For our second podcast in our bi-weekly series of interviews, I am glad to introduce Kain Warwick, Founder of Havven, a fee-based crypto-collateralised stablecoin built on Ethereum. Havven recently completed their ICO hard cap of $30 million in less than 90 minutes, making it the largest Australian cryptocurrency project.
This interview is ~20 minutes, feel free to click play and listen to it now, or subscribe to our podcast here, or just go ahead and read the edit below. Please enjoy and let us know what you think!
SR: I have to start with this question: What got you into crypto, and what inspired you to create a stablecoin? KW: I’ve been following crypto for a long time, but I got deeper into it during 2014–2015 when I started Blueshyft, an over-the-counter (OTC) payment gateway that processes somewhere around five to ten million dollars worth of cryptocurrency transactions a month. This got me really deep into crypto and understanding some of the friction around getting money in and out of the ecosystem. In late 2016, as the market was excited with new opportunities popping up, I realised there was still a gap in the market: MakerDAO was probably the only one pursuing a decentralised stablecoin and Tether was starting to get a lot of problems, so I saw the opportunity and jumped in.
SR: Let’s talk about Havven’s dual token system: You have the Havven token and the Nomin Tokens, could you explain their differences? KW: The Havven token is the collateral token, a participatory right to stake collateral and issue the stablecoin into the network, it provides “confidence” for people to transact in the network. To transact in the network, you use the nUSD token, which tracks the USD. So the Havven holders provide a service to network participants, and those participants pay fees to a pool which is collected by the Havven-holders, who stabilise the network.
SR: Where did you get this idea from? KW: It was a light-bulb moment. I was sitting in my house on a weekend, reading about crypto and playing with a number of game-theory approaches to deposit money in distributed collateral pools in bank accounts securely. That’s when I realised that a crypto-collateral is what’s needed, but no one had thought about charging fees for transactions, and using the fees for the collateral pool.
SR: For Havven to succeed as a decentralised payment network, Havven token holders are incentivised to lock their holdings in a smart contract, and get transactions fees in return. But only $17 have been generated from fees so far, is that because it’s still in experimental mode? KW: Yes, you are referring to the dashboard for eUSD, which was a test transaction system and never traded on exchanges as it was only operational for two months. Four weeks ago, we launched the nUSD system, which will be traded in major exchanges for people to transact.
SR: Could you explain in laymen terms the fees charged and the commission received per dollar? KW: It’s somewhat hard to determine because it depends on the transaction volume. But the way we usually think about it is that if you issue nUSD into the network, and maintain the right collateral ratio, the fees that are charged are about 2–3 basis points -which is a small fee compared to Visa, AMEX, PayPal, etc. The idea is that the locked-up collateral can support a lot of transaction volume, and we expect the transaction volume to be fairly high-velocity, so even locking up four thousand dollars could potentially see a turnover velocity of one or two turns per day. In the early days, most of the utility will come from transactions within exchanges, and the velocity will be much higher than a standard payment network, so we expect the fee reward to be quite high. But more interesting, because this is a market-driven system, it will be somewhat dependent on what people believe the rate should be. For example, if you lock up one hundred dollars and are getting a 1–2% return a day, that’s a high return, and ideally it should result in more people wanting to participate in the network by buying Havven tokens, and driving the price up. The expectation is that whatever the fee yield/reward is, there will be some equilibrium reached within the network, and it will completely monitored.
SR: Tell us about your board of advisors KW: Our advisory board is quite interesting. We have quite a few people from the Australian business community, but as we gained more prominence in the crypto community, we’ve attracted more crypto-advisors to diversify the board over the past year. As we get more exposure to the real world, we expect the traditional advisors from Australia to become very valuable for us.
SR: Why are nomins (nUSD) initially issued only by the Havven Foundation? KW: We have a number of mechanisms to stabilise the network that have not yet been enabled, and we want to ensure that only the foundation is putting up collateral at risk before we open up issuance for everyone. We are starting a white-listing process very soon.
SR: So there is a white-list process for Haven-token holders to mint? KW: There will be open issuance for everyone to whitelist, but in the short term it will be a white-listing process with market-makers and others testing the network.
SR: To prevent wild volatility, an automatic 80% ‘Havven escrow’ is built as a buffer into the system, to avoid a scenario where Havenn are rapidly sold off. But hypothetically speaking, does the possibility of someone doing this keep you up at night? I mean, it’s crypto (laughter). But it would need to be a very rapid drop in price for all of the built-in stability to fail to respond. Even if its a sharp drop in price over the course of a day, there are a number of different mechanisms built-in, ensuring that Havven token-holders are rewarded for stabilising the network. But at a fundamental level we have an expectation that, because of the fees generated, there should be an intrinsic price floor. Between that and a few other things, we have an expectation that the network will be able to recalibrate even if the price of Havven drops significantly, and that Havven token-holders will reduce circulating currency to ensure that the collareralization ratio doesn’t drop below the 80% ratio.
SR: Is this your advantage over MakerDAO? KW: I guess the challenge that MakerDAO has is that there is no correlation between DAI stability and the price of ETH, so if ETH drops, there is nothing they can do to change that — it will just drop. Whereas we have built-in mechanisms to pull the number of issued nUSD if the price of Havven starts to drop. MakerDAO can do similar things, but the fact that there’s a feedback loop between Havven and nUSd should allow us to be more responsive.
SR: What are your main target markets, can you talk about some partnerships in the pipeline? KW: We are building programmable money, an universal payment network, so essentially any use case that requires payments can be supported. But one example is Groundhog, a recurring payments platform. I think it’s a really strong use case for crypto because many of the recurring payments are international wire-transfers, and people pay very high-fees for the currency exchanges. A crypto SaaS payment platform that allows people to have recurrent payments in crypto, supported by a stablecoin, could reduce those fees significantly -and businesses and merchants processing those transactions are quite price sensitive. So I think it’s a market that will be somewhat easier than consumers that require behavioural change.
SR: Are you also exploring remittances payments for developing nations? KW: Its definitely a strong use case, but it think it will take some time for it to develop.
SR: How has been the process of being listed in exchanges? KW: The process has been quite positive. I think that as a stablecoin project we are very interesting to exchanges, and they tend to be pretty open, they understand the tech and what we are trying to do. Most exchanges are very vocal in their comparisons between us, DAI, Tether and other solutions. So I think that’s an advantage we have as a project, working with exchanges as a tool that they are interested in using. We are excited to go live into major exchanges, making Havven more accessible to people.
SR: When do you expect to have other fiat nomins on top of nUSD? KW: This still requires some additional research and we are working on several ideas. Depending on how the R&D progresses, we might have a functioning variety of nomins by end of year, but most likely we will just be testing them.
SR: Where do you see the stablecoin space going over the coming year? KW: I think it’s similar to the debate of Centralised vs Decentralised Exchanges. I think everyone, including the Centralised exchanges, understand that centralisation is something we should be moving away from. But pragmatically, we also need working solutions, and it wouldn’t be possible for all of us to trade in a DEX today. The centralised fiat or gold-backed solutions are pragmatic, the challenge I see for those projects is that most of them seem to believe that the problem with Tether is one of transparency, and I think that misses the point. Decentralised stablecoins is where we need to go, it’s just a question of how fast we can get to that level of scalability: Tether just crossed $3B in circulating currency, MakerDAO jut crossed $50M, and we’ve got about $1M… so there’s a long way to go for us to reel in Tether. But I think time is on our side and, eventually, decentralised stablecoins will catch-up. It’s no question is better technology, so once we get to that point, it will be the solution that people will be willing to use. Then you have algorithmic solutions, which may be even further away, but could ultimately be an even more efficient technology — assuming that some of the challenges they are facing can be resolved.
SR: Is your team also decentralised? KW: At the moment everyone is in Sidney, but we will be opening a Brooklyn office in the coming weeks, and a community manager in Singapore.
SR: Any other news or milestones from Havven that you’d like to inform our listeners? KW: Look out for nUSD being listed in the exchanges and follow us on twitter!