While Havven's existing coin (HAV) isn't yet on many exchanges, the payment network is gearing up to put its Havven token and Nomin stablecoin on the EOS blockchain. (It's already on the Ethereum blockchain.)
For the uninitiated, stablecoins are simply cryptocurrencies that seek to maintain a steady price relative to other assets – usually US dollars. But stablecoins for other currencies and non-fiat assets are also now coming online. Havven's is one of them.
What Is Havven?
Havven is designed to be a decentralized, self-sufficient payment network that allows users to store and transfer value without relying on fiat money or external collateral.
In essence, Havven's goal, as it notes in its white paper, is to create a decentralized alternative to SWIFT, PayPal, credit card and other centralized payment networks that have "absolute control over the value within the network, so any transaction conducted within them may be blocked or reversed at any time." Also noted is the fact that in centralized payment networks, fees are typically much greater than the cost of maintaining the network, with ever greater profits motivating companies rather than quality and affordability.
Havven's approach uses collateralization by reserves of the Havven (HAV) token, which backs the value of the network's secondary Nomin cryptocurrency, a stablecoin with a floating supply designed as a secondary mechanism to help stabilize its price.
As of writing, Havven has launched only one type of Nomin, the nUSD, which is backed by HAV, but plans to introduce "multi-currency nomins" by the end of November, 2018 (nEURO, nAUD, nJPY, nKRW, and nXAU).
Havven vs. Other Stablecoins
There are several ways stablecoins go about stabilising their prices against fiat.
Fiat-collateralized stablecoins store government-issued currencies (e.g., USD) to back their value, holding the same amount or more of fiat money as there are circulating stablecoins. Although backed by fiat, this method requires users to trust a central entity and/or its auditors.
Cryptocurrency-collateralized stablecoins solve the issue of having to trust a central entity, but create another problem by relying on volatile prices of cryptocurrencies to back them. Even if a stablecoin is significantly over-collateralized, there is no guarantee that the value of the collateral will maintain sufficient value. MakerDAO is probably the most well-known cryptocurrency-backed stablecoin. As mentioned, this is also partly how Havven functions.
Non-collateralized coins, meanwhile, attempt to control their money supply to affect the price on the market. For example, if a stablecoin's value falls, the controlling entity may buy up coins with reserve capital, and could either lock them out of the market, or burn (destroy) them. If the value raises, coins may be minted (created) and put on the market. This can be expensive and is obviously limited by the amount of reserve capital available. However, some cryptocurrencies use different types of mint-and-burn approaches. Havven, for example, relies on network participants to burn and mint Nomin stablecoins without requiring capital to buy up coins on the market.
Note: Havven isn't the only project working on non-collateralized stablecoins. For starters, the similarly named Haven also is.
Collateralization with a Spin
Although at first glance, Havven's stablecoin system may seem complicated, once broken down into its components, it's fairly simple.
Havven, acting as collateral for Nomins, gets its value from fees generated in the network. That's because HAV holders receive dividends from network fees when they "lock" their HAV in a smart contract. The Nomin's stability relies on this locked-in value, as HAV tokens are designed to overcollateralize Nomins.
When a Havven user puts their HAV in an escrow smart contract, a nUSD, for example, is automatically minted for each HAV and is listed for sale on a decentralized exchange at $1.00. The user then receives network fees while their HAV is locked in the smart contract. To get the escrowed HAV back, the user must buy back the nUSD (also at $1.00), after which the nUSD is burned.
Havven uses an algorithm to adjust transaction fees, and therefore network fee dividends to HAV holders, which incentivizes (or doesn't) the escrowing of HAV, and thus, the minting of Nomins.
As the Havven white paper explains, this distributed collateral pool aims to solve the problem of having to use collateral assets outside of the blockchain:
"...whether a system uses real-world assets or cryptoassets to back a stable token, if the value of the collateral is uncorrelated with the demand for the token, then the system is vulnerable to external price shocks. Large corrections can destroy the value of collateral without any change in the demand for the token issued against it."
Havven has the goal of maintaining at least 80% over-collateralization of Nomins by HAV, though the network has maintained a much higher collateralization ratio since its launch, as of writing (currently, collateralization sits at about 840 percent for all HAV, and 350 percent for locked HAV).
So far, nUSD has maintained a fairly stable price, with only a couple of brief forays out of the $1.00 range since launching in June 2018 – a brief dip to close to $0.90 around July 24 and a jump to $1.08 on November 1. In both cases, the network seems to have quickly corrected itself.
A Multi-Blockchain Stablecoin?
Though its stablecoin has parallels to other projects, the most notable aspect of Havven may be that it will soon be on more than one blockchain. HAV and Nomins will be launching on the EOS blockchain by the end of 2018, while also remaining on the Ethereum blockchain.
"Every blockchain needs a scalable and stable medium of exchange that's resistant to censorship," Kain Warwick, founder of Havven, told ETHNews. "As EOS supports an increasing number of dApps, we see the need to build a payments layer to improve usability for the entire EOS ecosystem."
Warwick said they chose EOS over other blockchains because of its quickly growing developer community and its ability to support high transaction volumes without fees.
"There are major advantages to having Havven on more than one blockchain," he said, continuing:
"Blockchain agnosticism means that the success of Havven isn't tied to the success of any one blockchain. We don't know yet which blockchains will still be operating in five or more years, and there's a good chance blockchain exclusivity this early on will lead to fragmentation throughout the entire ecosystem. Diversifying Havven among the most promising blockchains will ensure that we're well positioned to provide decentralized stability for the future, whatever happens."
Warwick said Nomins will have the same name on both blockchains, but with the extra designation of nUSD-ETH and nUSD-EOS, for example. Havven plans to drop 50% of the new HAV-EOS tokens to existing HAV-ETH holders to ensure that that people who supported Havven early on will have a major portion of the EOS system, according to Warwick.
Havven will launch on EOS before the end of 2018 but hasn't ruled out launching on other blockchains besides Ethereum and EOS in the future.
Havven hopes its method of combining collateralization with the minting and burning of the Nomin stablecoins based on demand helps to offset some of the problems associated with cryptocurrency collateralization. The stablecoin already doesn't rely on a central authority to burn or mint tokens – or on outside fiat money to back its value.
Obviously, if Havven can demonstrate long-term price stability with its stablecoin, its payment network could provide a real alternative to existing solutions. However, as with many stablecoins, more testing and long-term viability must be established, especially as Havven expands to multiple blockchains and multicurrency Nomins.