One of the biggest problems to solve in Cryptospace is to create a trusted and trustless stablecoin.

It’s a hard problem to solve, a problem that some say is impossible to solve.

Currently, the popular stable coin solution we have is Tether, but almost everyone agrees that Tether is not the trusted solution it should be.

Tether is plagued by rumors that they may be printing Tether coins without any USD backing.

Nevertheless, there are a handful of companies racing to create a better alternative to Tether.

The “Holy Grail” of stablecoins is one that is perfectly trustless, perfectly decentralized, open and transparent to all and, of course, able to withstand any sort of market turbulence.

It remains to be seen whether this is a possibility or a just a dream.

In the meantime, we have Tether which most investors will agree is at best a necessary evil, but one that needs to be replaced with a better solution.

Currently, there are several stablecoin approaches — some still being researched and some on the market now.

The key players in the race to create a truly decentralized stablecoin are Maker, Basecoin, and Havven. Other new entries to this market are the recent TrueUSD and the upcoming Carbon (based on Hashgraph network). There will be many more stablecoin projects over 2018 I expect.

For this article, I want to take a detailed look at Havven, a decentralized stablecoin platform.

Note that entire platform is called Havven and consists of TWO coins tied together with smart contracts and linked to a platform. Right now, the coin listed on the market is Havven (HAV), which is NOT the actual stablecoin that will be issued — it’s the speculative BOND token of the  platform. So the price of the Havven token itself will fluctuate. The actual stablecoin, Nomins (now called eUSD) have NOT been issued yet and won’t be till the platform is released.

Why Stability is Important

So why do we even need a stablecoin?

A trusted stablecoin is needed if crypto as a whole is to succeed (and a lot of smart people are claiming Crypto will be the future). A stablecoin is the Yang to Cryptocurrency’s Yin.

There’s a lot of benefit to cryptocurrencies, but stability is not one of them.

This makes using cryptocurrencies as a store of value (especially to transact goods) risky due to the highly volatile nature.

Consider, for example, ICOs accepting a volatile cryptocurrency like Ethereum. If an ICO has the goal of raising X amount of USD in Ethereum over the period of time, what happens if the price of Ethereum decreases over the ICO raise?

Replace Ethereum with any other cryptocurrency that can fluctuate by wide percentages and you have a serious problem when trying to transact with it.

Using a price-pegged stablecoin instead — one that does not fluctuate — to pay for goods and services is arguably a better and safer way. You get the benefits of a decentralized cryptocurrency (one where you don’t have to worry about a bad actor controlling currency) without the volitility.

In theory anyways. For all distrust in Tether, no other stablecoin alternative has been able to replace it.

Why?

Because it’s actually very hard to create a stablecoin that’s decentralized, resistant to price fluctuations, trusted by the public, and able to survive a serious market crash.

This is why a perfectly stable and decentralized stablecoin is considered the Holy Grail of crypto-assets.

And it may or may not be possible.

Stablecoins are so interesting because they push cryptocurrencies to the very boundaries of what we consider as ‘money’ and what that term really means.

The benefits stretch far beyond just transacting with a decentralized — stable currency to pay for goods or as a store of value for crypto traders during a market downturn. A decentralized stablecoin could replace the entire currency system.

A truely decentralized stablecoin that gains widespread use is an economist’s wet dream — there’s just so much you can potentially do with one (I’ll cover some of these benefits in a future article about stablecoins as there is a lot to write about there).

If you don’t care about the economic impact a decentralized stablecoin could have on crypto — or potentially the world — then perhaps the financial benefits may interest you.

The rewards for investing into a stablecoin that emerges as the market winner could be ginormous — on the low end, multi-billion dollar market cap, and on the high end, trillions if it disrupts national economies.

For investors, I believe the Stability market is going to be a key investment theme over the next several years and as such, there is a good deal of opportunity if you pick one that succeeds.

Types of Stablecoins

There are 3 different kinds of stablecoins:

  1. Fiat-Collateralized
  2. Crypto-Collateralized
  3. Non-Collateralized

Let’s talk about how each of these work.

Fiat-Collateralized

The very first type of stablecoins were the Fiat-Collateralized ones. The idea is pretty simple — every stable coin is backed by a fiat value (usually $1 USD). There are variations where the currency is backed by physical assets such as gold.

Tether is by far the most popular Fiat-Collateralized stablecoin.

However, the flaw with the fiat-collateralized are that you must trust a centralized authority.

And in the case of Tether, what do you do if the central authority itself is the bad actor?

Tether has a very bad reputation right now and there are many who feel Tether is printing Tether coins that NOT backed by USD. The problem is that no one can verify if Tether actually has enough money in their bank to back their coins. And it’s not possible to directly convert Tether coins through the holding company to USD.

Crypto-Collateralized

The second kind of stablecoins are the Crypto-Collateralized ones. We have a few attempts with Maker and now Havven. Instead of being backed by fiat, these stablecoins are backed by crypto in the form of a bond which is held in a smart contract.

The advantage over the fiat-collateralized is that this model is decentralized and everyone can see exactly how much collateral is backing the platform. The risk though is that if the market truly collapses, there may not be enough collateral to prop up the stablecoin value. Crypto-Collateralized usually consists of multiple coins in the network: the bond coin (which backs the stablecoin) and the stablecoin pegged to a fiat value (usually 1 USD).

Non-Collateralized

The final kind of stablecoin are the non-collateralized ones which claim that as long as people trust the currency has some inherent value, the currency does not need to be backed by anything.

I’ve heard this called a ‘faith-based’ stablecoin.

However, when you think about it, all money is based on some type of faith. Non-collateralized stablecoins just take this concept to the extreme by removing all collateralization (beyond the initial seeding at the start).

If this idea can work in the market, it leads to some very interesting use cases for such a stable currency which make it extremely flexible and perhaps the most useful of all cryptocurrencies. A currency not backed by any sort of collateral can expand or contract as needed.

As long as people believe the coin to hold that value. And as long as the market doesn’t collapse to the point where the stablecoin breaks.

This kind of stablecoin is more of a social-economic experiment than anything else. But a fascinating one. Basecoin is one such example of a non-collateralized stablecoin. Carbon is another.

Havven, a Crypto-Collateralized Stablecoin

Now that we have the basic intro to stablecoins out of the way, let’s talk about Havven.

One of the more promising stable coin solutions is Havven which builds on the collateralized system but with some modifications that offer better protection.

Will Havven succeed? This is the billion dollar question.

Let’s take a look.

How Havven Works

The idea behind Havven is to create a payment system that that harnesses all the advantages of a decentralized system but without the volatility that inherently plagues it.

The initial value of the system is seeded during the Token sale which raised 30 million.

Havven network will pay fees for every transaction to those who collateralize the network. Those collateralizing the network will, in turn, control the coin supply and are driven to do so through a fluid rate that’s determined by an algorithm. The stability of the system is driven by economic incentive.

There are two coins in the Havven ecosystem that hold the system together: Nomins and Havvens.

Nomins: the actual stable coin linked to a fiat currency, in this case, the USD. Nomins are basically the Havven version of the Tether coin.

Those wishing to flee the volatility of crypto can purchase Nomins on the platform.

The number of Nomins are not fixed and will depend on the issuance of Havvens. All Nomins are backed by Havven coins and are only issued when Havven tokens are locked into a smart contract. Nomins are overcollateralized; that is, for every 10 Havvens locked into a contract, only 2 Nomins will be issued. This is to buffer against Nomin price swings.

Havvens: the collateralized token that ‘back’ the Havven system and provide the stability. The price of each Havven is determined by the market. However, the price is not only just based on speculation but also from the projected future value of the transaction fees generated by the network. In short: the more transactions on the networks, the more fees paid out to Havven holders who have issued nomins, the more value the Havven tokens will have. Even shorter: the more the network is used, the higher the value of the Havven.

When Havvens are locked into a smart contract, Nomins are issued with a ratio of 20% Nomins to 80%.

Fees are charged per transaction on the Havven platform.

Those fees are distributed Havven token holder pool as rewards for holding the token. As more and more transactions occur over the network, the value of the assets backing the platform increase. The value of the Havven token is therefore based on the total value of the Haven ecosystem. As the system is used and transaction fees accrue, the value of Havven will increase.

To hedge against price changes 80% of the Havvens are locked up and only 20% of the Havvens will be issued as Nomins.

Thus there is an 80% ratio of collateralization as a buffer against price change.

The Havven system is basically a payment network where Havven acts as a sort of bond that’s pegged to the Nomin.

How is Havven Different Than Tether?

Decentralized and Open: Havven is different than Tether in that the public can see exactly how it works and the exact collateral backing the system. With Tether, the public can’t directly a) trade their Tether coins for USD and b) can’t see Tether’s bank account balance. We are trusting that every single USDT coin printed has an equivalent USD in a bank account.

Rewards: Those who participate in the system by backing it by holding Havven tokens will be able to profit by sharing in the transaction fees generated as users trade Nomins.

Havven token holders can elect to escrow (lockup) their tokens for a period of time to generate additional tokens.

The Team

Havven is an Australian company. There’s the usual assortment of core team members, marketers, and advisors.

Kain Warwick is the founder; before Havven, Warwick was the CEO (and co-founder) of Blueshyft which is Australia’s biggest cryptocurrency payment platform. Warwick has hands-on experience running a crypto-centric company.

Other notables are Jordan Momtazi who worked at Paypal for over 2 years in a marketing/sales position and Justin Moses who was the director of Engineering at MongoDB (a popular cross-systems databases company) for 8 years. Tim Bass (CEO of Block8) is leading the blockchain development.

These are the core guys in my opinion. While they are not superstars in the crypto world, they do have some hands-on experience with running crypto-based companies.

Pros & Cons

Let’s look at a few of the pros and cons that stand out with Havven.

Pros

  • Decentralized and open; everyone can see the actual collateralization backing the Nomins.
  • The founder, through Blueshyft have direct relationships with infrastructure that transact from crypto to fiat which may bode well for future integrations
  • Potentially profitable for investors holding Havven coins as the network grows in use
  • Dividends paid out for holding
  • Stablecoin basket likely to increase in the future as the market gravitates to these projects

Cons

  • Still untested in the wild with no real platform launched
  • No details on the actual blockchain technology behind it or the fundamentals of the tech
  • Unlikely to survive a black swan crash event
  • To transact in Nomins and Havvens, you must use Havven’s special exchange. This is a significant barrier to adoption as it means users won’t be able to transact in Nomins from regular exchanges (like Binance).

The Stablecoin Competition

Havven is not alone in the race to find a working Tether alternative. Some other promising stablecoin projects include Basecoin which is a highly experimental non-collateralized stablecoin due out this year (2018) and Makker, a crypto-collateralized stablecoin that’s already on the market.

We also have Bittrex with their own version of a fiat-collateralized stablecoin called TrueUSD which is basically a version of Tether but one where you can actually trade it for real USD via an escrow contract.

And finally, we have a new non-collateralized stablecoin being launched on the Hashgraph network called Carbon. Carbon is sort of a cross between non-collateralized and collateralized and it’s built on a DAG network which can (supposedly) scale.

Many of the other stablecoin platforms (Havven, Maker, Basecoin) that utilize smart contracts to power their decentralization, but the underlying blockchain technology powering these has not yet been clarified (i.e are they using Ethereum). There is also the issue of scalability — assuming the stablecoin picks up serious volume, can the smart contracts handle the throughput? Non of this has yet been addressed.

Havven As an Investment

If you are investing in Havven, you can earn money by getting a discount on Havven tokens before the network gains traction and the Havven token price appreciates.

When the platform is launched, Havven token values will appreciate as more and more transaction fees are generated and more Nomins are traded. Speculation on the Havven tokens (through trading) will also increase the price.

There is also the opportunity to earn what is essentially dividends by holding Havven and locking them up in a smart contract at a discounted rate. The lockup results in the issuance of Nomins in the Havven system. When the contract is unlocked, you’ll receive extra Nomins as ‘payment’ for collateralizing the platform.

My personal opinion is that Havven is one of the more promising stablecoin projects I’ve seen. If there is there is no black swan event that pushes Havven to the limit of its collateralization, I believe it will be an effective stable coin and perhaps superior to Maker (and far more trustworthy than Tether).

I’m less sure about a black swan event and I believe that all the stable coins, despite the promises, could and would completely collapse. There is just not enough collateralization to handle a significant number of the market selling off.

Currently, the Havven tokens are trading at under .50c which gives the market cap of about 26 million which is UNDER the ICO raise.

However, the current market conditions as of the end of March  and going into April 2018 have been bad; Havven has performed very well when looking at the eth/btc prices all things considering, but it’s still under the USD ICO raise.

The real value will be over the long term (1-2 years) though, assuming Havven gets traction and becomes a real alternative to Tether.

Keep in mind the actual Havven platform has not yet been launched. It’s due within a couple months and this may increase the price of the Havven token.

The prospects of an ROI are good when comparing Havven marketcap to other stablecoin projects

Maker, for example, is about 360 million marketcap while tether is over 2 billion. If Havven can land somewhere near Maker when the platform is launched, that would be a 7X-10x return for Havven holders.

Note that Maker is much further ahead in terms of development with their stable coin (DAI) and platform deployed. The DAI is also available as a trading pair on IDEX.Market as well. So Havven has a lot of catching up to do, but the potential is there for some decent ROI if they can deliver.

Tether has a 2 billion dollar marketcap which shows how big the stablecoin market cap is.

There is a new form of Tether being rolled out by Bittrex called TrueUSD which is like tether but backed by real, verifiable USD. And unlike tether, you can, in fact, trade your TrueUSD coins for actual USD, all through an escrow smart contract. However, unlike Havven, TrueUSD is a still centralized solution.

The Final Word

Havven is the type of project that crypto needs. It’s highly ambitious and seeks to tackle one of the big fundamental problems in crypto: stability.

Havven is, in my opinion, a better version than Tether — in theory. I like what these guys are trying to do. But Havven will need to prove to the public that it works first.

We do need to be realistic here with predictions: Havven has a long road ahead of it to gain any traction. Tether, despite its flaws, is still widely used and I don’t see Havven, unproven as they are, disrupting Tether anytime soon.

I’m positive about the future of Havven but at the same time I will fully admit these guys have a steep climb to gain any significant piece of the pie. Their ability to do so will depend on their upcoming platform and if it works as promised.

Note that entire platform is called Havven and consists of TWO coins tied together with smart contracts and linked to a platform. Right now, the coin listed on the market is Havven (HAV), which is NOT the actual stablecoin that will be issued — it’s the speculative BOND token of the  platform. So the price of the Havven token itself will fluctuate. The actual stablecoin, Nomins (now called eUSD) have NOT been issued yet and won’t be till the platform is released.



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