13.13. Design Doc 013: Wallet-to-Wallet Payments

13.13.1. Summary

This design document proposes an extension of the Taler protocol that allows payments from wallet-to-wallet without a merchant.

13.13.2. Motivation

To be usable as an electronic payment system with cash-like properties, customers should be able to transfer money between themselves without needing to setup anything beyond their wallet(s).

This will be used for payments via e-mail and other messaging apps, as well as possibly for transfers via NFC/QR code between mobile phones.

Invoice Flow User Experience

digraph invoice { settings [ label = "Invoice flow"; ]; ranksep="0.5" { rank = same; "inbox"; "begin"; } { rank = same; "sending"; "receiving2"; } { rank = same; "receiving"; "paying"; } { rank = same; "mid"; "midbox"; } { rank = same; "body"; "amount"; } begin [label="Seller Inbox",shape=box]; body [label="compose\nE-mail message"]; amount [label="specify\ninvoice details"]; receiving [label="receiving...",shape=diamond]; sending [label="transmitting...",shape=diamond]; mid [label="Seller Inbox",shape=box]; notified [label="Notification:\npayment received"]; end [label="Seller Inbox",shape=box]; begin -> body [label="(1) new"]; body -> amount [label="(2) attach invoice"]; amount -> body [label="(3) Ok"]; body -> sending [label="(4) send"]; sending -> mid [style=dashed]; mid -> receiving [style=dashed]; receiving -> notified [style=dashed]; notified -> end [label="(9) Acknowledge"]; inbox [label="Buyer Inbox",shape=box]; receiving2 [label="receiving...",shape=diamond]; midbox [label="Buyer Inbox",shape=box]; open [label="message with\nattached invoice"]; confirm [label="review invoice"]; paying [label="paying...", shape=diamond]; paid [label="message with\npaid invoice"]; finbox [label="Buyer Inbox",shape=box]; inbox -> receiving2 [style=dashed]; receiving2 -> sending [label="Internet\n(pEp)",style=dashed,dir=back]; receiving2 -> midbox [style=dashed]; midbox -> open [label="(5) select message"]; open -> confirm [label="(6) view invoice"]; confirm -> paying [label="(7) pay"]; paying -> paid [style=dashed]; paid -> finbox [label="(8) back"]; paying -> receiving [style=dashed, label="Internet\n(Taler)"]; }

Donation Flow User Experience

digraph donation { ranksep="0.5" settings [ label = "Donation flow"; ]; { rank = same; "inbox"; "begin"; } { rank = same; "sending"; "receiving2"; } { rank = same; "body"; "amount"; } { rank = same; "mid"; "midbox"; } { rank = same; "accepting"; "timeout"; "receiving"; } begin [label="Donor Inbox",shape=box]; body [label="compose\nE-mail message"]; amount [label="specify\npayment details"]; receiving [label="receiving...",shape=diamond]; timeout [label="timeout...",shape=diamond]; sending [label="transmitting...",shape=diamond]; mid [label="Donor Inbox",shape=box]; notified [label="Notification:\npayment confirmed"]; notified2 [label="Notification:\npayment refunded"]; end [label="Donor Inbox",shape=box]; begin -> body [label="(1) new"]; body -> amount [label="(2) attach payment"]; amount -> body [label="(3) Ok"]; body -> sending [label="(4) send"]; sending -> mid [style=dashed]; mid -> receiving [style=dashed]; receiving -> notified [style=dashed]; mid -> timeout [style=dashed]; timeout -> notified2 [style=dashed]; notified -> end [label="(9a) Acknowledge"]; notified2 -> end [label="(9b) Acknowledge"]; inbox [label="Recipient Inbox",shape=box]; receiving2 [label="receiving...",shape=diamond]; midbox [label="Recipient Inbox",shape=box]; open [label="message with\nattached payment"]; confirm [label="accept payment?"]; accepting [label="accepting...", shape=diamond]; paid [label="message with\naccepted payment"]; finbox [label="Recipient Inbox",shape=box]; inbox -> receiving2 [style=dashed]; receiving2 -> sending [label="Internet\n(pEp)",style=dashed,dir=back]; receiving2 -> midbox [style=dashed]; midbox -> open [label="(5) select message"]; open -> confirm [label="(6) review payment details"]; confirm -> accepting [label="(7) yes"]; accepting -> paid [style=dashed]; paid -> finbox [label="(8) back"]; accepting -> receiving [style=dashed, label="Internet\n(Taler)"]; }

13.13.3. Requirements

  • The protocol must permit transacting arbitrary amounts in any currency, as long as both parties trust the exchange involved.
  • The control data for wallet-to-wallet payments should be small enough to fit into a QR code or short message (so ideally less than 64 bytes).
  • No other direct communication channel between payer and payee should be required.
  • The wallet-to-wallet payment must be possible without trusting the other party beyond the point where the money has been received by the payee. Thus, sharing of coin private keys is not sufficient, we need transactional semantics resulting in exclusive control over the funds by the recipient.
  • The wallet-to-wallet payment protocol must not allow users to circumvent income transparency. That is, each wallet-to-wallet transaction must be visible on a KYCed transaction ledger (such as a bank account).
  • The money received via a wallet-to-wallet payment must be usable for further Taler payments with minimal delay (after KYC).
  • It must still be possible to associate payments with a contract that is effectively (alas not necessarily directly) signed by both parties: the payer with the coin private keys, and the payee with their KYC’ed account private key.
  • The contract must be able to satisfy laws like the German TSE law, which implies that the payer must be able to obtain a payment receipt.
  • Two payment scenarios must be possible: (1) one where the payee first transmits a proposal to the payer (request-to-pay) that the payer accepts by making the payment, and (2) completely uni-directional payments where the payer includes a proposal with the payment and the payee accepts the proposal by taking the offered payment.
  • If the payment fails (i.e. the receiver refuses to accept the money or the message is lost), the payer must automatically recover the funds (minus applicable fees) without the need for further communication.
  • If funds flow back to the payer due to an aborted payment, it must be provable for the payer that these funds were not income but merely an aborted transaction. Furthermore, in this case, no KYC should be required from the payer.
  • If a payment would partially succeed, i.e. because the payer inadvertedly used some double-spent coins and some valid coins, this must fail before the uni-directional communication and be correctable payer-side. In other words, the actual payment must be atomic.
  • The usual properties of Taler (everything auditable, unlinkability, high-performance in terms of CPU, bandwidth, latency, storage requirements, and the ability to levy fees on every operation that is costly for the exchange) need to be preserved.
  • The system must handle the case where a customer no longer intends to use the KYCed account (due to disuse, death, or key compromise).

13.13.4. New Terminology

  • An account is a non-expiring reserve for which entity knowing the reserve private key has completed a KYC procedure sufficient to enable receiving income under that address.
  • A purse is a public-private key pair where the public key is an exchange address from which any owners of an account can merge the amount left at a purse into their account balance assuming they know the purse private key.
  • A wad is an exchange-to-exchange wire transfer that wires money into a group of accounts at the target exchange.

13.13.5. Proposed Solution


  • Purses are ephemeral and only serve for one transaction.
  • The purse’s transaction amount is fixed when the purse is created, and specified together with the maximum deposit fee acceptable to the payee. Deposit fees exceeding this limit must be paid by the payer.
  • Each purse is associated with a contract terms hash and an expiration date.
  • The contract is optionally stored encrypted at the exchange. The contract must be encrypted to the purse private key. An additional ephemeral public key (for DH encryption) should be part of the POSTed payload.
  • The exchange deletes the encrypted contract at this expiration date.
  • The exchange may limit the encrypted contract size and storage duration.
  • Either payer or payee can create the purse and associate it with the contract.
  • By merging the purse into the account, the payee accepts the contract.
  • By paying the purse to the designated amount, the payer accepts the contract.
  • Until the purse is fully paid, the payer can abort the payment.
  • The exchange may charge a purse fee for managing the purse, but we want most scenarios to not require it to be effectively charged.
  • By associating a purse with an account upon creation, the purse fee can be made optional for account holders as long as the number of purses created per account is below a configurable threshold.
  • By charging the purse fee only in case the payee did not merge the purse into their account, the purse fee can be limited for payers to the case where they are receiving a refund — and here it could be then entirely avoided if the refund fee is non-zero.

W2W Payment Metadata

The standard Taler Customer-to-Merchant payments always use a contract terms JSON object to record the modalities of the payment and the resulting obligations of a successful payment.

The contract terms concept does not directly carry over to W2W payments, because:

  • Either party may initiate the payment.
  • The payee does not have a merchant public key, and at the time of payment initiation, the payee account might not yet be known.
  • There is no nonce that the customer generates and uses to prove that they uniquely “own” the contract terms.
  • There is no negotiation of trusted auditors / exchanges possible.

As a result, some of the existing fields of the contract terms no longer apply to wallet-to-wallet payments.

Contract metadata for W2W payments can be exchanged in three ways:

  1. Inline, as part of the payment request / payment offer. In this case, both parties are already aware of the contract’s contents and the exchange’s contract exchange facility is simply not used.

  2. The payee can create a purse and immediately associate it with an account by sending a signed merge request together with the (encrypted) contract.

    1. The purse creation request created by the payee must include a signature with the account private key of the payee signing the purse public key and the hash of the contract, thereby affirming that the contract was pre-approved by the account owner.
    2. The exchange may wave the purse fee for a certain number of active purses per account. Additional purses can be purchased by paying the purse fee.
  3. The payer can store a contract with the exchange by POSTing an encrypted contract to the exchange as part of creating a purse.

    1. The exchange charges the purse fee to payers for purses that are refunded after not being merged.

    2. When paying into a purse, the coin signature includes the purse public key, the contract hash and the desired expiration date (how long a merge is allowed).

    3. Payment offers are not allowed if the amount transacted is below the purse fee.

    4. The exchange auto-refunds coins in purses with deposits matching expired contracts.


      While the refund fee amount can be reused, these types of refunds are not approved by a merchant’s signature. Thus, we will need a new message type in the coin history to represent these events.

Account creation

  1. The payee generates an account key, which also yields a payto://taler/$EXCHANGE_BASE_URL/$ACCOUNT_PUB target address (for which the payee knows the corresponding account private key).
  2. When withdrawing from an account, the exchange first checks if the customer has satisfied the KYC requirements. If not, the customer is redirected to a Web page where they can perform the necessary KYC operation.
  3. For this, the exchange wire gateway is extended with a request to check the KYC status of a customer based on an ACCOUNT_PUB. Possible replies are in-progress and succeeded. An in-progress status should be accompanied with information how the customer may complete the KYC check.
  4. A new exchange endpoint /account/$ACCOUNT_PUB/kyc allows wallets to request a KYC for an $ACCOUNT_PUB. Such a request may include the requirement to pay a KYC fee. The KYC fee may be charged to that account (if it exists), or could be waved if the account was established via a wire transfer from a partner bank.
  5. If the account owner fails to perform the KYC check, the funds in an account remain inaccessible. After a configurable duration, the funds may be considered forfeit and become the property of the exchange where the account is located.

Withdrawing from accounts

  1. When requesting an account’s history (which can get quite long), the exchange only returns the last 3 months of data. Requesting the full history requires paying an account history fee (which is not done via a 402, but simply charged to the account when requested; full account histories for accounts with an insufficient balance cannot be requested – except of course the wallet could simply top up the account balance first, see below).
  2. If the exchange has merged a purse into an account, or received an inbound wire transfer from a wad matching the account (see below), it adds the respective amount(s) to the account’s balance, allowing the KYC’ed customer to withdraw the funds, similar to withdrawals from a reserve.
  3. The account history endpoint should also allow long-polling. Note that long-polling should be limited to short durations, as inbound transfers via taler-exchange-wirewatch cannot cause the long polling to be resumed, only transfers within the same exchange can benefit from long-polling acceleration.

Account deletion

  1. The account owner can delete an account by signing a deletion message with the account private key.
  2. This basically resets the KYC data at the exchange, preventing further use of the account. This is helpful in case a user is concerned about having accidentally disclosed the account private key to a third party.
  3. If funds remain in the account, an error message is generated instead. The user can pass an extra override parameter to delete accounts even if they still contain funds.
  4. A related endpoint should exist for the exchange operator, possibly using messages signed with the exchange offline key. This could be useful in case customers die or are otherwise in need for manual intervention that requires an account to be deleted. In this case, remaining funds in the account should be wired to a bank account designated in the message with the offline signature. The audit report should contain a special note for all of these account deletions.

Payment offers

In this protocol variant, the payer is initiating the process.

  1. The payer creates a purse by computing a public-private key pair.

  2. The payer POSTs to the /purse/$PURSE_PUB/depost endpoint to deposit coins into the purse and optionally upload the encrypted contract terms. The deposit signatures should use payto://taler/$PURSE_PUB as the target address and signing over the $CONTRACT_HASH as usual in deposit operations. Note that the lack of a hostname indicates that the target address is a local purse.

  3. The payer shares the purse’s private key and the base URL of the exchange where the purse was created with the payee. This can be done using a taler://purse/$BASE_URL/$PURSE_PRIV URL.

  4. The payee uses the new /purse/$PURSE_PUB endpoint to retrieve the encrypted contract (if available) and purse balance, which includes all (coin) deposits and merges involving the purse.

  5. The payee’s wallet must ensure that either:

    1. The purse has an attached encrypted contract terms, the contract terms can be decrypted and are valid, and their hash matches the contract terms hash of the purse.
    2. The wallet received detached contract terms, and their hash matches contract terms of the purse.

    If neither case applies, the payee’s wallet must reject the payment.

  6. The payee can then POST to /purse/$PURSE_PUB/merge a request signed by the purse’s private key to merge the funds into an account. A second signature must be provided by the account private key, signing the $CONTRACT_HASH thereby affirming that the payee accepted the contract. The account is of the form payto://taler/$EXCHANGE_BASE_URL/$ACCOUNT_PUB.

  7. Processing continues depending on the location of the account:

    1. If the $EXCHANGE_BASE_URL matches the local exchange, then the exchange processes the merge request akin to the logic for payments into known accounts, as detailed above.
    2. If the $EXCHANGE_BASE_URL does not match the local exchange, a wad fee is charged, and the remaining amount are placed into a wad to inform the target exchange, as detailed below. Wad fees may be covered by the merchant, just like deposit fees, depending on the contract.
  8. The exchange confirms the merge (per response to the merge request). This allows the payee software to instantly affirm to the users that the transaction is final (even if it may not be instantly available to the payee if the payee did not complete the KYC process for the account).

  9. The payer uses the GET /purse/$PURSE_PUB endpoint to obtain the receipt from the payee (in the form of the merge signature). Query parameters are used to avoid downloading the (already known) encrypted contract and the deposit operations. Long-polling must also be possible for this request.

Payment requests

  1. The payee creates a purse by computing a public-private key pair.
  2. The payee POSTs to the /purse/$PURSE_PUB/merge endpoint to both upload the encrypted contract, associate it with the payer’s account and signal its agreement to the contract. The merge request must be signed by the purse’s private key. A second signature must be provided by the account private key, signing the $CONTRACT_HASH thereby affirming that the payee accepted the contract.
  3. The payee provides the $PURSE_PRIV to the payer.
  4. The payer computes the corresponding public key and uses the new /purse/$PURSE_PUB endpoint to retrieve the encrypted contract and the merge request, which signifies that the payee would agree to the contract.
  5. The payer software decrypts the encrypted contract using the purse private key and the payer accepts the contract in the user interface.
  6. Processing continues depending on the source of the coins:
    1. If the payer’s coins originate from the same exchange, the payer software POSTs to the /purse/$PURSE_PUB/depost endpoint to deposit coins into the purse. The deposit signatures should use payto://taler/$PURSE_PUB as the target address and signing over the $CONTRACT_HASH as usual in deposit operations. Note that the lack of a hostname indicates that the target address is a local purse.
    2. If the payer’s coins originate from another exchange, the payer software deposits the coins at the originating exchange using the traditional /deposit endpoint and a target account of the form payto://taler/$EXCHANGE_BASE_URL/$ACCOUNT_PUB. In this case, the remote exchange charges a wad fee and places the remaining amount into a wad to inform the target exchange, as detailed below.
  7. The exchange confirms the deposit. This allows the payer software to instantly affirm to the users that the transaction is final, or to abort or try again in case of errors.
  8. The payee uses the GET /purse/$PURSE_PUB endpoint (possibly with long-polling) to be notified about the successful deposit and subsequent completion of the merge request.

Payment into accounts at remote exchanges

In case the coins and the accounts in the transaction flows above are at different exchanges, an aggregated exchange-to-exchange payment (short wad) is used.

  1. Exchanges specify a new wad fee that they charge for exchange-to-exchange payments. They also specify their wad policy, that is how often they perform exchange-to-exchange transfers.


    We may want to consider allowing for different wad-speed levels, where express payments (without aggregation) are allowed in return for higher wad fees.

  2. The payer’s exchange creates a wad by grouping all wad requests to the same target exchange. It executes the transaction when either the wad threshold (maximum number of transactons aggregated per wad) or the wad delay (maximum delay for transfers) has been reached.

  3. If the (aggregated) wire transfer fails (say the /wire endpoint of the payee exchange does not resolve to a valid bank account), the originating exchange automatically creates a full refund for all involved coins (refund fees apply).


    While the refund fee amount can be reused, these types of refunds are not approved by a merchant’s signature. Thus, we will need a new message type in the coin history to represent these events.

  4. The payee’s exchange observes the wire transfer with a wire transfer subject with the originating exchange base URL and a $WATID, and uses a GET /wad/$WATID request to obtain details about the target accounts.

  5. When the payer’s exchange is requested to provide information about aggregated transfers under the $WATID, it provides a signed list of account public keys and associated amounts that must add up to an amount below the total amount transferred. If they do not, the payee’s exchange does not credit any of the accounts and instead preserves the bogus reply (to justify its inaction with its own auditor) and reports the issue to the auditor of the payer’s exchange (keeping the received funds for future manual resolution).

  6. taler-exchange-wirewatch and the Taler wire gateway API will need to be extended to allow passing inbound wire transfers with $WATID and exchange base URL to the exchange. Furthermore, another tool is needed to lookup the wad data at remote exchanges.

  7. If the payee trusts the originating exchange, it may consider the transaction final once the originating exchange has affirmed the deposit (assuming the payer has a way to submit the evidence of that payment, which may not apply in uni-directional scenarios). Otherwise, the payee may simply only trust its own exchange, resulting in the transfer only being considered final after the receiving exchange has confirmed that the wad has arrived.


Cross-exchange W2W payment request:

  • Bob borrowed 15 EUR from Alice to buy a train ticket. A few days later, Alice wants her money back. She creates a request for payment in her wallet. The wallet creates a purse for 15 EUR at the only exchange that Alice is currently using. The wallet shows her a taler://purse/{EXCHANGE_URL}/{PURSE_PRIV} link that she can share with Bob. Bob receives the link and opens it with his Taler wallet. Bob is using a different EUR exchange than Alice. Bob’s wallet makes a /deposit request to his own exchange. Shortly after, Alice’s exchange receives the wad from Bob’s exchange, and credits the money into Alice’s purse.
    • Q: How does Bob find out if Alice’s exchange supports a wad transfer from Bob’s exchange? A: This needs to be part of the wad policy.
    • Q: How does Bob get a “receipt” to prove that he paid Alice? A: He has Alice’s account public key and the associated signature chain leading to her payment request. If he paid someone else by accident, the KYC of Alice’s exchange could be used to find out who received the funds.

Cross-exchange W2W payment offer:

  • Carol wants to send some money to Dave as a birthday gift. Carol knows that Dave is using Taler, but she does not know which exchange he is using. She opens her Taler wallet and initiates a P2P payment. She sends the resulting taler://purse/{EXCHANGE_URL}/{PURSE_PRIV} in an e-mail to Dave. Dave opens they link in the e-mail with his Taler wallet. Since Dave is using a different exchange than Alice, Dave’s wallet issues a merge request to Alice’s exchange pointing Alice’s exchange to Dave’s account at his exchange. Shortly after, Dave’s exchange receives a wad from Alice’s exchange, and credits Dave’s account with the money.

State machine for Purses

// The "OPEN-ACCOUNT" start state implies that the purse is associated
// with an account and a merge request for that account.

// "Partial" means that it is filled with a fraction of the coins
// indicated in the creation request.

// The purse was filled with as many coins
// as indicated in the creation request, resulting in the transaction to complete.

// The offer expired before any payment was received.

// The purse was filled with as many coins
// as indicated in the creation request, resulting in the transaction to complete.

// During an abort, already deposited coins are being taken out of the purse.

// All coins put into the purse are refunded because the
// payer never completed the purchase before the timeout.

// The "OPEN-DEPOSIT" start state implies that the purse is filled with
// deposited coins.

// Paid and merged with an account (locally or via a wad)

// The offer expired without a merge request.

Additional considerations

  • Creation of additional accounts per customer can be discouraged by asking for higher fees.
  • The global transaction volume of one customer can be easily determined by authorities, which can then trigger further audits of the customer
  • As a technically expensive but more water-tight measure, normal withdrawals from reserves could be disallowed. Instead, a modified refresh protocol could ensure that whoever has knowledge of the account private key can also learn the private keys of coins withdrawn from that account, thereby removing Taler’s “one-hop withdrawal loohole”.

13.13.6. Alternatives

  • The payer could directly give deposit permissions to the payee. This has two problems:
    1. The payer does not know the wire details of the payee. Thus we would need to introduce some “wildcard deposit permission”, where the exchange allows any wire details on /deposit.
    2. The payment information would be rather large, making it difficult to transfer via a QR code or short text message.
  • Account history exceeding a configurable time limit (like 6 years) could be subject to garbage collection. However, doing so may be difficult to square with onboarding new auditors in the presence of existing accounts, as the auditors could then not reconstruct the account balances from cryptographic proofs.
  • Accounts without KYC check could be eventually closed. However, even if the coins used to fill the account are refunded, it would be difficult to inform the originating wallet that the coins have received a refund. This applies even more strongly in case of accounts filled via wads, where in theory the originating exchange may not even be in business anymore. Thus, it is cleaner and simpler to declare such funds forfeit.

13.13.7. Drawbacks

The overall changes required are not small:

  • New KYC fee, wad fee and account history fee required in /keys endpoint (similar to closing and wire fees), requires some work across toolchain (offline signature, etc.)
  • New taler wire method needs special case to possibly bypass (same exchange scenario, with long-poll trigger) the usual aggregation logic.
  • New exchange table(s) required to store inbound amounts by account. Likely two tables, one for local exchange p2p and one for remote exchange p2p payments.
  • New exchange table for purses required (for remote p2p payments).
  • New exchange logic required to make transfers requests for purses (another separate process).
  • New /account/$ACCOUNT_PUB/kyc endpoint required.
  • New /purse/$PURSE_PUB/merge endpoint required.
  • Additional tables to be verified by the auditor.
  • taler-exchange-wirewatch needs to support receiving purses closures and exchange-to-exchange wire transfers with WTIDs.

Aside from implementation complexity, the solution has the following drawbacks:

  • If a W2W payment failed (say the receiver lost the account private key), the customer’s money can be forfeit. Alas, this should be very, very rare as the wallet software can trivially ensure that a backup was made of the account private key before initiating the KYC process.

13.13.8. Q / A

  • Q: Why are direct payments into accounts allowed?
    • A: Direct payments into accounts may be used by the customer to fund the expenses for using the account. They should not be used for payments between customers, as contract terms for the /deposit of coins cannot be negotiated. Furthermore, the sender of the payment cannot be sure that the account of the sender is still valid.
  • Q: Who “owns” a purse? The payer of payee?
    • Both. Ownership is shared. Either the payer issues a refund on the purse, or the payee claims it by merging it with one of their accounts.
  • Q: Are purses created with a pre-determined “capacity”?
    • A: Yes. Otherwise there would be weird failure modes when the payee merges the purse before the payer fully deposited into it.
  • Q: Are account public keys considered private or public data?
    • A: Public. The payer needs a signature from the payee affirming that they accepted the contract, and this requires a key that is linked to the KYC process to be meaningful. However, the software should NOT permit direct payments into foreign accounts because it would be too easy to accidentally send payments that nobody can receive, because the account public key is wrong/lost.
  • Q: Why do traditional merchant payments not use purses?
    • Refunds are not possible with purses after they are closed.
    • The customer cannot prove that they own the contract terms (Contract terms claiming requires interactivity that is not possible in all W2W scenarios.) Thus, while payers can prove that they paid, the payee may claim someone else also bought the same product. A secure channel must thus be used to exchange the purchase offer.
  • Q: What determines when a wad transfer can happen between two exchanges?
    • Exchanges should explicitly state which other exchanges they are willing to do wad transfers with (and how often, at what cost). This may involve abstract policies like sharing an auditor, using the same currency and the same (banking) protocol, or other constraints (like a specific list of exchanges).