A Treaty Framework for Trading in Gold

Between Sovereign Nations

Foreword
The Trump administration has increasingly used sanctions to penalize nations and individuals
by locking them out of the dollar-centric payment system without due process. Sanctions were
originally dressed up in moral arguments. However, the USA is now openly using sanctions and
tariffs to gain economic advantages over other countries. This, along with de-risking, is making
it more and more expensive for companies and countries to use legacy bank clearing systems,
such as the BIS, based on the US Dollar.

It is finally dawning on the nations of the world that the dollar-centric payment system is a
national security risk. Experts have been looking for alternatives to dollar payments for trade.
IMF Special Drawing Rights, and the Chinese Yuan have both been considered. Both of these
alternatives confer the same “special power” to one country or organization. Simply handing
another nation the advantage formerly held by the USA is not an optimal solution.

Nations need a currency of trade that will work between people who do not trust each other.
This means the system cannot depend on one country to hold all the assets. And it cannot
depend on one nation’s currency for pricing all exchanges. It must be a level playing field.

The Gold Treaty is proposed as a solution to this problem. The Gold Treaty is an agreement
between several nations to:

● Mint a common gold coin - each country can make their own brand with the same
dimensions.
● Create a common Gold Token to enable gold payments electronically.
● Create forex, bill, and bond markets using the Gold Token to facilitate commerce.
● Create a clearing system for fiat currency payments that uses gold instead of dollars.

The primary advantage of The Gold Treaty is that no nation has to trust the others. Each can
mint their own Common Gold Coins and Gold Tokens and use this common currency for trade.
There are other advantages also.

All Member nations can mint gold coins, and all Members agree to accept them as payment.

The Gold Treaty will allow several countries to jointly issue a gold token. It uses collateral to
prevent any of them from cheating.
The Gold Treaty will establish gold bill and bond markets to enable Member nations to earn a
return on their gold. This also puts the gold into circulation for trade and economic growth.

The Gold Treaty is designed to create a framework that will attract private capital and pull gold
out of hoards. Sovereign nations will jump start it. But businesses will adopt it and build upon it.

The Gold Treaty is a practical solution to the abuse of the international payment system, by
making a new one that gives no special advantage to anyone. The Gold Treaty is a meritocracy
that rewards those who use it.

1. Introduction
The document is an early draft of the Gold Treaty. This is an agreement that will enable several
sovereign nations to achieve the following objectives:

a. Use gold as the currency of international trade.

b. Process international payments in fiat currencies using gold as the currency for clearing.
c. Create markets for debt (sovereign and commercial) that are compliant with Christian,
Buddhist, and Islamic prohibitions on usury.

These objectives will be accomplished by jointly minting a Common Gold Coin and jointly
issuing a digital Gold Token. This Treaty is designed to be compatible with existing fiat
currencies issued by the Member nations.

The Gold Treaty framework is trustless. This means that none of the Members need to trust the
other Members. No Member has the power to unilaterally turn off the payment network or block
another Member.

Potential benefits of this treaty include:

● Enable trade in a neutral monetary unit without political interference.

● Enable clearing of forex transactions by using gold as the top currency.
● Enable a free and independent payments clearing network.
● Enable nations to maximize the value of their gold.
● Enable nations to earn a return on their gold.

2. Gold Treaty Framework

Sovereign signatories of this treaty are called “Members.” Members may license institutions
within their jurisdiction to act as “Affiliates.” Affiliates may perform some of the functions
specified in this treaty on behalf of Members.
The Gold Treaty Framework consists of these elements:

A. The Gold Treaty Market Association

B. Common Gold Coin
C. Common Gold Token
D. Exchange and Clearinghouse
E. Bill & Bond Markets
F. Open Source Software
G. Arbitration Agreement

3.0 The Gold Treaty Market Association

The Members of the Gold Treaty shall form a cooperative called the “Gold Treaty Market
Association” for the purpose of governing and operating the payment systems and markets
created by this treaty.

3.1 Membership
a. There shall be three tiers of membership: Members, Affiliates, and Users.

b. Members are sovereign nations that are signatories to this treaty in good standing.

c. Affiliates are persons licensed by Members to perform functions on their behalf. The
functions which may be licensed are CGC mints and token issuers. Each Member may
set their own internal policies for the licensing of Affiliates.

d. Users are private or public persons who hold Tokens.

e. Members and Affiliates shall pay an annual membership fee in Gold Tokens.

3.2 Board of Directors

The Board shall consist of seven directors who serve six year terms. The Chairman, Treasurer,
and Secretary shall be elected by vote of the Members. Two directors shall be elected by vote
of the Affiliates, and two directors shall be selected by vote of the Users.

To ensure continuity, elections shall be staggered. One third of the board seats are up for
election every two years.

a. Chairman
b. Treasurer
c. Secretary
d. 2 Affiliate Directors
e. 2 User Directors
3.3 Executive Staff
The day to day operations of the organization shall be conducted by the following officers, to be
appointed by the Board.

a. CEO
b. Controller
c. Trading Desk Manager
d. Reserve Trustee
e. Mint Trustee

3.4 Audit
Members and Affiliates may pay the Association to audit their asset reserves backing the Gold
Tokens. The Association may subcontract this role to private companies or specialists.

3.5 Arbitration
The Association will create and fund a forum of Arbitration for disputes between Members,
Affiliates, and Users, as specified in section 7 of this Treaty.

3.6 Grounds for Expulsion

A Member may be placed on probation or expelled from the Association for any of the following
violations.

a. Defaulting on redemption of Gold Tokens.

b. Impeding the import, export, or free exchange of CGC or Gold Tokens.
c. Taxing Gold Token transactions, fees, bills, or bonds.
d. Failure to keep at least one CGC mint open to the public.
e. Interfering with the creation or withdrawal of Gold Tokens by the public.
f. Imposing sanctions on other Members outside of Arbitration.
g. Failure to enforce the Arbitrator’s rulings against an Affiliate or User in their territory.

4.0 Common Gold Coin

The Members agree to jointly issue a Common Gold Coin with standard specifications. Each
Member nation may issue their own brand of the Common Gold Coin. Each Member agrees to
treat the Common Gold Coin issued by other Members as identical to their own for the purpose
of payments. However, it must comply with the standard dimensions and purity set by this treaty.

The physical specifications for the Common Gold Coin will be defined in the treaty. This is
discussed in Appendix A.
Members agree to treat the Common Gold Coin (CGC) in the following manner:

4.1 Fungibility

a. The CGC shall be defined by standard mass, purity, dimensions and tolerances in this
treaty.

b. Members shall recognize the CGC as lawful money for foreign and domestic trade.

c. No Member shall levy taxes or duties on the purchase, sale, transfer, storage, or
manufacture of CGC.

d. Every Member shall recognize CGC issued by other Members as equal to their own in
every way for the payment of debts and taxes.

e. Members shall place no restrictions or duties on the import or export of CGC on their
territory.

4.2 Manufacture

a. Every Member shall maintain at least one mint to manufacture CGC.

b. Members may license Affiliates to operate their mints. This may be subcontracted to a
private company inside or outside the Member’s territory.

c. Members may brand their CGC with their own unique design, branding, and wording, so
long as the treaty specifications are followed.

d. Members shall open the mint to the public for the exchange of raw gold for CGC.

e. Mints may charge a fee for this service.

f. Any mint must accept returns of any substandard CGC specimens issued by them, in
exchange for specie that meet the standard, at no charge.

g. Members shall punish the issuance of counterfeit or adulterated CGC as a criminal

offense within their jurisdiction.

5.0 Common Gold Token

Members agree to co-issue a digital Common Gold Token to enable gold transactions at a
distance. Each Member will store CGC in custody, and issue Gold Tokens against them.
5.1 The Gold Token Contract
a. The primary purpose of the Gold Token is to provide a digital gold accounting unit
to enable exchange and trading on the clearinghouse and debt markets created
by this treaty.

b. The Gold Token shall be a Ricardian Contract for digital gold numbered in grams
of gold; and redeemable for whole CGC held in custody by the issuing Members
and their Affiliates.

c. The Gold Token shall be divisible to 1 milligram, which is the smallest possible
transaction.

d. The transaction fee shall be ½%, within the limits. The minimum shall be 1
milligram. The maximum shall be 1 gram.

e. The Gold Token will run on a blockchain, as specified in Appendix B.

f. Each Member, or their Affiliates, may issue Gold Tokens against CGC held in
their own custody at the ratio of 1:1 in grams of fine gold.

g. Any transaction fees generated shall be automatically distributed on a daily basis

to the issuers of the Gold Tokens in proportion to the number of tokens they have
issued.

h. Each Member must host a minimum of one node of the blockchain. Affiliates
may host additional nodes of the blockchain.

5.2 Creation and Deletion of Gold Tokens

a. The Gold Treaty Market Association shall appoint a Mint Trustee, a Reserve
Trustee, and a Gold Contract Manager (the Manager).

b. The Manager shall operate the trading desk for deposits and withdrawals for the
creation and deletion of Gold Tokens.

c. The Mint Trustee shall control the issuance of new Gold Tokens.

d. The Reserve Trustee shall control the collateral and keep public records of the
reserve assets.
e. Before a Member or Affiliate may issue any Gold Tokens, they must first put up
collateral in the form to be specified, by transferring the collateral to the Reserve
Trustee, and presenting the receipt to the Manager.

f. The value of the collateral which has been set aside shall set the issuance limit
for the Member or Affiliate.

g. The default rate of collateralization shall be 100%.

h. Third party users may put up collateral on behalf of a Member or Affiliate.

i. Members and Affiliates may issue Gold Tokens by transferring a receipt of title to
a certain quantity of CGC to the Reserve Trustee. The Issuer of the Gold Token
will retain custody of the CGC, however the CGC is now property of the
Association.

j. Upon presentation of the Receipt for CGC issued by the Reserve Trustee, the
Mint Trustee shall mint and transfer new Gold Tokens to the issuing Member,
provided that the total Gold Tokens issued by that issuer does not exceed the
value of their collateral.

k. No Member or Affiliate may issue Gold Tokens exceeding the value of their
collateral.

l. If the collateral changes in value, the Manager shall issue a notice to the Member
and Affiliate issuers that their issuance limits have changed.

m. If the collateral value of any Member of Affiliate falls below the value of their total
Gold Token issuance, the Manager must require them to bring their issuance into
compliance by either putting up additional collateral, or by unwinding their Gold
Token issuance.

n. In order to unwind Gold Token issuance, a Member may spend Gold Tokens to
the Mint Trustee Account (which destroys them). Then present the receipt of the
transaction to the Manager, who will provide it to the Reserve Trustee with
instruction to spend an equal number of CGC receipts back to the issuer, which
extinguishes the debt. This removes the encumbrance on the issuer’s CGC.

o. These functions will be automated as much as possible within the software

created for the purpose of this treaty.

p. The Ledger showing the collateral, CGC debt receipts, and total token issuances
of the Members and Affiliates shall be public on the blockchain.
5.3. Asset Reserves
a. Gold Token Issuers shall maintain a reserve for any Gold Tokens they issue in
the form of segregated CGC in allocated storage.

b. CGC held in reserve shall be stored in transparent, tamper-resistant containers,

each signed and sealed with the quantity and date they were entered into
custody, the receipt number, and labeled as “Gold Treaty Market Association
Reserve Asset.”

c. The containers must allow visual inspection of the contents without breaking the
seal.

d. If a Member or Affiliate defaults on redemption, their collateral may be called in

by the Arbitrator and liquidated to unwind their issued Gold Tokens.

5.4 Gold Token Fungibility

a. The Gold Contract enables Members to issue Gold Tokens independently.

b. Each Member must create a minimum of 100,000 grams of Gold Tokens.

c. Gold Tokens issued by any Member shall be treated as identical.

d. Member Issuers agree that the public may redeem Gold Tokens for CGC at any
time.

e. Members may subcontract the issuance of Gold Tokens to Affiliates.

f. No Member may issue more than 25% of the total number of Gold Tokens.

g. Gold Token transactions and fees shall be free from taxation by all Members.

h. All Members and users must agree to Arbitration for disputes.

i. The blockchain software shall enforce any judgments by the Arbitrator.

6. Foreign Exchange Market and Clearinghouse

Members and Affiliates may license the open source software used in this treaty to create
issuances of their own national fiat currencies hosted entirely in their own territories, as well as
local gold payment institutions.
Using the common payment protocol, Users in different Member countries may make payments
which will be cleared through the forex exchange and clearinghouse here described. In a
hypothetical example, this will allow a User in Country A to make a payment in “roubles” to a
user in Country B in “baht”.

Figure 1 shows a simple schematic for a gold payment network consisting of Issuers, Agents
and the Clearing House.

6.1 Licensing of Member Payment Institutions

a. Members may license local payments institutions as Affiliates under this Treaty.

b. Members may create tokens in their own fiat currencies and link them to this payment
network.

c. Any fiat tokens created must be 100% reserved by the currency unit they represent.
 d. Affiliates may set their own transaction fees.

e. Affiliates may use a tiered risk-based KYC policy for identification of the beneficial
owners of accounts.

6.2 Foreign Exchange

a. The Association will host a Foreign Exchange Market (the Exchange) which allows the
trading of Member fiat currencies against the Gold Token.

b. The Exchange shall be open to institutional investors and traders domiciled in Member
countries.

c. The Exchange fee will initially be 5 basis points of any trade.

6.3 Payments Clearing Protocol

a. The Common Payments Clearing Protocol will enable the Foreign Exchange Market to
function as a Clearinghouse.

b. Payments between accounts of member Affiliates in different currencies will be cleared

through orders placed on the Exchange automatically.

c. The Association will maintain a matching service to enable Issuers with too many Gold
Tokens to exchange them for physical CGC from Issuers with too many CGC. The need
for this will arise from the balance of trade between issuers and nations.

7. Bill and Bond Markets

The Association will create one market for bills of trade, and one market for bonds. The trading
currency for these markets will be the Gold Token.

7.1 Bill Market

For 1,000 years prior to 1918 a system of commercial credit existed where makers of seasonal
goods would deliver them to retail businesses and the buyer would sign an invoice payable in
gold in 91 days. The signed invoice is called a bill of trade, or bill of exchange.

The seller could wait 91 days to be paid. Or, he could go to the bill market and sell the bill for
gold coins at a discount of 1%. Novgorod had such a market, as did most cities in Europe and
the Levant in the late Middle Ages.
This is also called ”factoring.” Certain banks still specialize in this today. However, the discounts
are much higher because there is no bill market where buyers compete to buy the bills.

The Association will create a market for bills of trade payable in gold. In order to do this several
elements must be created.

● A credit reporting system for merchants.

● A protocol for standardized commercial invoices and digital signatures from the buyer.
● A means to enable purchased invoices to be transferred between parties.
● A means to enable payment of the bill without knowing who currently holds it.

7.2 Bond Market

The Association shall create a digital bond market for both sovereign and commercial debt,
priced and payable in the Gold Token.

This will allow both States and Corporations to issue bonds payable in gold. These are
auctioned on the market. Buyers bid on the discount they will accept. The smallest discount
wins the auction.

This market will allow Members and companies to borrow capital at the lowest price.

In order to comply with Christian, Muslim, and Buddhist prohibitions on usury, the bonds sold on
this market shall be limited to simple, non-interest-bearing bonds. The discount price of the
bonds shall be sufficient to reward investors for the risk taken.

7.3 Limitations on Collection

In order to avoid the notorious cyclical excesses of debt-driven economies, the following limit
shall be set and enforced on the collection of debts, whether as bills or bonds.

On the Northern Hemisphere Winter Solstice of every seventh year from the initiation of this
treaty, all bills and bonds issued prior to that date shall become legally uncollectible.

The software will be written to prevent accidentally issuing bills or bonds which cross that date.

The purpose of this rule is to standardize the business cycle and prevent the endless expansion
of unpayable debt. This will keep the system honest by forcing members to periodically write off
uncollectible debt. This will reduce the risk to all parties in the economy because the start and
end of each business cycle will be precisely known in advance.
8. Arbitration Forum
The Association shall create a forum of arbitration to handle disputes between Member,
Affiliates, and Users.

a. Arbitrators may be nominated by Affiliates and Users.

b. An Arbitration Fund shall be created.
c. A standard fee of 5% of the amount in dispute shall be paid to the arbitration fund upon
the completion of any arbitration ruling.
d. A board of appeal made up of three senior arbitrators shall be established.
e. All Members, Affiliates, and Users must agree to the arbitration clause when joining the
treaty or opening an account.

Appendix A - Common Gold Coin Specifications

It is necessary to choose and specify a certain species of gold which will become the Common
Gold Coin. The form of the CGC could be a coin, small bar, or wafer. One must be chosen and
specified in the treaty.

In the history of international commerce, the smallest gold coin in circulation at the time usually
became the standard unit of payment for trade, going back to the time of Julius Caesar. At 3.99
grams, the British Half-Sovereign was the last in a long series of gold coins. These coins
worked well for international trade, but could not be used for common purchases of bread and
milk at the grocery store. The value is too high for common transactions. Most countries issued
low value silver coins which were used by common people. (In this Gold Treaty the pre-existing
fiat currency of each Member may continue to serve as the money for common transactions in
that country.)
 Soviet Gold Chevronetz - 8.9 grams

While it is possible to make gold coins as small as 1 gram, at that size they become difficult to
handle. 4 grams is the practical lower size limit for a gold coin.

It is now possible to make gold wafers or “notes” of 1 gram and smaller. A new technology uses
“magnetron sputtering” to deposit gold uniformly on a substrate of polyester. This creates a
uniform layer of gold between two layers of polyester. A design is printed on the polyester using
standard CMYK printing processes, prior to adding the gold.

The gold is deposited on top of the CMYK ink. The variation makes the printed design visible
through the reverse side of the gold wafer, in addition to the obverse side. This effect is difficult
to counterfeit.

The result is a flexible gold wafer that is comparable in size, shape, and appearance to a
currency note. These can be made in denominations from 50 to 1000 milligrams. 100
milligrams in this form is worth about $10 at current prices. This form of gold would be practical
for common purchases. The one gram version of this wafer would be the optimal size for the
CGC. At today’s values the 1 gram wafer would be equivalent to a $100 bill.
 Singapore 100 Milligram Gold Wafers

The manufacture of these wafers is expensive. They currently trade at 100% premium above
the spot price of gold. However, this may create a path for nations participating in the Gold
Treaty to double the value of their gold holdings. By creating several mints with the ability to
manufacture these, the cost can be expected to come down. Once established in the
marketplace at a 100% premium, these wafers will continue to trade at a high value because of
their desirability for savings and trade. Therefore, the mint can profit on the premium between
the cost of manufacture and the market price.

For the purpose of this treaty, one specie must be chosen. The standard must include the
specifications for its size, weight, purity, dimensions, and placement of certain marks. The
standard must allow for custom artwork and wording. This will allow each Member of the treaty
to make their own national gold coin. But all of them will be equal for trading.
It is suggested that the two best options are the classic 4 gram round coin design, and the new
1 gram wafer. One of these must be chosen and defined as the Common Gold Coin.

Placement of Marks
The following information should be placed in the same locations on every CGC:

● Common Gold Coin - universal logo

● Milligrams of fine gold
● Purity
● Mint mark
● Country of Issue
● Year of Issue
● Unique Serial Number
● QR code to the Association website with Serial Number (allows tracking)

If a coin is chosen as the standard, then a QR code can be put on one side of the coin which
contains all of this data. If the wafer is chosen as the standard, then the layout will be similar to
a currency note, and a QR code can also be included.

Appendix B - Common Gold Token Blockchain Design

In order to enable a Gold Token where none of the Members trust each other we require a
blockchain.

A blockchain is a shared ledger or database which is replicated between many computer

operators. A node is a full copy of the database. Each node checks the work of the others to
ensure that only valid transactions are added to the ledger.

Each Member may run one or more nodes to verify transactions entered by the others. Any
transaction that breaks the rules will be detected instantly and rejected by the majority.

There are three major categories of blockchain: proof of work (POW), proof of stake (POS), and
delegated proof of stake (DPOS). Of these, the only one that has proven to be both scalable
and energy efficient is DPOS.

We propose to create a DPOS blockchain for this Treaty which uses a voluntary transaction fee
similar to Bitcoin. This DPOS blockchain will be a variant of the “Graphene” family of software.
Block Producers
In a DPOS blockchain, block producers are selected by holders of the tokens staking them to
vote for a specific candidate. The candidates are ranked by the number of staked tokens they
have. The top 100 candidates create active nodes of the blockchain. Each node maintains a
full copy of the transaction history.

Of the 100 candidates, the top 21 are selected as block producers. The block producers
produce transaction blocks on rotation at the rate of 1 block per second. One cycle typically
takes about one minute.

After every cycle, the conditions for selecting the top 100 and top 21 are tested, and if they have
changed, a new set of 21 block producers may be selected for the next cycle. This selection
occurs automatically in a few milliseconds between every cycle.

Most blockchains produce new tokens at some specific rate so that N tokens are created each
block, and paid to the block producer to completed the block. The block producer also receives
any transaction fees included in the block.

We suggest that the Gold Treaty blockchain use the following rules for block producers:

1. Candidates must post a bid of how many new tokens (N) they will accept per block.
2. Each User may “vote” by staking some or all of their tokens to only one Candidate.
3. Users, Members, and Affiliates may not vote for more than one Candidate.
4. The staked tokens are held as collateral to guarantee the good performance of the
Candidate.
5. The User may withdraw his stake at any time, but it may require a cooldown period of
say, seven days, in order to prevent abuse.
6. The top 100 Candidates are selected based on their total stake. This is the “Candidate
Pool”.
7. From the Candidate Pool, 20 Block Producers are chosen based on the lowest bids for
new tokens. If all the bids are zero, then the top 20 will be selected based on the
highest stake. This will keep the inflation rate of the Treaty Token at a low rate.
8. When making a new block, the Block Producer will be rewarded the number of tokens
(N) that he had bid.
9. Block Producers are subject to Arbitration.
10. Block Producers may have their stake confiscated to satisfy a judgment of the Arbitrator.
This might happen if a Block Producer causes loss to others through negligence or
malfeasance.
11. In order to provide incentive for the entire Candidate Pool, the 21st Block Producer will
be randomly selected from the Candidate Pool, once each cycle.
Tokens
This blockchain requires a minimum of two tokens, although more could later be added. The
initial two tokens will be the Treaty Token, and the Gold Token.

Treaty Token
The Treaty token will be similar to Bitcoin or EOS. A limited supply will be created initially
(pre-mine), and new tokens will continue to be created at a limited rate to support the cost of
operating the blockchain. The Treaty Token is not backed by anything. Its value will be
determined by trading on a market with the Gold Token.

The Treaty Token will have four functions.

1. Similar to Ethereum, Treaty Tokens will be used for transaction fees of any token on the
blockchain. However, the fee is chosen by the sender. It can be zero. Block Producers
may prioritize transactions based on fees. In this way some fees will be paid, but they
will be kept reasonably low.

2. New Treaty Tokens are created in each block (N), and paid to the Block Producer as the
block reward. The fees are also paid to the Block Producer. This supports the cost of
operating the blockchain.

3. In order to select the top 100 block producer candidates, holders of the Treaty Token
may stake their tokens to one candidate. The staked tokens are held as collateral for the
performance of the candidate. The 100 candidates with the largest number of staked
tokens become the pool from which the top 21 block producers will be selected.

4. In order to issue Gold Tokens, a Member must first pay some Treaty Tokens to the
Reserve Trustee, to be held as collateral. The member may then set aside CGC up to
the value of the collateral, and issue Gold Tokens against them. If the Member defaults
on the redemption of Gold Tokens, or fails an audit, then the Arbitrator may call in their
collateral. The collateral may be liquidated to unwind the Gold Token debt issued by the
defaulting Member. The reason for holding Treaty Tokens as collateral is that they have
economic value which is entirely digital. They can very easily be transferred from one
party to another without requiring physical shipment or storage.

Gold Token
The Gold Token will be issued using the Gold Contract. This will allow any of the Members or
their Affiliates to issue Gold Tokens against CGC held in their custody.
In order to discourage cheating, each Member must put up Treaty Tokens as collateral. The
value of the collateral will determine how many Gold Tokens they may issue. The collateral will
be set at 100%. Therefore, to issue 100 kilograms of Gold Token, the Member must put up
Treaty Tokens equal in value as collateral, and then must segregate 100 kilograms of CGC in
their own storage facility.

If the value of the Treaty Token rises or falls relative to the value of CGC, then a Member may
be called upon to add more collateral, or may be allowed to issue more Gold Tokens, as the
situation requires.

Third party Users may stake collateral on behalf of Members or Affiliates. For example,
insurance companies might offer this as a paid service to issuers, similar to creating a bond.

The Gold Token has its its own transaction fee of ½% in addition to the voluntary fee of Treaty
Token. The ½% fees will be automatically deducted from the amount of the payment.

These fees will be paid out daily to the issuers of the Gold Tokens. This will generate a gold
return on gold. This creates incentive for countries, companies and individuals to make or buy
CGC and issue them as Gold Tokens.

For the Gold Token issuers, the return on their gold will be the transaction fee multiplied by the
annual turnover.

Historically, digital gold issuers in the 2000’s had annual turnover between 80 and 120. This
would generate fees equal to 40% and 60% of the deposit base.

Most banks have a turnover between 8 and 12 times per year.

The economic incentives from such a high rate of return will pull gold out of hoards and into the
system. Over time this will cause the turnover to fall until the return is near 1%. But this allows
the private citizens and companies to fund the gold payment system with their own capital.

If the Members licence Affiliates for a percentage of the transaction fees, this will create a gold
revenue stream for the Member nations.

In order to make the most profit from issuing Gold Tokens, Members should lend them on the bill
and bond markets created for this purpose. This puts the gold into circulation to generate the
most fees.

Additional Tokens
Once this platform is put into place, a silver coin and silver token could be added if the
Association thinks there is good reason to do so.

The benefits of this system are to convert a government cost of minting currency into a
profitable revenue stream for the government. You let others pay you for the privilege of minting
coins and issuing tokens.

Initializing the Blockchain

The Treaty Tokens will be used to select the Block Producers. However, in order to initialize the
Gold Treaty Blockchain the Association will manually select the first 21 Block Producers. In the
genesis block of the blockchain, 1 billion Treaty Tokens will be created as property of the
Association, and equally staked to the starting Block Producers.

100,000,000 (10%) of the Treaty Tokens will be retained as property of the Association.

The Association will auction the remaining 900,000,000 of the Treaty Tokens to the founding
Members, Affiliates, and Users. This auction will use physical CGC. The Association will have
a secure physical storage facility. To participate in the auction, buyers must deliver CGC to the
Association’s account at the storage facility. The initial auction will be over a period of thirty
days. (Alternatively, the CGC could be stored in the Member’s storage facilities and digital title
transferred to the Association for the auction.)

At the end of the thirty days, the total amount of CGC collected will be divided by the number of
Treaty Tokens being auctioned to find the price per token. Then all of the participants will be
paid a number of Treaty Tokens equal to their gold contribution divided by the auction price.

In this way the tokens will be distributed and an initial price of the token will be set. Upon
receiving their tokens, the Users may use them on the blockchain for their various purposes.

In this way, the Association will receive its initial funding in gold, which it can use to pay for
operations by lending the gold to Gold Token issuers.

Discussion
One unusual feature of blockchain payment systems is that all new transaction requests are
sent into a pool. From this pool, Block Producers take them and include them in a block, which
records them in the ledger. Block Producers may prioritize transactions from the pool based on
the transaction fee included in the transaction.

This design of the Gold Token has the unusual feature of two transaction fees. In order to make
a payment with Gold Token, the sender may include a small fee the Treaty Token, which pays
the fee to operate the blockchain. Second, the Gold Token ½% transaction fee will be deducted
from the amount of Gold Token sent in the payment.
The blockchain fee is voluntary. The fee can be set to zero by the sender. However, the Block
Producers may treat zero fee transactions as the lowest priority. This could cause a delay in the
processing of zero fee transactions. Including a Treaty Token fee will ensure the Block
Producers prioritize the transaction so that it goes into the first available block. This creates an
economic incentive to keep the fees high enough to ensure they get processed, but they will be
low enough to be cost effective.

Appendix C - Initializing the Economic Circulation of Gold

The Gold Treaty presumes the participation of at least two sovereign nations with a strong
interest in facilitating the use of gold as the medium of international trade.

If the sovereign Members merely mint a large batch of CGC and sit on them, nothing will
happen. In order for the CGC to be used in commerce, they must be made available to the
companies who need to trade.

Likewise, if the sovereign Members merely issue a large batch of Gold Tokens and then sit on
them, nothing will happen. No transaction fees will be generated on Gold Tokens that are not
spent.

The Bill and Bond Markets are the beating heart of the Gold Treaty. If the sovereign Members
mint a large batch of CGC, issue Gold Tokens against them, and then lend them into the Bill and
Bond Markets to earn a return, then the Gold Treaty economy will be started.

Traders in energy, commodities and goods will be able to go to the Bill and Bond markets to
borrow Gold Tokens and use them to conduct their business.

Economic Incentives

1. The ability to convert a lower value form of gold into a higher value form of gold will
motivate private persons to bring raw gold to the mints and convert them into CGC.

2. The ability to earn gold transaction fees will also motivate private investors to bring CGC
to an affiliate and put them into circulation as Gold Tokens.

3. The ability to earn a gold return on gold will pull gold out of hoards to be lent into the Bill
and Bond markets.

For all three of these profitable activities, as more gold is brought into the system the profits will
be reduced. If too much gold is brought in and the return on investment falls below some other
industrial use for gold, then investors will take their gold out again and use it for some more
profitable purpose. Removing gold from the system will cause the profits to rise again.

Together these three economic incentives will create a self-regulating elastic money supply.

The Gold Treaty requires sovereign Members to kick start the engine. But once it is up and
running, the economic incentives will pull more and more private gold into the system. This will
enable a reboot of world trade in a multi-polar world.

Implications
The design of the Gold Treaty has several interesting implications.

1. It reverses the relationship between government and the central bank, and turns the
government into the lender.

2. It reduces the need for a central bank in the long term.

3. It will enable governments to collect resource royalties and taxes in the form of gold,
creating gold revenue streams.

4. It reduces national vulnerability to currency manipulation by hostile entities.

5. It reduces vulnerability to arbitrary sanctions by hostile entities.

6. It will promote stabilization of prices in the economy.

7. It will standardize the business cycle to seven years.