Havven: Reinventing: The Stablecoin

12/15/2017 11:18 am ET Updated Jan 03, 2018
AN ARTICLE SERIES EXPLORING COMPANIES REINVENTING MARKETS USING THE BLOCKCHAIN.
AN ARTICLE SERIES EXPLORING COMPANIES REINVENTING MARKETS USING THE BLOCKCHAIN.

Anyone following BTC over the past month would agree that we are dealing with an extremely volatile store of value. Some will argue that we see a bubble about to burst, and some will argue it’s not a bubble. I won't weigh in here as I'm not an economist.

Regardless of your position here, one thing I feel is fair to say is that cryptocurrency presently lacks one element of money that we all have come to count on and expect, a balanced and stable 'unit of account.' A 'unit of account' is a term used in economics to describe a real value (or cost) of an economic item. Typically this is easy to do with a Fiat currency like the USD because of the inherent stability, and predictability of inflation and the Consumer Price Index.

With cryptocurrency like Bitcoin, you don't have this, and instead just have a world where anything can happen depending on the buy or sell actions by holders of coins. This means that, at present, we cannot reasonably trust the value of a Bitcoin tomorrow enough to accept and hold it with absolute certainty the way we have come to do with Fiat currencies. Imagine paying for a coffee with a Euro coin that might only be worth half the next day, it doesn't work.

For example, let's say you want to put a new roof on your house, and this is estimated to cost $30,000. You would be hard-pressed to find a roofer that would accept 2 bitcoins for this right now because he or she knows that that value can't reliably be counted on tomorrow. They could also be missing out on an excellent price for a new roof - but the point is, they can't count on it.

The price stability and reliability of the USD or Euro are what makes it work, and cryptocurrency needs to achieve this to gain widespread success as well.

With this in mind, the cryptocurrency industry has a category of digital assets which have come to be known as a "stablecoins." A stablecoin is essentially a coin which can peg itself to a store of value or an underlying group of assets that can be reliably counted on, like gold, or fiat currency. The idea is that by creating a container of sorts for other secure assets, we can have the benefits of cryptocurrency, along with the reliable store of value that has come to be expected when using a currency to trade for goods. (Euro coin for coffee.)

While there are no promises (even the value of gold can crash), the idea is that by creating a cryptocurrency that isn't directly tied to the storm like the volatility of BTC, it can begin to be adopted and used more reliably and faithfully by society. Examples like Tether, Basecoin, and Maker are all attempting to provide a solution for a stablecoin backed by another asset like USD, or Gold which they represent in a bond.

However - do we need a centralized asset backing our decentralized one? Perhaps not. Money is a technology, and it can be reinvented like any other technology.

One Australian cryptocurrency startup company I recently discovered has added another new layer on top of this concept to provide further insulation which I feel puts it in a category of its own. They have removed the need for a centralized core asset, like USD altogether. If adopted successfully, their solution would offer both a decentralized tradable token, and a decentralized backing asset; a revolution of money technology.

They call themselves Havven, founded by Kain Warwick who previously founded Australia’s largest cryptocurrency payment gateway. They have developed a novel way for the stablecoin to generate a store of value itself using fees within the transactional flow; creating a tangible collateral that can be used to offset fluctuations and be tracked on the blockchain itself removing the possibility of centralized theft. This is dramatically different than being backed by a fiat asset in a bank account that could be stolen or seized by a government or hackers. Also, the core assets it holds can fluctuate without the value of the stablecoin being dramatically affected due to a unique buffering method they propose.

Here's how it works:

Users transact using the stabilized exchange token, which they call a Nomin. A Nomin is backed by its own reserve token, which they call a Havven.

As transactions occur, fees are charged and distributed to the pool of Nomin token holders.

This means that as transactions happen, the value of the core asset backing the Nomin increases, but it remains a decentralized cryptocurrency.

These fees are spread among the pool of havven token holders, thereby rewarding those who hold the token and encouraging stability via actively maintaining the cryptocurrency.

To prevent wild volatility, an automatic 80% ‘escrow of Havven’ buffer is built into the system to avoid a scenario where Havenn are rapidly sold off. By requiring this, it becomes difficult for one large stakeholder to short the system, and crash the entire market value.

The result:

A cryptocurrency with baked in volatility guards, and backed by a decentralized token vs. a centralized fiat currency subject to world market volatility and theft.

While the road ahead is long and acquiring widespread adoption of their platform will require establishing public trust and proof of their concept, this is an excellent example of how money can reinvent itself to create a genuinely stable and decentralized cryptocurrency.

Money can and will continue to reinvent itself.

Havven is presenting a concept where we can have all the benefits of cryptocurrency, without the underlying idea that we are still using a underlying centralized fiat currency. When credit cards made money ‘invisible’ to most of us by requiring just our PIN instead of cash, it was a revolution of what it meant to spend money. This is similar, and represents a chance to create a stable decentralized currency that could effectively replace replace credit cards of today with its true potential stability. As soon as Nomins are listed on exchanges, you will be able to become part of this revolution.

It's a new concept, and for those not familiar with the crypto world, will take some time to understand. However, I strongly encourage anyone interested in stablecoins to read their white paper in full and understand the concept they are proposing.

Another example of how blockchain is reinventing business and changing the world.

This article is part of a new series of articles I am writing profiling businesses reinventing existing industries using the Blockchain.

It’s not just a solution for The Stablecoin, it has the potential to become the new backbone of the internet. Watch, and you will see more and more companies emerging with solutions to existing markets with solutions based on the Blockchain. It’s early days, and the best is yet to come. Follow me here as I will continue to write about great examples of the “Blockchain reinventing business.” If you have or know of a company I can review and potentially profile, please submit your idea to me at reinvent.biz.

Need to know more about Blockchain?

because it would take up the entire article to explain how blockchain works, I assume you have a basic understanding of the core concepts. If you don’t, I recommend watching this quick 3 minute video. Have more time/interest? I recommend this slightly more in depth course.

Disclaimer: I make the best effort to select companies I feel are the best fit for the markets I profile, and in some cases I work directly with PR firms to promote their clients, who are the leaders emerging in the space. While I am not directly affiliated or invested in the companies I profile here, I do own Bitcoin, Ethereum and other cryptocurrencies. I hold investment positions in the coins, but do not engage in short-term or day-trading. When mentioning an ICO or TGE, it is not intended to be investment advice.  You should seek a duly licensed professional for investment advice. (I recommend Abacus Wealth Partners, for their philosophy of sustainable investing.)

Thanks for reading, and tune in again next time by following me @jesseseaver.

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