The Havven project, which brings together a decentralized payment network and a stablecoin, announced that it is going to release its nUSD stablecoin on the EOS blockchain by the end of this year. At the same time, the startup does not plan to leave the Ethereum network. Instead, nUSD will become a cross-platform stablecoin, which will exist on two blockchains in parallel and will allow transfers between decentralized platforms without the intermediation of exchanges. 50 percent of the new Havven tokens created on Ethereum will be distributed among current Havven holders during the airdrop (the minimum amount of Havven a user must own to receive new coins is yet to be determined).
"At this stage, cryptocurrency is still in its infancy, so it's not clear which blockchains will manage to scale. For this reason, it's important that projects providing blockchain infrastructure plan to provide cross-chain compatibility, so their success isn't bound to the success of whatever chain they've chosen," said Havven founder Kain Warwick.
When Having Many Projects Is Bad
In early August, in a Medium blog post, Warwick pointed to the "fragmentation" of today's crypto industry. While creating its crypto asset and its ecosystem, the project chooses one of the existing blockchains or builds a new one. As a result, on the one hand, most tokens are not compatible and locked inside one blockchain, and on the other hand, big projects (Ethereum remains the king in this field today) offer their platform for creating new tokens and thus monopolize the market and resources that contradicts the idea of decentralization. "This competition for developer resources and attention will likely play out over the coming years, or even decades," writes Warwick, while noting that it's too early to consider Ethereum the winner of this race and a fully reliable platform: "While Ethereum has a well-defined path to scaling, the uncharted decentralized system design space is too vast to wait for one project to find the solution."
Warwick made an analogy with operating systems (OS), recalling how much of the development work moved from Windows to Linux precisely because of the compatibility of various operating systems within this family: "As Linux gained traction for servers, most of the development effort shifted there. Even though there are many flavors of Linux, tools like Apache (a web server) work on all of them. To contrast, imagine if Apache only worked on SUSE (one of the Linux operating systems), nGINX (a web server) only worked on Ubuntu (one of the Linux operating systems), and the effort of porting them across was half of the initial build effort. Now imagine only one combination is a viable solution. This exemplifies the problem we face as the smart contract platform wars commence," Warwick writes, noting that instead of trying to create a new, improved Ethereum, one must strive to unite the market and develop not a separate platform, but the crypto industry on the whole.
Reading the White Paper
Havven held the ICO in February, reaching a hard cap of $30 million in 90 minutes. On March 12, the project announced the distribution of Havven tokens, and in April launched the test stablecoin eUSD on the main network. With the help of a special converter, it was possible to exchange Ether for eUSD and back. After the successful testing, on June 11, Havven launched its real stablecoin, the Nomin (nUSD). It can also be purchased using Ether with the help of a converter on the official website (it requires a MetaMask or MyEtherWallet wallet), and in July, the token was listed on the Hong Kong cryptocurrency exchange KuCoin. The second native token, the Havven, is already traded on Coinspot, KuCoin, Qryptos, Gate.io, Tidex, and IDEX.
According to the white paper, Havven combines the best features of Bitcoin and stablecoins, that is decentralization and a stable rate. "Havven is a decentralised payment network where users transact directly in a price-stable cryptocurrency. Those who use the stablecoin pay fees to those who collateralize the network, compensating them for the risks of providing collateral and stability,” the project description reads.
This structure is provided by two interconnected tokens: Nomin and Havven. Nomin is a stablecoin with a floating rate, and it's important that its fiat price remained stable. While the Nomin is a means of exchange, Havven is responsible for the collateral of the system. Its emission does not change.
Owning Havven tokens gives the right to issue a value of Nomins that is proportional to the dollar value of Havvens placed into escrow. In a traditional financial system, an escrow contract is an arrangement by which a third party receives the transacting funds or assets and holds them until the conditions of the transaction are met. A simple example of how it works in the crypto industry is a smart contract on Ethereum.
In this particular case, the Havven tokens are held in the escrow contract. And if the user wants to get them, he or she must provide the system with the correct number of previously-issued Nomins. This is a condition for the execution of such a contract.
Havven tokens create a so-called “distributed collateral pool" in the system, which maintains a fixed value for the stablecoin, while the pool derives its value from transaction fees. Thus, the increase in the volume of transactions will increase the value of the pool, allowing the token supply to grow and meet demand.
"This enables a form of representative money in which there is no requirement for a physical asset, thus removing the problems of trust and custodianship. Issuance of Nomins requires a greater value of Havvens to be escrowed in the system, providing confidence that Nomins can be redeemed for their face value even if the price of Havvens falls. The system incentivises the issuance and destruction of Nomins in response to changes in demand, but ultimately the intrinsic value of the Havvens will reflect the required Nomin supply. Backing a stablecoin in this way provides full transparency over how many tokens have been issued against the available collateral. This provides a solid basis for confidence in the solvency of the payment network built upon it," the white paper of the project notes.
The Clue to Tether
As a creator of a stablecoin, Warwick is sure that many projects working in this niche are going in the wrong direction, meaning the tokens that try to surpass the main stablecoin, Tether, in terms of transparency.
"Tether is a crypto abomination. But it’s not for the reasons you might think," so begins the recent post by Warwick on the Havven's blog. Before discussing stablecoins, Warwick makes a short digression into the history of crypto projects, as he believes that crypto entrepreneurs are working on the wrong things because of the lack of a "fundamental understanding of the history of decentralized systems." "These blockchains are too slow; just reduce the number of nodes! These coins are too volatile; just dump a bunch of fiat in a bank!" Warwick brings these examples of incorrect logic.
So, according to Warwick’s crypto history record, 2016 was the year of projects created by "Bitcoin refugees" and early supporters of Ethereum, and their projects, according to Warwick, were "fairly sound, if somewhat audacious.” "Things began to veer into dangerous territory in early 2017, when everyone and their brother began building marketplaces for every imaginable use case — everything from cannabis to dental care — with a proprietary token to match," Warwick writes. Further, by the middle and the end of 2017, the emphasis shifted to decentralized exchanges (DEX), because this "tsunami of new tokens" had to be traded somewhere. In late 2017 and early 2018, the focus was on "next-gen smart contract platforms," trying to solve Ethereum scaling problem. Finally, "now, in mid-2018, it seems like every second project is a stablecoin."
The hype surrounding the secrecy of Tether and its possibly insufficent collateral, according to Warwick, pushed such projects in the wrong direction. "I personally believe there’s a strong chance Tether is fully collateralized. It is also a pragmatic solution to crypto volatility," Warwick notes. "...Tether is ultimately antithetical to crypto and what Bitcoin was designed to create: a censorship resistant, decentralised and immutable way to transact on the internet. What people fail to see is that the surface problem they identify in Tether — a lack of transparency — is actually a feature, not a bug."
Warwick believes that Tether intentionally chooses to remain opaque in order to stay as long as possible in a regulatory gray area. “If they were to fully disclose where their collateral is held, it would give regulators the incentive to ask the questions that they will most definitely be asking at some point. By maintaining a level of opacity, Tether is delaying the inevitable," writes Warwick. Therefore, in his opinion, the projects creating "transparent Tether" are trying to solve a problem that does not exist and, moreover, themselves are at risk of being in a quandary. "The U.S. Government will not allow people to make their own currency. Bitcoin has only survived this long because it was designed to avoid the centralization that undermined previous attempts to create internet money," Warwick notes, citing E-Gold and Digicash as "the most salient examples" of such projects.
He also suggests that Tether has not yet sunk into oblivion under the government pressure (which represents the central authority) because Bitcoin is "providing a high-profile smokescreen to hide behind — one that will surely disperse soon enough." Warwick is confident that sooner or later Tether will be censored and lose the privilege of decentralization, and therefore cannot be a solution to the volatility problem in the long term.
The Clue to Bitcoin
Speaking about the critical importance of decentralization, Warwick quotes Satoshi, who in 2009 wrote: "A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990's. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system."
According to Warwick, this quality (true decentralization) has made Bitcoin so viable. Its weak side lies in monetary policy, which makes it extremely volatile and unsuitable for use as a cash system. Therefore, according to Warwick, the projects of stablecoins should not strive for a "better Tether,” but for a "stable cryptoasset without compromising decentralisation."
Based on Warwick’s concept, the government's attention can be considered a criterion for the success of stablecoins: "Rest assured that when a solution is found, the same arguments currently deployed against Bitcoin will be applied but in a much more aggressive fashion. The bottom line is that a stable decentralized currency will be a genuine threat to fiat."