Token Design

XAGm utilizes the Fungible Reserve Standard (FRS) and the initial representation at launch is 1 token to 1 fine troy oz. of 99.9% purity LBMA-accredited Good Delivery silver. This representation will decrease slightly over time as reflected in the on-chain ozPerToken daily value, which represents the amount of silver weight each token corresponds to. The total supply of XAGm tokens multiplied by the ozPerToken value is intended to correspond to the total amount of physical silver in the vaults.

The value of ozPerToken starts at 1.000000000 at launch and it is reduced daily at 00:00 UTC through on-chain calculations via a set AnnualFeeRate. This is to account for fees accrued by custody costs. As ozPerToken adjusts, totalSupply will increase accordingly such that the relationship of ozPerToken x totalSupply = totalReserves holds. To achieve this, the reconcileSupply function will create the additional tokens, which correspond to the fee amounts and send them to the Fee Collector address.

The combination of daily rule-based reduction of ozPerToken value and the reconcileSupply function continuously ensures that the existing tokenized silver is appropriately accounted for. It also allows for new minting of XAGm tokens at the prevailing ozPerToken value for newly deposited bars into vault.

The calculation of daily ozPerToken value and reconcileSupply amounts are as follows:

The below example illustrates where the AnnualFeeRate is set at 0.30% and applied to a totalReserves amount of 999 troy oz. fine weight (99.99% purity 1000 oz. gross weight) silver bar:

Day 0	Day 1	Day 2	Day 3
1.000000000	0.999991781	0.999983562	0.999975343

The ozPerToken value is applied to all tokens equally, including the tokens which have been created from the reconcileSupply function. The process of reconcileSupply essentially converts the small portion of physical silver collected as fees into the same fungible XAGm tokens. This ensures the relationship of ozPerToken x totalSupply = totalReserves holds.

	ozPerToken	Pre-Reconcile Total Supply (XAGm)	Reconcile Amount (XAGm)	Post-Reconcile Total Supply (XAGm)	Reserves Fine Weight
Day 0	1.000000000	-	-	999.000000000	999.00 troy oz.
Day 1	0.999991781	999.000000000	0.008210848	999.008210848	999.00 troy oz.
Day 2	0.999983562	999.008210848	0.008210983	999.016421831	999.00 troy oz.
Day 3	0.999975343	999.016421831	0.008211118	999.024632949	999.00 troy oz.

The precision of ozPerToken, totalSupply and reconcileSupply amounts are all truncated to 9 decimal points during on-chain representations, intermediate calculations and cross-chain bridging. Across multiple chains, the same ozPerToken value is used to ensure seamless cross-chain bridging and synchronous value representation. The precision of totalReserves is accurate to 2 decimal points in fine troy ounces, as per vault asset statement standards.