# Design of the FRT

The Customer instructs VNX to generate an FRT on the basis of VNX Gold (which the Customer grants into irregular custody of VNX), whereby the FRT should behave at least on a parity basis to a legal tender according to the principles of the market. This minimum parity for the FRT is to be achieved in a market economy by the following steps:

1. Physical gold is in a determinable ratio to a legal tender according to the intraday daily exchange rate. Therefore, physical gold refers to legal tender.
2. The VNX Gold generated by VNX represents co-ownership in physical gold. One VNX Gold token corresponds to 1/1000 co-ownership of a gold bar of 1 kilogram, which corresponds to 1 gram. Therefore, VNX Gold is also in a determinable ratio to a legal tender according to the intraday daily exchange rate of gold. Therefore, VNX Gold also refers to legal tender.
3. The FRT, which will be generated by VNX at request and on behalf of Customers, in turn refers to VNX Gold. This is in such a way that the Customer forms a reserve with VNX with their VNX Gold. This reserve is the basis for the FRT.&#x20;

The reserve initially consists of VNX Gold and may be replaced with an equivalent amount of assets. This means that for every FRT generated by VNX and remaining in circulation, VNX will hold an equivalent amount of reserve on behalf of Users (the “FRT Reserves”).”

In a nutshell the process looks as follows: a user (who has FRT Minting Agreement with VNX for the generation of FRT) requests FRT generation and provides VNX Gold in irregular custody to VNX. VNX uses VNX Gold to create the FRT reserve, generates FRT and transfers it to the user account on the Platform. Then in the process of the reserve management VNX replaces VNX Gold by the FRT referenced fiat currency held in the bank deposits. To ensure that the reserves correspond to the FRT in circulation, the reserves are regularly audited. The audit reports are available on the VNX website in the section “Transparency".

Due to the fact that the Customer creates a reserve with his VNX Gold at VNX, which VNX manages, an FRT can be generated for the Customer, which refers to legal tender on a parity basis according to the principles of the market. To sum up, VNX ensures that the Customer's FRT are always supported by adequate value of reserves.

However, an FRT holder (other than VNX FRT issuing Customer) has no redemption rights. An FRT holder can therefore only ask for an exchange service from VNX or any other exchange service. VNX, in accordance with the TVTG registration as the TT Exchange Services Provider, provides an exchange service for the exchange of the FRT into fiat or another token. For any exchange service, the token holder will be required to register on the VNX Platform and comply with the AML/KYC requirements.
