An Australian blockchain company looking to tackle one of the biggest issues in the cryptocurrency space has received more than $US25 million ($31 million) in pledged funds for its initial coin offering (ICO) at the end of the month.
The startup is called Havven, and it is looking to create one of the first successful ‘stablecoins’ in the cryptocurrency space. Stablecoin projects look to provide cryptocurrency traders and other businesses in the space with a tradeable, decentralised token that has a stable value — akin to putting fiat currency on the blockchain.
Havven’s founder Kain Warwick explains the inherently volatile nature of cryptocurrencies such as Bitcoin or Ethereum means that while they’re great a speculative asset, it also makes them inappropriate for use in everyday transactions and purchases.
The original vision for Bitcoin was for it to be a peer-to-peer electronic cash system, and Warwick believes it has failed that vision, as stability is a key criterion for a cash-related system.
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“We need something that’s decentralised, permissionless, and stable, which is what Havven is looking to achieve,” Warwick tells StartupSmart.
“Payment networks like PayPal need central authorities to administer transfers. Our system, while it still charges fees when people transact, those fees go to thousands of people collateralising the system, instead of them going to the central entity like they do in PayPal’s case.”
Havven’s stablecoin works like this: the platform offers two different tokens, one stable token called Nomin, and one non-stable or collateral token, called HAV. Users purchase the collateral token through avenues such as the initial coin offering (ICO) and can then choose to escrow them, locking them away for a period of time.
The locked up collateral tokens’ value is then used as a backing for the value of the stable tokens, providing users of the stable token confidence that the currency is backed by value, much like how currencies were previously backed by gold.
“People only have confidence in [a payment system] because it’s solvent, and if it wasn’t solvent, the whole thing would unravel really quickly. We’ll have a big pool of collateral maintaining the system confidence and the value of the stable coins,” Warwick says.
“We’re solving a very large problem in cryptocurrencies, second only to blockchain scaling issues.”
The scope of the Havven team’s solution is why they’re confident the startup’s $US30 million ($37 million) token sale opening on February 28 will sell out. The project has also had a significant level of international attention, with Warwick currently in Silicon Valley presenting a keynote speech about the platform.
A full sell-out of the Havven ICO would result in the project becoming Australia’s largest token sale, edging just ahead of Power Ledger’s $34 million raise in October last year.
$US20 million of token sale locked in already
However, the capital raise might be over before it even begins, as Havven says it has received more than $US25 million in pre-sale pledges from individuals and crypto investment funds. These pledges stemmed from an expression of interest period the startup ran earlier this year, and while no customers have actually purchased any Havven tokens yet, the team is confident the vast majority of pledges will follow through with purchases once the sale opens.
“Over 50% of those pledges are from large funds, and we have a few more still to announce and work out the paperwork for. We’ve also kept a firm line offer of a 30% discount for everyone through the expression of interest period,” Warwick says.
“It’s hard to know how many of the pledges will follow through, but 95% of the funds I’ve spoken to will be completing their purchase, so I expect the pledges to equate to over $US20 million of the sale.”
The lofty near-$40 million target for the raise would put Havven’s ICO up there next to some of the largest funding rounds in Australia last year, but the founders say that amount of capital is necessary to allow the Havven system to operate.
“The collateralisation process requires a big purchase of the collateral tokens, so that’s what much of the raise will go towards. We’re different to other projects in that we don’t need to fund as much development of our project — our platform is built and the code’s being audited now,” he says.
“Right now it’s less about building the network and more about advocating support for the network and help it grow internationally.”
Looking forward, Warwick says the project’s mid- to long-term goal is to knock incumbents such as Tether off their pedestal. Tether is a centralised stablecoin-esque project created with the support of giant cryptocurrency exchange Bitfinex, and provides an electronic US dollar tied to the value of the real US dollar.
The company claims each dollar of Tether currency (of which there are 2.2 billion) is backed by a US dollar, but this claim has been widely questioned.
“[Tether] has a big head start on everyone, with a lot of adoption and great exchange partnerships. Our goal is to get the Havven decentralised stablecoin to the fore, but that’s more of a medium to long term goal,” Warwick says.