On February 28th, Havven, a crypto startup, began a token sale (ICO), which, as the company noted, was supposed to run until March 6th, or whenever the hard cap of US$30M was reached. In less than a day, the site states that token sales have closed and the cap has been realized.
Why the clamor for Havven tokens? Because of what the company calls “a revolutionary method in which Havven utilizes smart contracts to control the balance of the platform and the cost of the stablecoin.” As a result, if the system value changes, the smart contracts adjust automatically to control the appropriate number of stablecoins in circulation.
Havven: how it works
Havven works as follows:
- Users of its network receive transaction fees;
- they allocate the fees to collateral token holders.
This is where their token plays its utility role.
Havven’s eco system has 2 tokens:
- havvens: the collateral token;
- nomins: the stablecoin.
Havven tokens provide the backing for nomins, as nomins are only issued when havvens are locked into a smart contract.
A portion of nomins can be dispersed against the value of havvens, thereby ensuring that the network stays price shock resistant. The initial value of the network is established through a token sale. Since transactions are not available, those participating in the token sale are predicting the valuation of the Havven system, taking into account a certain amount of risk.
How Havven creates value
According to this blog post at Havven’s site this is how Haven creates value:
Initially, while we transfer to the fully-functioning Havven system, only the Havven Foundation will have the ability to issue nomins. For more details on how the system will operate when it launches, see our blog post here detailing that process. Once the full system is up and running, the contract will have an interface that allows you to manually issue nomins, though we also have plans to build an automated tool for this action.
Users of Havven’s system purchase collateral tokens with the understanding that growth of the network and an increase in transaction fees means the collateral token value will increase thereby rewarding users for collateralizing the system. The Havven network disseminates collateral to provide stability. Havven tokens represent the collateral value of the network, which is determined based on the future projected value of transacted fees created by the system.
As a result, the price of havven tokens is not merely conjecture, but rather determined by the fee reward distribution to those who hold havven and have issued nomins. This is important for two reasons:
- It means that the network can be both decentralized;
- Backed by collateral. By comparison, systems that need to rely on a physical asset like gold as collateral become non-viable based on their centralization.