GNU Taler — ‘Digital Cash’ that is socially responsible
A Technological Option to Save our Democracy and Economy from “Cashless” Totalitarianism
As a part of the lead to 50p, a conference on payments scheduled to be conducted on the 24th and 25th of January 2017, there was a talk conducted in the Open House session at the HasGeek office on GNU Taler, the GNU based digital payments solution. We have Christian Grothoff, one of the members involved with Taler, talking about how it will benefit Governments, Merchants, Citizens and Operators.
The demonetisation move in India was introduced with the aim of improving the accountability of cash, pushing money back into the system, decreasing tax evasion and killing illegal activities like drug trafficking, arms trade and money laundering. This prompts us all to go digital, which increases the risk of surveillance. There is a need for a tool that would respect the privacy of the citizens while allowing governments to enforce taxation and track the flow of money through the economy.
The GNU Taler project aims to do just that.
The main motivation for the GNU Taler project is to combat the increased surveillance and corruption associated with modern currencies.. Credit cards can be tracked too easily by governments, and cash cannot be tracked at all. Most of us do not realise the amount of data we are sharing with merchants and third parties everyday. Even something as simple as the last four digits of your credit card or your phone number, can be crucial information when trying to breach accounts. Ofcourse additional security measures are always available, but these are often complicated and not made compulsory, leaving a large portion of the public prone to attacks.
The problem with existing digital currency — Bitcoin
The bitcoin system is a cryptocurrency that is largely unregulated. One of the major selling point for Bitcoin was that it was decentralised. There was no central regulating body like the RBI or any federal bank. This lets the currency exchange rates fluctuate according to various factors and not be decided by a central body. The Bitcoin currency can never be demonetised and the coins in circulation cannot be withdrawn either. The number of coins in circulation is also limited to 20999999.9769 BTC or roughly 21 million BTC. This ensures that any exchange or body cannot issue more coins than what is in circulation. It promises to limit the inflation rate as well.
The other problem with Bitcoin is that all the transactions are traceable unless you use a service that masks your identity. Bitcoin aims to be transparent with all the transactions. All transactions are public, traceable and stored in the Bitcoin network permanently. Even though you won’t have to reveal your identity, your transactions are still public and can be traced back to you. This creates an issue for individuals and businesses who might want to keep transactions hidden.
There are transaction fees associated with Bitcoins. The fees are dependent on the size of entry in the blockchain and other factors. This creates a problem for small transactions as the transaction fees might be a significant chunk of the amount transacted. At the same time, Bitcoins cannot be generated, but must be earned by performing mathematical computations, which entitle you for coins as rewards.
Existing systems have several glaring flaws and most of them lack crucial features. For safe transactions, these problems need to be fixed, or at least addressed.
The proposed Solution — Taler
Taler wants to fill in the void created by the existing systems. Taler builds on the existing protocols and seeks to improve transparency, accountability and security by leveraging the power of free software.
Taler pitches itself to be ‘Digital Cash’ that is socially responsible. It works by introducing an exchange between the customer and the merchant. The exchange is allowed to set the rates for the transactions and in turn is audited by external auditors.
When Taler is implemented, there would be several exchanges set up by private and public entities, which would offer competing services and pricing. A customer can prefer a one exchange over the other and request the other party to adhere to the rules of the preferred exchange. The merchant on the other hand cannot dictate the exchange. He only control the terms of the transaction including the currency and auditors. An exchange allows a customer to withdraw coins for spending, and these coins are signed. The merchant on the other hand, can deposit the coins to the exchange. A customer can perform wire transfers through the various banking institutions to the exchange and this money is withdrawn into the customer’s wallet, which can later be spent on transactions.
On the client side, the customer downloads a wallet, which for the purpose of the demo was shown to be a chrome extension. The wallet as defined in Taler is locally stored and lives on your computer only. When a website requests a payment through Taler, the service pings the wallet to check if there are enough coins and then withdraws those coins. A more detailed explanation of what happens under the hood when a customer makes a payment or withdraws coins is below.
When a customer initiates a request to withdraw coins from an exchange, he is first authenticated and the withdrawal is initiated from the bank’s website. Once the details are provided and the transfer is initiated, the customer’s browser requests the coin denomination keys and wire transfer data, which is then sent to the customer by the Taler exchange. When the confirmation comes through, the bank initiates a wire transfer to the Taler exchange. The customer can then withdraw the coins and is confirmed by the bank. The customer then sends a request to withdraw the coins from the exchange and the Taler exchange sends the customer signed blinded coins (The public key associated with the coin is disguised, before it is signed) which are then converted to unblind coins on the browser. The coins then live on the customer’s computer browser until the customer spends them.
When making a transaction, a similar procedure is followed. The customer gets an option to pay with Taler on a merchant’s website and selects the goods or services they want to buy. The request is sent to the merchant, who sends a signed digital contract proposal to the customer. Once this is accepted, the customer navigates to the fulfillment URL and initiates the payment execution. The merchant now sends the customer a hash of the digital contract and the payment information. The customer sends the payment and the payment is forwarded to the Taler exchange and once it is confirmed that the merchant has received the payment, the customer is redirected back to the merchant website and the goods and services are provided.
If you’re worried about losing your digital wallet by accident, you can make a copy of the wallet and store it safely. And because each coin is uniquely signed, the coins can be duplicated to create backups, but cannot be spent twice (double-spending). The information stored in a coin cannot be linked to a user. Taler promises to remain completely free and hence allows third party auditors to verify the process and algorithms used in the transactions. We will now look at the various problems Taler promises to solve:
- Taxability
Each merchant’s income is visible from the various deposits made to the exchange as well as from the exchange to the bank account. The state can then trace the various sources of income and tax that income. Although the government or any body can see the amount transacted, they would not be able to identify the nature of the transaction. It would simply show up as a withdrawal or a deposit. Once the merchant gets coins for a transaction, he would not be able to spend the coins as a customer. This forces the merchant to separate the income and the expenditure separately, thus enforcing taxation on the income. - Privacy
Payments can be made on Taler without revealing any personal information. Governments and Auditors can only access transaction values and not the nature of the transaction. This makes it safe for transactions which might compromise your personal information and bring you under government scrutiny. The merchants can only disclose what customers have purchased and the value of a transaction, but not who the buyer is. The customer can be required by law to reveal their identity when making sensitive transactions. - Ease of use
Traditional payment gateways and wallets make you jump through several hoops to authenticate your transaction. This can be frustrating for customers leading them to lose interest in the transaction. Taler is a one click payment solution once you load your wallet with the coins and all the authentication and processes happen in the background. - Stability
Unlike Bitcoins or other forms of digital currency, Taler does not do any conversion of currency. The amount you present to the exchange is the amount you receive in coins, after factoring in the transaction costs. Payments in other currencies are possible, through another exchange that is specifically built for foreign exchange or through the bank itself. It works with all approved currencies in the countries where regulations permit Taler. - Efficiency
In current systems, all money is routed through the banks and each transaction entails a transaction fee. This creates a problem for accounting when there is a large unprecedented volume of transactions. Another problem with the large volume of transactions is the rate of failure. If the systems are not optimised properly, then there would be too many transaction failures for the system to be reliable. So Taler does not really improve efficiency compared to credit cards, but it’s use of crypto is computationally cheap enough to complete with canonical electronic payment systems. - Transparency
The problem with existing systems is that they are mostly proprietary. They are not subject to regular audits or checks and a user cannot examine the inner workings of the system to make sure it is suitable for them. Some of the systems currently in place don’t even completely disclose the charges and fees associated with transactions[2].
Here[1] is how Taler compares to other services like Cash, Bitcoins and Credit Cards. Taler is still in early stages of release and is in the process of looking for partners to set up exchanges who would then have to apply for clearances from the various government bodies for its use in everyday life. There are other services which can be built around Taler such as Merchant portals and maintaining the software. Unlike Bitcoins, since Taler is heavily tied to the bank accounts of the customers and the merchants, there would be a regulatory framework in place for auditing the exchanges and other services used as a part of a Taler transaction. Taler is only a framework or a protocol setup to redefine the way digital payments are made today. The promotion of such a protocol would create a competitive space where government bodies and private entities would be able to set up exchanges and offer rates that directly compete with one another. Since it is free to use, there is no royalty fee paid to the project. This encourages established players and newbies alike to set up services based on the Taler protocol.
Now that we’ve detailed how Taler works, you can check it out for yourself using their handy demo at https://demo.taler.net. You can also help contribute the project by developing Point of Sale software for mobile phones and retail terminals, payment plugins, and help in localization of the project by translating it to your language. To know more about Taler, visit https://taler.net or head over to their git repository [https://git.taler.net] to check out their code and contribute.
About Christian
Christian is a researcher associated with the Institut National de Recherche en Informatique et en Automatique (Inria). He is one of the principal architects and the GNU contributor of the GNU Taler project. He also works on Network Security, is a Software Architect and a Privacy Researcher. You can reach Christian at christian@grothoff.org or drop by:
Equipe Décentralisé
Inria Rennes Bretagne Atlantique
263 Avenue du General Leclerc, Room 437F
Campus Universitaire de Beaulieu
F-35042 Rennes Cedex, France
- The comparison table shows the areas where the existing systems fail and what Taler brings new to the table. A ‘+’ indicates a positive and a ‘-’ indicates negative while a ‘0’ is neutral.
- The non disclosure of charges and fees associated with electronic payment methods refer to the recent move by the government to waive off transaction charges for certain limits. It is unclear to the merchants and the citizens what the charges for the same would be after the lapse of the promotional period.
HasGeek creates discussion spaces for individuals who are curious and passionate about technology, health and fitness, media, emerging problems in data science, and machine learning and mobile and web development. HasGeek has been organizing some of India’s finest technology conferences since 2010. We care about free internet, free speech, ethics and integrity in media, and parity between genders (including persons of non-binary genders). (https://hasgeek.com)
