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Date: Wed, 01 Mar 2000 15:34:04 -0500
To: "R. A. Hettinga" <[EMAIL PROTECTED]>
From: James Turk <[EMAIL PROTECTED]>
Subject: Circulating Gold as Currency

Dear Mr. Hettinga,

I understand that some recent postings on the cypherpunks list have
mentioned the patents I have secured.  These patents have carved out a
unique process that enables Gold to circulate electronically as currency.
I thought that you might be interested in learning a little more about
these patents and the business goals that I have been working toward.  I
also will use this opportunity to introduce myself, and GoldMoney.com,
which is under development and will begin operating later this year.

By way of background, I first conceived the idea behind the patents and
GoldMoney in February 1979.  I came up with this idea because I was seeking
a solution to Herstatt risk.  I was working for Chase Manhattan Bank in
Bangkok, Thailand when Germany's Herstatt Bank failed in 1973, and I
witnessed first-hand the devastating impact from this collapse on the
international monetary system.  It seemed an absurd situation that one
bank's failure could have such a crippling effect, but it did bring many
banks to their knees and severely impaired the global economy.  So in my
spare time I set about learning more about the nature of currency in order
to seek a solution to Herstatt risk.

Over the 27 years since Herstatt failed, the big banks have spent hundreds
of millions trying to solve Herstatt risk, but given the nature of their
currency, their task is impossible.  They can reduce/minimize Herstatt
risk, but they cannot eliminate it.  And it was this recognition that
eventually led to my solution in February 1979.

After solving this problem and having this idea, my thoughts at the time
were that it was a great idea.  But though I was only 32 at the time, I
never thought I'd see the idea brought into use in my lifetime.  The
technology just didn't exist back then.  PC's were a hobby, not the
necessity they've become; no one ever heard of the Internet; and
transatlantic telephone calls cost a small fortune (if you could actually
make the connection).

In September 1979, I bought my first personal computer, an Apple II, and
while I recognized the potential of the PC, even then I did not think that
the technology would move forward fast enough to make GoldMoney a practical
reality.  But by the late 1980's, I began to sense that the technology was
developing quickly enough that maybe my earlier assessment was incorrect,
and that GoldMoney might soon be possible/practical.

Because I recognized in the late 1980's that I was still early in my
thinking, I set about researching how best to protect the solution I
developed.  In 1990 I started studying patent law to see whether I could
secure the idea, with a view to turning it into a business when the
technology was ready.  In 1992 I hired a patent attorney, and filed the
first application in February 1993.  Even back then the Internet was still
more a vision than a reality, but it seemed that we were getting close to
the technology I required.

The first patent was finally awarded 4-1/2 years later in September 1997.
By this time my son, Geoffrey, joined me to develop this business
opportunity.  We jointly filed the second patent application which was
awarded in November 1999.  A third patent application we again filed
jointly is still pending.

My patent attorney says that the 4-1/2 years it took for my first patent to
be awarded was the longest time he ever saw an application pending.  In the
end though the patent was granted because it advanced the 'prior art'.  In
other words, I created a new form of currency, and in the process
eliminated Herstatt risk.  GoldMoney is also creating a currency that is
more efficient than the currencies that exist today.  I am therefore
hopeful that GoldMoney will be a commercial success.

In a paper about Gresham's law <http://www.columbia.edu/~ram15/grash.html>,
Nobel Laureate Robert Mundell makes an interesting and I think accurate
observation about the history of currency:
Among the precious metals, gold drove out others...because it was more
efficient from the standpoint of effecting transactions at the least cost.
The dollar became the dominant international money in a world of paper
currencies...because, among the alternatives, it best satisfied the
characteristics of an international money.

I think we are moving full circle back to gold, but gold will circulate as
currency in a way that overcomes the impediments that stopped it from
circulating as currency in the past.  GoldMoney aims to deliver a currency
that is more efficient than any currencies now existing.

With GoldMoney, owners of GoldGrams (one gram of gold, and the unit of
account of GoldMoney) always own their metal.  GoldMoney never takes
possession of it.  The metal is placed in vaults around the world (we use
the term StorageSites), and is always held in the name of the customer,
until it is spent.  At the moment the GoldGrams are spent, the ownership of
those GoldGrams changes.  The weight of gold remains in the StorageSite,
but ownership changes the instant the GoldGrams are spent.  It's the
electronic equivalent of a gold coin passing from one hand to another, but
the gold always remains in the vault.  A couple of points of explanation
will be useful here.

1) GoldMoney is NOT a fractional reserve system.  The total quantity of
GoldGrams in circulation is always exactly equal to the weight of gold in
the different StorageSites.

2) One GoldGram is composed of 1000 mils for specificity in transactions.
At $311 per ounce, one GoldGram exchanges for $10, and one mil exchanges
for one US cent.

3) GoldGrams are identical except in one important respect.  A gram of gold
stored in a UBS vault in Switzerland, for example, is different from a gram
of gold stored in Scotia Mocatta's vault in New York City, and both of
these grams of gold are different from a gram of gold stored in GoldCorp's
vault in Perth.  The differences arise for two reasons.  First, there is
the political risk associated with each location.  Political risk varies
from country to country, so for example, given the 1933 gold confiscation
in the US, vaults in the US may be perceived by some to have a higher
political risk than vaults somewhere else.  Second, there is the commercial
risk.  These companies may not have the same security procedures.
Therefore, every GoldGram in circulation will be tagged with a vault mark
showing where it is stored.

4) Every user of GoldMoney will have the choice whether to accept in
payment any other GoldGram being offered.  The user of course is making a
commercial decision as to whether or not to accept/use any particular

5) Access to GoldMoney is provided anywhere in the world through a standard
web browser, with 24/7 availability of the funds.

6) All payments are made in real-time, so there is no float, clearing, etc.

The above explanations are not meant to be all encompassing, but rather, it
highlights some basic attributes of GoldMoney.  I think it also shows that
GoldMoney is well thought out, which shouldn't be too surprising because
I've been thinking about it and working on it for 21 years now.

Finally, GoldMoney is a registered service-mark of G.M. Network Ltd., a
company established in the Isle of Man in order to create the GoldMoney
currency and payment system.  We plan to launch our operation in September.

I hope that the above information is of interest to you.  I think that with
GoldGrams we are creating the currency of the 21st century.  That may sound
presumptuous, but it seems logical to me.  After all, all we are doing is
taking the world's oldest money, and enabling it to circulate as currency
in a way that overcomes those impediments that stopped gold from
circulating as currency in the past.  Even though many of gold's
fundamental attributes as money have been forgotten, they have not
disappeared.  GoldMoney will see whether those attributes remain important,
and if they do, then the market will prove whether or not GoldMoney will be
commercially successful.

I have one last observation you might find useful.  The Internet today -
when it comes to currencies - is very much like the automobile 'industry'
at the beginning of the last century.  When the car was first invented, it
was a horse-carriage (a 'buck-board') without the horse, a guy sitting up
top, trying to drive with a stick.  Those early inventors/entrepreneurs did
not realize the invention of the automobile was so profound that they no
longer had to think of transportation as what it was conceived to be up
until that moment in time.  New ideas about power, weight and comfort
evolved slowly, so it took a few years before an automobile that we could
recognize as 'modern' emerged with fenders, doors, glass and a roof.
Attempts to make plastic credit/debit cards circulate today on the Internet
are not unlike those first automobiles which look better suited to being
pulled by a horse than having any similarity to what we now consider to be
a car.  Just like those early automobile inventors/entrepreneurs, those who
have 'created' the early versions of Internet 'currency' are merely
transpositions of what currency is conceived today to be (mainly plastic).
These early Internet currency promoters have not generally recognized that
the invention of the Internet is so profound, we are not restricted in
thinking narrowly about what currency will be or should be on the Internet
in the future.  Currency will evolve in ecommerce like those first
automobiles evolved with trial and error.  And given gold's historical role
as money, I expect that GoldMoney will become an important currency on the
Internet.  It is our objective to make GoldMoney a "Global Currency for
Global Commerce".  Of course only time will tell whether I'm right or not,
but that is the beauty of an unfettered market and the outcome of competition.

I hope this information is of interest.  You may post it if you would like,
and if you think others may find it useful.  In the meantime, I would be
happy to answer any questions you may have.  Also, you may want to visit
<www.goldmoney.com> and record your email address to receive updates on our
progress as we approach our launch date.

James Turk

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R. A. Hettinga <mailto: [EMAIL PROTECTED]>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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