Taler does not use any Blockchain technology or Bitcoin directly. Taler is not based on proof-of-work or any other distributed consensus mechanism. Instead Taler is based on blind signatures.
It would be possible, however, to withdraw coins denominated in Bitcoin into a Taler wallet (with an appropriate exchange), which would give some benefits over plain Bitcoin, such as instant confirmation times.
Your wallet stores digital coins and thus ultimately your computer holds your balance. The exchange keeps funds matching all unspent coins in an escrow bank account.
Since the digital coins of value in your wallet are anonymized, the exchange can not assist you in recovering a lost or stolen wallet. Just like with a physical wallet for cash, you are responsible for keeping it safe.
The risk of losing a wallet can be mitigated by making backups or keeping the balance reasonably low.
In case of a compromise of one of your devices, an attacker can spend coins from your wallet. Checking your balance might reveal to you that your device has been compromised.
If your friend provides goods or services for you in exchange for a payment, they can easily set up a Taler merchant and receive the payment in their bank account.
Future versions of the Taler wallet may allow exchanging coins among friends directly as well.
Taler wallets can store digital coins corresponding to multiple different currencies such as the Euro, US Dollars or Bitcoins.
Taler currently does not offer conversion between currencies.
Your wallet stores digital coins that are blindly signed by an exchange. The use of a blind signature protects your privacy as it prevents the exchange from knowing which coin it signed for which customer.
The Taler protocol allows any exchange to set its own fee structure, allowing operators to set fees for withdrawing, depositing, refreshing or refunding coins. Operators can also charge fees for closing reserves and for (aggregated) wire transfers to merchants. Merchants may choose to cover some of the fees customers incur. Actual transaction costs are estimated around 0.001 cent/transaction (at high transaction rates, amortized over billions of transactions, excluding migration costs). Note that this is an early estimate, details may depend on hosting and backup requirements from the regulator and could thus easily be 10x higher.
Taler's wallet supports multiple currencies, but the system currently does not support conversion between currencies. However, in principle an entity that accepts deposits in one currency and allows withdrawals in another currency could be created. Still, the regulatory hurdles in this case tend to be particularly complex. The focus for Taler is on day-to-day payments, so we have no plans to support currency conversion in the near future.
We believe the European Electronic Money Directive provides part of the regulatory framework a Taler exchange with coins denominated in Euros would have to follow.
The exchange would be operated by a bank or in cooperation with a bank, and that bank would hold the funds in escrow. Note that this bank could be a regular bank or a central bank for a centrally banked electronic currency. Regardless, the bank would fall under the respective banking regulations establishing a reason why consumers would have faith in the conversion from Taler coins into regular bank money.
Any exchange should be audited by one or more independent auditors. Merchants and consumer wallets will report certain issues automatically to the auditors, but auditors may also provide a method for manual submission of issues. The auditors are expected to make their reports available to the respective regulatory authorities, or even the general public.
We are aware of several businesses running exploratory projects or having developed working prototypes. We are also in discussions with several regular banks as well as several central banks about the project. That said, there are currently no products in the market yet, and we believe this would be premature given the state of the project (see also our bugtracker for a list of open issues).