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[Taler] Proposal For GNU Taler System That Pays Merchants in Liquidity T

From: taler
Subject: [Taler] Proposal For GNU Taler System That Pays Merchants in Liquidity Tokens
Date: Tue, 24 Aug 2021 01:01:15 +0200 (CEST)

Hash: SHA256

- - -Hello GNU Taler Mailing List,

I would like to thank Dr. Grothoff for responding and informing me of the Taler 

Gateway API. I will certainly take a close look at it when writing code

inspired by GNU Taler. You mentioned the real challenge is convincing

users to trust the exchange's payment system. For an exchange, this

will include clients wishing to trade coins as well as merchants that

must accept the species of payment. I have attended cryptocurrency

meetups in person, specifically the Crypto Mondays LA Meetup:


At this in-person meetup, people made clear that see cryptocurrency

as an investment asset, less so a currency for daily merchandise.

I believe it is wisest to offer cryptocurrencies of some form to users

rather than attempting to invent a digital currency completely from

scratch. Cryptocurrency trading clearly has an established market

that is here to stay for the forseeable future. The reason why is

what I learned at the meetup.

People I met at the meetup hyperlinked above informed me they care

much more about making lots of money by cryptotrading than they

care about their privacy. And they prefer cryptotrading over stock

trading since cryptocurrency is more resistant to inflation.

For the average person, using an exchange for the sake of conventional

cryptotrading is best. It would be easier for a layperson to make money

by wisely exchanging coins based on price fluctuations in cryptocurrency

than invest in liquidity pools. Investing in liquidity pools require depositing

large sums of money before significant earnings in dividends can be made.

But for merchants, who can potentially amassĀ  a diverse set of payments

under the GNU Taler System, the best form of payment would arguably be

liquidity pool tokens, such as the Uniswap tokens.

Allow me to explain.

According to Glen Goodman, a successful cryptotrader that literally earned

enough dividends from cryptotrading to live off of it, simply holding onto

a diverse array of cryptocurrencies will lead to a loss in value.

He demonstrated this by example in his notable work on Cryptotrading

- - --The Crypto Trader--that merely diversifying one's crypto asset

portfolio without taking into account of price volatilities will inevitably

lead to significant loss in profit (The Crypto Trader p. 195-8).

It is technically possible for a merchant to buy and sell cryptocurrencies

they receive from customers as payment to avoid this and optimize

the appreciation in value of their crypto assets, but this is very

cumbersome and there are no widespread cryptotrading algorithms

that are guranteed to work in the long-term yet.

A second problem is that since cryptocurrency prices fluctuate,

what a customer pays in cryptocurrency to a merchant may fall

in value until the merchant loses the profit they were supposed

to make. Liquidity pools are much more resistant to price

crashes in the cryptocurrency market. If one cryptocurrency's

price falls, people will more frequently exchange said cryptocurrency

for the other in the liquidity pool. And the liquidity pool investor

earns dividends from the exchange fees regardless.

A third problem liquidity pools resolve is allowing a user of a

liquidity pool to exchange any amount of cryptocurrency,

whatever the price is. In an exchange not conducted by

an automated market maker, an order book is made where

people offer various prices for the cryptocurrency, and the

average is often chosen ( The Crypto Trader -- Glen Goodman

p. 79 - 81).

Despite all these benefits, one must choose liquidity pools wisely.

Good liquidity pools are the Liquidity pool involving 50% of

ETH and 50% WBTC and the Liquidity pool involving

50% of ETH and 50% of cSAI:


A merchant that does this will be able to earn a good monthly

percentage yield of ~15%-20% monthly on top of the monthly

profits the merchant earns. This monthly percentage yield

is an incentive to encourage merchants to accept the GNU Taler

System as payment.

When a client wishes to pay a merchant, they can use whatever

digitized coin, or even fiat money, they wish. However, the merchant

may setup a payment plan with GNU Taler where the client's money

is automatically exchanged for liquidity tokens of the merchant's

choosing. This will allow the merchant to not only earn the expected

monthly profit from sales, but also a monthly percentage yield

from holding onto liquidity tokens belonging to liquidity pools.

This is my idea on how to convince merchants to adopt the GNU

Taler payment system. Please let me know what you think of

this concept Professor Grothoff.


Tanveer Salim

P.S.: You can find my PGP public key and all other keys in my Web of Trust

at: https://raiderhacks.com/gpg


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