (99.99%) gold or silver;
redeemable against standard gold and silver bars.
The new global currency will include the symbol of the defunct currency Austral (Unicode
U+20B3) followed by “g” for Silver and “u” for gold with the convention:
1 g (for AgAu Silver) = 1 gram of Silver.
Otherwise found with the ticker ASLV.
1 u (for AgAu Gold) = 1 gram of Gold.
Otherwise found with the ticker AGLD.
AgAu AG was founded in 2018 and is based in Zug, Switzerland. The Swiss direct democracy,
ensured through referendums, is a system embedded in the Swiss constitution. Switzerland is
amongst the most stable countries globally, internationally recognized for its financial system,
respect of private property, and privacy laws. Zug is already known as a hub for commodity trading.
Zug is also the epicentre of the “Crypto Valley”, hosting the most advanced cryptographic and DLT
ecosystem in the world.
Cryptocurrencies like Bitcoin are highly volatile and are improper to be considered as a store of
value over time or even as a unit of account (a unit today is not representative of a unit tomorrow)
due to wide price fluctuations. AgAu’s price might fluctuate slightly; however, the volatility of
precious metals (particularly gold) has been historically low over the long term.
AgAu Mission and Vision
AgAu’s vision is to create a world with an open and reliable electronic peer-to-peer sound money
system based on gold and silver. AgAu’s mission is to create a superior form of money enabling
more economic freedom for everyone to preserve and enjoy the fruits of their labour.
The traditional banking system has failed; more particularly vulnerable and remote populations.
With its tokens, AgAu is democratizing services previously only available to the top 1%. AgAu
makes it easy for anyone to pursue financial freedom and own fractions of precious metals secured
in the most stable, neutral, and reliable jurisdiction in terms of private property: Switzerland.
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Introduction
Throughout thousands of years, all across the world, different civilizations,
without communication, reached the same conclusion: Gold is money.
Early in history, precious metals quickly became the standard to store value. More than 3000 years
B.C, Ancient Mesopotamia, Egypt, Greek, Aztec and Mayan civilizations have reached the same
conclusion: gold is money.
Over the long term, the fiat standard is a historic aberration. It is only recently (less than 50 years
ago) that humanity departed fully from the gold standard. In August 1971, the President of The
United States of America, Richard Nixon, "temporarily" suspended the convertibility of the dollar
into gold.
Gold as money on the other hand, is an antifragile concept meaning: the more we depart from it,
the clearer the evidence becomes that “gold money” is the only sustainable form of money over the
long term.
A Monetary Reset
Following the Global Financial Crisis of 2008, central banks strongly deviated from their mandate
by conducting unorthodox policy experiments such as Quantitative Easing. This led to market
aberrations such as negative interest rates. More importantly, actions from Central Banks are
jeopardising the due process of price discovery and have ultimately questioned the free market
system.
Structural problems within the financial and traditional banking system are becoming increasingly
evident and many players such as AgAu advocate for a Monetary Reset. In this context, precious
metals are a hedge against systemic failure.
For too long, the vast majority of the population has suffered as a consequence of a system that
politicises money for all the wrong reasons such as re-elections, out of control fiscal deficits (paid
through debt monetisation), currency wars or other arbitrary sanctions to free trade. It is time to
reject the fiat politicized system. AgAu allows to take back control of the highest quality money
through direct ownership.
Since gold is not a legal tender controlled by any particular government and because AgAu operates
in a parallel peer-to-peer system, AgAu tokens are politically independent and can legally operate
outside the traditional banking system.
AgAu token holders would typically seek a store of value independent from government control
and fiat currencies. AgAu represents a true alternative to fiat and a more practical and efficient way
to hold and exchange precious metals legally in the most neutral and secure jurisdiction on earth:
Switzerland.
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Limitations Of Physical Gold And Silver
Most precious metals trading in financial markets today are either synthetic products composed of
financial derivatives or unallocated precious metals. Unallocated precious metals are often used in
the case of gold funds, ETFs, or other structured products to provide exposure but not ownership
of the underlying.
On the other hand, real” allocated bullion bars are characterized by their limited practicality in
terms of transportability and quality insurance such as authenticity, purity, and quantity.
AgAu, The True Gold Standard 2.0
AgAu tokens are the equivalent of having direct ownership through a digital gold or silver
certificate representing allocated precious metal of LBMA Good Delivery quality. Many layers of
proof are put in place to guarantee the integrity of the system.
AgAu’s Proof of Asset system shows that no token can be created without first proving the assets
including: all bar’s serial numbers, quality, quantity, and regular audits. All documents and proofs
are accessible AgAu’s public Matching Ledger. By using blockchain technology AgAu tokens solve
all the limitations of physical precious metal related to quality (Audits) and practicality
(transferability).
AgAu is built on the Ethereum public network, the most decentralized smart contract protocol in
existence today with the largest ecosystem of developers, exchanges, lenders, and other integrated
platforms. This ensures the portability of AgAu tokens and serves its vision; to spread as permission-
less global money system, making it the perfect unit of account, medium of exchange and store of
value tradable internationally at all times (24/7).
The Ultimate Stablecoin
Most stablecoins are impractical in the long term or fall back into the fiat paradigm, especially those
backed by national currencies with higher regulatory controls. In addition, fiat backed are subject
to confiscation, default or arbitrary changes by the issuer of the underlying fiat.
AgAu’s unique model allows for direct ownership. AgAu has purposely avoided the use of a
multitude of ownership layers via trusts, funds, traditional venues or other forms of custody or
centralised protocols. We decided to give the token holder the choice on how to keep AgAu tokens,
be it in their “primitive form” (allocated, in self-custody) or using other forms of custody layers or
protocols as described above. AgAu will not make that choice on behalf of the user and therefore
provides less counterparty risk and gives more direct ownership, security and optionality to the
user.
Other tokens may have:
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No storage fee, raising the suspicion if the precious metal is really allocated or if it has been
used as collateral (swapped or lent, etc.) in order to pay for the storage fee because if that is
the case, the full property of the assets may be temporarily compromised.
An inflation rate ultimately failing the “money mandate” of store of value; as well as a unit
of account; because if that is the case, 1 token will not always represent a particular unit of
the precious metal and the value of 1 unit will decay over the long term.
AgAu tokens do not possess an inflation component. 1 token will always be 1 gram of physical and
allocated LBMA quality gold or silver. Also, the Company does not own the precious metals on the
customer’s behalf as it is sometimes the case. Therefore, AgAu represents the closest blockchain
solution to owning a physical allocated bar.
Properties of gu Money
Trust and Respect Of The Rule Of Law
AgAu ensures transparency and ownership using blockchain and smart contract technologies.
Every relationship is based on two pillars: Trust and Respect. It is hard to trust someone we do not
respect, and it is merely impossible to respect someone we do not trust. In a world where
governments and financial institutions have lost both, blockchain technology allows for immutable
rules and more transparency; both features ensure trust in a decentralised system. With blockchain,
more trust is achieved through a decentralised system where the data is immutable and verified by
multiple parties. With Smart contracts, rules are respected as they are written in the form of
immutable code (“The code is law”). AgAu uses both blockchain and smart contract technology to
establish the direct ownership of allocated LBMA quality gold and silver for the user.
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Gold is Money
Chemical reasons
Besides being a scarce resource, the chemical element of Gold (Au) is immutable through time.
Gold’s atomic number 79, makes it one of the higher atomic number elements that occur naturally
and amongst the least reactive chemical elements. Gold is the most malleable of all metals and is a
good conductor of energy (heat and electricity).
Because of its unique chemical properties, there has been no better way to materialise time and
energy other than gold.
Economic Reasons
Adam Smith, considered the father of the modern political economy, describes how mankind chose
gold as money early in history in Chapter IV of his magnum opus The Wealth of Nations (1776).
Money is fundamentally a medium of exchange, a unit of account, and a store of value. In addition,
gold has intrinsic value because of the use of the physical metal for the crafting of jewellery,
ornamentation, and others such as: electronics, precision tools, and medicine.
Political Reasons
Due to the fact that gold cannot be “printed” out of thin air, the gold standard used to represent an
implicit covenant ensuring that government debt could not be monetized (paid through inflation
or devaluation). In other words, a real gold standard forces financial orthodoxy onto governments
to control their deficits and avoid populist measures (i.e indirectly buying votes through giveaways
and unaffordable welfare programs).
Humanity has only departed from the gold standard less than 50 years ago. In August 1971, Richard
Nixon, then President of The United States "temporarily" suspended the convertibility of the a into
gold. What followed is now known as the "Nixon Shock” and the fiat system. In the great scheme
of things, the departure from the gold standard can be seen as a historic anomaly.
Departing from a gold standard has allowed for debt monetization and excess leverage through a
fractional reserve system. With time, both fractional reserve banking and debt monetization
inevitably creates excessive leverage and out-of-control debt ultimately leading to ruin and
financial collapse.
Gold is apolitical and self-sovereign, meaning that there is no authority to rule gold unilaterally “by
decree” as opposed to fiat. The convention of gold as money has not been defined by government
bureaus but by natural law and universal consensus.
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Exter’s Golden Pyramid
AgAu’s adaptation of John Exter’s Golden Pyramid displays gold and silver forming the base of most reliable value with
a form of money. Silver and gold are Tier 1 assets but do not represent a liability.
Financial Reasons
The Bank for International Settlement (BIS) recognizes central banks holdings of physical gold as a
reserve asset equal to cash. This means that gold is accounted for 100% as Tier 1 Capital since
allocated physical gold is the only form of money that does not represent a liability. If there was to
be a great default event that would jeopardise the financial system, those holding physical gold
would most likely be able to benefit. That is why gold is perceived as a natural hedge against
systemic collapse.
Precious metals have long been considered as a hedge against the leveraged financial system as well
as long term inflation. As debt levels in the Financial System are reaching unprecedented levels,
signs of systemic failure become increasingly evident. Therefore, precious metals held outside the
banking system become particularly relevant. Even today, gold is part of most central banks’
reserves. One can argue that the proportional holdings of gold by private, public entities, and
central banks are the direct result of trade flows and balances between the nations over millennials.
If a monetary reset was to occur the most likely consensus across the world would probably be gold.
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A Monetary Reset
The Financial System Today
In the aftermath of the global financial crisis of 2007-08, central banks conducted monetary
experiments such as Quantitative Easing (QE), Troubled Asset Relief Program (TARP), “Operation
Twist”, Outright Monetary Transactions ("OMT") and Asset Purchase Programs (APP). One can
argue that; they are all different manifestations of the same strategy, creating monetary stimulus.
These interventions lead to a substantial increase of the monetary mass without necessarily having
real long-term repercussions in the creation of wealth in the same proportion. Conversely, it has
most certainly led to market distortions. Data shows that central bank stimulus mainly benefited
those who hold financial assets; particularly the assets targeted by central bank purchases. The
“artificially low interest rates” mentioned in the press are none-other than flagrant interest rate
manipulation. Overall, the policies described have resulted in maldistribution of wealth and
monetary oppression for savers as the vast majority of people did not benefit from central bank
interventions.
The elephant in the room is the question of moral hazard: First, because government bailouts and
central bank interventions have by-in-large rewarded irresponsible behaviour and severely
punished savers. It is important to notice that without savings there cannot be investment.
Therefore, by jeopardising the ability to save for the majority of people, the current financial
response is also jeopardising the future. Second and more importantly, because central banks have
continuously engaged in outright manipulation of asset prices starting with interest rates, but now
also bonds, equities and even non-investment grade instruments since the COVID-19 crisis.
The main moral hazard is that of affecting price discovery. Essentially, the price of financial assets
is controlled by central banks deciding which assets to prop up through purchases. By not letting
natural market forces determine asset prices, price discovery and market mechanisms have been
severely distorted. It is no longer a secret that central banks’ balance sheets arbitrarily affect the
financial valuation of a large number of assets.
A “normalisation”, albeit necessary, could imply a system “deleveraging”, as described in the book:
"A Template For Understanding Big Debt Crises" by Ray Dalio. Unfortunately, there is no end in
sight indicating any willingness to cease Open Market Operations. If anything, recent world-
changing events due to the COVID-19 pandemic indicate more central bank intervention. We can
foresee a desperate attempt to rescue the current system by doing more of the same perhaps until
asset prices fail to make meaningful sense. Cracks in the system are already becoming apparent as
it is the case with negative interest rates or negative oil prices. Increasingly, it seems that the change
will be involuntary, and the situation might change only when we evolve from “The Fed is the only
game in town” to “the Fed is the only player in town” and the game is over. Today, no one is
certain of the real consequences of such financial experiments. AgAu believes in a future monetary
reset backed by gold. AgAu ought to provide a safe haven by creating the full allocated ownership
of gold and silver outside of the traditional banking system.
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Gold is Antifragile
Gold as money is an antifragile concept, meaning that the more it is tested and challenged, the
stronger it becomes. The idea of gold as money has been validated throughout history. In fact, the
more we depart from it, the clearer the evidence becomes to validate “gold money” as the only
sustainable form of money so far discovered.
History is crystal clear, no currency has lasted more than 100 years without going out of existence
or depreciating at least 90% against gold. For example, in 1968, gold was 35$/ounce, today’s price
is around 1700$/oz this gives gold a performance of 48.6 times or most accurately a dollar loss of
98% compared to gold.
Inflation under the Federal Reserve
The evidence is clear, far from religious beliefs, there are strong political, economic, historical and
natural reasons why gold is money. Fiat money based on credit is increasingly becoming irrelevant.
In fact, to paraphrase J.P.Morgan during his testimony to congress in 1912:
Gold is money and everything else is credit.
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The AgAu Monetary System
Gold and silver are considered amongst the most liquid assets often displayed along with major FX
pairs. With AgAu tokens there is no fractional reserve (as opposed to the current Central Bank
Fiat Standard depicted below), no token is generated without the respective asset backing it 1:1.
There is no dilution or inflation, 1 AgAu token will always be equivalent to 1 gram of direct
ownership of the corresponding precious metal.
The AgAu Money System
The image above highlights the difference between modern forms of money including the previous Bretton Woods
System deemed to be a gold standard versus The AgAu Money System (AMS).
AgAu token holders are the direct owners of the underlying physical bullion stored in secure
private vaults. Tokens can be redeemed on demand against the associated physical bars or can be
exchanged against fiat currencies. AgAu only acts as a platform between the holders/clients and the
vaults.
In short, AgAu proposes a compelling alternative to fiat establishing a solid foundation for a better
monetary system.
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AgAu and The New Taxonomy of Money
Our research report entitled
AgAu and the New Taxonomy of Money
explores many forms of
monies classified within different dimensions. In the new money flower, AgAu is classified as
private money that is peer-to-peer, electronic, and convertible as it represents the direct property
of redeemable precious metals.
AgAu and The New Taxonomy of Money
Source:
AgAu and The New Taxonomy of Money
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The Gold Market and AgAu
Despite gold being the best alternative to fiat currencies some limitations have burdened its
modern-day usage. Today’s problem with precious metal investments is typically related to their
ownership structure, practicality, and cost. However, AgAu has managed to surpass all of gold’s
limitations with a unique solution.
The most important part when owning gold is to eliminate as much counterparty risk as possible
by having direct ownership protected by law.
1 Allocated vs. Unallocated: Most of the precious metals trading today are not allocated gold.
Unallocated gold is often used in the case of gold funds, ETFs, or synthetic products composed
of financial derivatives. Unallocated gold represents a position with a counterparty where the
client is a creditor of the gold but does not own it. By contrast, allocated gold represents the
direct ownership.
2 Structure: Other products claiming to have allocated precious metals” the ownership structure
is not direct but through a company or trust. In some cases, the precious metals can be leased,
swapped, or collateralised in order to produce income covering the cost of storage. Typically,
there cannot be direct ownership of allocated precious metals without storage costs (this is often
the case for products not account for storage fees because the precious metal is not fully
allocated at all times).
AgAu tokens allow for Direct ownership of allocated precious metals. This is very important
for us, as we want to offer the most “primitive” base layer to own pure quality (LBMA)
physical precious metals directly. We want to leave the choice for our users, to enable them,
not us, to choose whether they want to keep the direct ownership or if they prefer to offset
certain costs via other centralised parties (or Decentralised Finance protocols etc.)
3 Audited: External and independent audits and inspections are a seal of trust to certify physical
possessions. Unfortunately, many precious metal funds or even central banks are not as
transparent as to the public regarding holdings.
4 Testing and Assaying: Theoretically one should always be assaying and weighting every gram
of gold transacted in order to verify that no process has tampered with the quality of the
precious metal as it has sometimes been done through history. This is a major reason why
certificates were first introduced so that certified pure quality bars would be stored, and
certificates would become a better medium of exchange with fractional denominations as
opposed to trading directly with the physical metal.
The precious metal backing AgAu tokens is LBMA quality (London Bullion Market
Association) of a minimum fineness of 99.95% purity. The seal of quality is also guaranteed
by the assay, testing and audit of the precious metals.
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5 Counterparty Risk: The counterparty risk is the sum of all counterparties involved multiplied
by their respective risk. In this case, the more counterparties there are, the more points of
failures there can be. Counterparty risk can be a financial institution such as a bank or another
corporation or government.
AgAu disintermediate to a maximum so that the token holder is the direct owner of the
precious metal. There is therefore a limited counterparty risk. Insurance costs are included
in the storage cost.
Table Comparison: AgAu, ETFs and Bullion
6 Cross Border Transferability / Straight Through Processing: Physical bullion bars are costly and
difficult to transport; the logistics and security involve a complex process to ensure the integrity
of the bars and the safekeeping during transportation
AgAu tokens transact on the blockchain within a system enjoying a secure straight-
through-process with clearing and settlement within seconds no matter the amount.
7 Fractional Reserve: In today’s fractional reserve system, most financial institutions guarantee
only a fraction of deposits.
AgAu tokens are backed 1:1 by the precious metals. All bars are of guaranteed quality,
quantity and audited. All bars can be identified with their serial numbers, audits and stock
report through our Matching Ledger which verifies that not a single token can be produced
without having first proved the precious metal it represents.
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8 Political Risk: Besides all of criteria mentioned above there is precedent of government
confiscation or limitations of private property laws, for example in the USA with Executive
order 6102.
AgAu is based in Switzerland which is a rare case of direct democracy. This makes the
country the safest jurisdiction in terms of private property laws and constitutional
protection. Constitutional amendments can only happen through citizen-initiated
referendums. That is also the reason why historically Switzerland is home of the biggest
privately owned refineries and gold vaults in the world.
At AgAu we believe that in order to mitigate political tail risk such as confiscation or
prohibition, the choice of a neutral jurisdiction with a rule of law and direct democracy is
a guarantee to preserve private property.
9 Inflation: Fiat currencies, some stable coins backed by fiat and even some gold token projects
suffer from inflation. Inflation is the most popular form of “invisible taxation”. Inflation is the
erosion of value over time. Many Central Banks even have atarget inflation” where they aim
to depreciate the currency by close to 2% annually.
AgAu is not inflationary, the value of a token will always be 1 gram of precious metal. The
storage fee of 0.2% annually (much lower than the typical 2% inflation target of central
banks) is not inflation but the payment of a service to the safe storage facilities where assets
are held in order for us to operate in the most secure environment. AgAu aims to lower that
cost as much as possible without compromising the pure ownership structure for the token
holder. In a way, the storage fee is the proof that the gold is allocated.
10 Redemption: The possibility of redemption is very important. Physical precious metals are often
unavailable for withdrawal when most needed. In today’s financial system, nobody guarantees
that banks or financial institutions will remain open or will even have the possibility to
withdraw deposits at any time.
AgAu uses secure private vaults outside the banking system accessible all 24 hours of the
day, 7 days a week. The safekeeping of the property of AgAu token holders is of utmost
importance.
AgAu operates outside the global monetary system and represents an effective portfolio
hedge in the event of a monetary reset.
11 Financial Privacy: Increasingly financial privacy has been eroded and underappreciated by the
banking system across the globe.
While all blockchain transactions are published and transparent in the public ledger, the
ownership of the account /crypto wallet is virtually anonymous, emulating the banking
secrecy available in certain jurisdictions.
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Moreover, the distributed ledger technology is efficient in eliminating central points of
failure. AgAu tokens based on gold and silver are self-sovereign; no government has
authority over all gold and silver nor do the tokens need a centralised banking
infrastructure such as SWIFT or SEPA to operate.
Integrity of The AgAu System
AgAu established the direct property of the physical metal and has made it easier for users to audit
and inspect their own possessions. Through The AgAu System, the user has access to 7 layers of
certification proving that the assets are backed by allocated LBMA quality precious metals:
1. The first layer is that during the Token Generation Ceremony (TGC), all assets need to be
proven by the Vault issuing a Stock report
2. An independent auditor or assayer must certify both the quality and quantity.
3. A notary must sign therefore providing an extra independent party to reduce operational risk
as well as making sure that the legal ownership resides with the token holder
4. A periodic audit will be conducted to ensure the integrity of the data and physical holdings.
5. All data is posted in the AgAu Matching Ledger via an IPFS System (decentralised database)
and the hash of the files (unique reference) is posted to the blockchain, pinned permanently
preventing any possible tampering and rendering them immutable and verifiable.
6. We will also be working towards “an open-door policy” to allow users to appoint third party
auditors of their choice to inspect and verify holdings at their own cost.
7. Finally, as an ultimate verification, the user can request a redemption with AgAu to receive his
physical property and can verify empirically for himself that the bar he redeemed was part of
the AgAu system and has been marked (as redeemed) in the AgAu Matching Ledger.
Technical Features
Ethereum Protocol
AgAu uses the public and permission-less Ethereum Blockchain. AgAu tokens are ERC-20
compatible tokens. ERC-20 tokens benefit from portability across the Ethereum protocol, by far the
most extensive smart contract network. This serves the vision of AgAu to spread as a permission-
less global money system, making it the perfect medium of exchange, store of value and unit of
account tradable internationally. Blockchain technology uses cryptographic security to secure
access and transactions within the distributed network. Transactions are verified in a matter of
seconds in an immutable ledger that provides full transparency and security to all participants.
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Therefore, AgAu is a secure, flexible and cost-effective way to use gold and silver as payment and
asset ownership.
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The AgAu System
The AgAu System is a decentralised solution to generate digital assets backed by physical
commodities such as AgAu Gold (u) and AgAu Silver (g) tokens. The AgAu System and approved
partners can mint AgAu tokens and request a Token Generation Event (TGE). Tokens can be
created when a set of specific requirements are fulfilled (Proof of Asset Authentication process).
The physical assets must be proven before any token issuance by using a Proof of Asset (POA)
protocol displayed in the Matching Ledger (See Screenshot).
The Matching Ledger
The Matching Ledger is publicly available at all times allowing anyone to verify the integrity of the
system by proving that no token was created without having first proven the assets. The Matching
Ledger therefore ensures that the number of tokens outstanding balances with the correspondent
assets 1:1.
The POA Explorer shows all the IPFS Documents composing the batch and proving the assets. This
includes:
Stock Report
Proof of Ownership
Audit Inspection
Certificate(s)
A box indicating whether the item of this batch has been redeemed or not
The system is implemented to follow the no inflation, no dilution, no fractional reserve 1:1
principle so 1 token will always represent 1 gram of precious metal.
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AgAu Matching Ledger
The Matching Ledger UI displays transparently:
The Token Explorer (left column) including:
The Total Supply of ₳g₳u tokens
The Individual Batches that have been
created including
o The Batch ID
o The Type of Token
o The quantity of tokens created
Date of creation (TGE time Stamp)
o Links to a third party blockchain
explorer (Etherscan)
The Proof of Asset (POA) Explorer (right
panel) including:
The total number of digitalised assets
The asset batch details corresponding
the Individual TGEs
Information about The Assets
composing the batch including:
The Type of Asset (Pm Type):
Gold/Silver
The Bar ID
Weight (Gross)
Quality
Bar No.
Brand
Custodian (Location)
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Fees
AgAu token’s smart contract have two main fees embedded in the smart contract: the storage fee,
justified as the payment for the service of storing the physical metals and the transaction fee in
order to ensure the security of the system, the continuity of operations, the company’s independent
status, ecosystem development and the evolution of the system. In order to optimise transactions,
storage fee and transaction fees are merged into one transfer packaged within the user transaction.
Fees
Description
Storage fee
0.2% per year
Transaction fee
Dynamic, Higher bound of 0.39% of the transacted amount
(See Transaction Fee Section)
Storage Fee
The storage fee is taken on the basis of how much time the gold token has been held in order to be
as just as possible with a “pay per usage”.
Wallets are debited automatically of their storage fees and users can see their available
balances
Upon sending or receiving transactions, a storage fee is calculated and taken for the time
lapsed since the last transaction timestamp.
For the case of accounts that only rarely transact, a function will allow to loop over accounts
subtracting the pending storage fee and resetting their timestamp of the last transaction
Transaction Fee
Similar to the gas fee paid on ethereum, AgAu has a transaction fee to ensure the continuous support
and development of the system.
By default the transaction fee is paid by the sender, however, every account can customize
this feature by toggling a “collect-call” setting in the smart contract. This feature and others
will be accessible through the AgAu web and mobile apps.
The transaction fee rate fluctuates within a range defined by the higher bound and the
lower bound.
The Higher Bound will initially be set at: 0.399%
The Lower bound will initially be set at: 0.1%
The transaction fee rate is updated dynamically every month within the range defined by
higher and lower bounds. The following sigmoidal function of the volume of transactions,
the market cap and a steepening parameters determines the transaction fee rate level as :
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/begin
$r = ( k - ( k - s ) / ( 1 + e^( a + b * x ) ) )$
/end
Where:
r is the tx fee rate
k is the higher bound
( k - s ) is the lower bound
a is a constant that determines at which velocity the r starts decreasing
b is a coefficient that determines how fast r decreases
AgAu might artificially lower the Transaction Fee over a defined period of time to stimulate
transactions and for promotion purposes.
Units and Rounding
AgAu tokens are divisible. As unit of account, AgAu tokens are precise up to a 10-18. When
calculating the fees on transaction AgAu rounds up to the nearest the elementary AgAu unit called
the atto gold for AgAu gold (au) and atto silver for AgAu silver (ag) following this table:
Unit
Acronym
AGLD (₳u) / ASLV (₳g)
Gold / Silver
u / g
1
deci gold / silver
du /dg
0.1
centi gold / silver
cu / cg
0.01
milli gold / silver
mu / mg
10-3
micro gold / silver
μu / μg
10-6
nano gold / silver
nu / ng
10-9
pico gold / silver
pu / pg
10-12
femto gold / silver
fu / fg
10-15
atto gold / silver
au / ag
10-18
Delegated Gas Fee and Whitelisted wallets
AgAu is a token based on the Ethereum platform. In order to use the Ethereum platform users must
pay a gas fee native to the Ethereum blockchain protocol (usually a few cents) paid in Ether. AgAu
can decide to sponsor transactions by paying the gas on behalf of users.
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AgAu also has the possibility to whitelist certain wallets for ecosystem partners in order to eliminate
or reduce the transaction fee, storage fee of both.
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Oversight
System Quality Assurance
AgAu’s Proprietary system and code was verified internally and externally. The system was
developed by industry experts and has been audited externally by Intellica Group, and Pessimistic
and Solidified Technology solutions.
Other security checks as well as operational risks checks, such as penetration tests, were performed
before the go-live of the system.
Regulatory Approval
In 2020, AgAu has secured the legal opinion that AgAu Tokens in their entirety are a direct co-
ownership of the assets and therefore should not be considered a security under Swiss Law. Under
this premise, AgAu has filed a Non-Action Request to FINMA (Swiss Financial Market Supervisory
Authority). In addition, AgAu will be seeking the status of a self-regulatory organisation by The
Financial Services Standards Association as a preventive step.
AgAu AG has obtained an indicative response from the Swiss Financial Supervisory Authority
FINMA dated June, 2020. In the indicative response, FINMA confirms that AGLD and ASLV tokens
are not to be qualified as securities.
Legal Authorities and Compliance
Because AgAu Tokens are ERC-20 Compatible and operate on the Ethereum blockchain with
transparent on-chain transactions. Monitoring can be conducted by legal authorities to detect and
investigate potential wrongdoing. AgAu intends to use KYC and AML processes for all
counterparties directly involved with the Company.
Financial Audit
AgAu works with Big four auditors, top public accounting and notaries to review and certify that
every token is backed 1:1 by allocated LBMA good delivery quality precious metals. These
verifications are performed before the creation of every token. Regular external and independent
audits will also be performed to ensure periodically the integrity of the system.
Emergency Freeze Mechanism
AgAu smart contracts have an emergency stop mechanism that can be triggered by_ an authorized
account in case a major bug is detected.
Force Majeure Freeze
A balance asset freeze or seize function has been implemented in compliance with additional
regulatory requirements. This function can only be called in extremely exceptional cases and if
ordered by law. The Force Majeure Freeze can: freeze, unfreeze and transfer the balance of an
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address after it has been ordered by the appropriate authorities. AgAu does not intend to use this
function at all.
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Conclusion
The timing is unprecedented. AgAu is taking advantage of this historic opportunity to create an
inclusive platform for all and redesign the monetary system at its core.
AgAu is the best way to go back to a real gold & silver standard where the digital allocated precious
metals of certified quality are owned directly by the token holder
The position of AgAu in the fintech space is of strategic nature with a growth potential of orders of
magnitude rarely available. We are convinced that the structural changes to come will represent a
tremendous opportunity. We are driven by:
The vision to achieve peace through trade; and increase the free exchange of goods and
ideas by guaranteeing a sound monetary system with AgAu
By democratising access to premium services previously available only to the top 1%, AgAu
is creating an innovative and sustainable business model that leaves no one behind.
We are confident in our mission to increase the freedom of exchange of goods, values and ideas.
AgAu aims to establish secure, stable, and decentralised money available for all, to protect wealth
and execute borderless payments globally.
The direct ownership of sound money, by the people for the people is the cornerstone of a
responsible democracy with private property as a fundamental human right including the
ownership of one’s mind, bodies and possessions.
“AgAu: The Peer-to-Peer, Electronic Money System”
backed by Silver (Ag) and Gold (Au)
Join us in our mission to create a superior form of money enabling more
economic freedom.
27/24
Get Involved
AgAu is created to democratise sound money. We are constantly looking for partners to achieve
our vision. The objective is to deliver effective service and benefits for all. We encourage you to get
involved to create an ecosystem of users and partners. We are open to partner with financial
institutions, NGOs, merchants, and investors:
Financial Institutions
We are partnering with financial institutions, regulated vaults and storage facilities for custody,
exchanges to create liquidity, and offer a lucrative partnership to gold owners and refineries as
strategic partners. AgAu has a top-down approach (B2B) aiming to strategically position itself as an
institutional-grade product before expanding quickly with our retail distribution partners (B2C).
Strategic Partnerships
AgAu specifically aims to engage in strategic alliances with dominant precious metal players as well
as exchanges and service providers to grow our ecosystem.
Investors
AgAu is open to investment and partnerships with those who would like to integrate our solutions
and expand with us.
Users and Community
AgAu users are at the center of our attention. We want to reward the community who shares our
values. If you are interested in being part of a vibrant and open community that encourages
freedom, and moves us towards a better system, follow us on social media and become part of the
change. Give us feedback and help us fix what is broken in the financial system by engaging with
us and spreading the word.
Non-Governmental Organizations (NGOs)
AgAu looks forward to collaborating with Non-governmental Organizations to promote our
expedited solution to achieve some of the Sustainable Development Goals. AgAu will contribute
towards achieving sustainable and inclusive growth together with our NGO partners.
Media
AgAu is eager to communicate about our progress and partner with media organisations to spread
the word, educate and promote our vision. Leave your email and subscribe to our Newsletter on
AgAu.io and subscribe to our social media:
Twitter: https://twitter.com/AgAuCrypto
Facebook Page: https://www.facebook.com/AgAucrypto
Linkedin: https://www.linkedin.com/company/AgAucrypto
Youtube: https://www.youtube.com/AgAuCrypto
Medium: https://medium.com/@AgAuCrypto
Telegram Group: https://t.me/AgAuCrypto
Instagram: https://www.instagram.com/AgAucrypto
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ResearchGate has not been able to resolve any references for this publication.