Havven and Maker are two leading decentralized stablecoins. I think both might make it but I am starting to slightly prefer havven.
Maker creates its stablecoin Dai by locking up ethereum( and eventually other tokens). If the collateral falls in value (according to an oracle) below the value, the collateral can be claimed and the Dai destroyed. If dais are in shortage (sell over $1) people make more of them by locking ethereum. If dais are cheaper than $1 you can pay back your loan at less than par. If Dai is short collateral someone else can seize it, destroy the Dai and keep the system well collateralized
- Sudden plunge in value of colleral May lead to systemwide shortage or someone getting collateral called away when they weren’t paying attention.
- People might not borrow enough leaving prices above $1 an fluctuating with propensity to borrow.
- The real problem is in a downturn volatility goes up, demand for stable value goes up (Dai >$1) and no one wants to borrow and fears the volatility will result in them losing collateral
All that said, I think it will work better and better as crypto volatility decreases
Havven is backed by fees rather than collateral. Like maker Nomins are locked to generate eusd, the stable coin. But, the value of these nomins is dependent on the number of transactions . Nomins receive a stream of transaction fees. If not enough Nomins are locked, then they receive less fees. To receive max fees you need to lock more Nomins. This sounds similiar but isn’t. The Nomins are claims on future cash flow and hence have a longer duration of cash flows where the collateral based coin is based on one large cash flow (the estimated resale value of the collateral). Interestingly resale value can and does plummet in a downturn but stable value transactions are likely to increase. As everyone sells risky coins and buys stable eusd coins, Transactions will increase. As people look to deleverage and pay off debt, transactions increase(hopefully they use eusd to pay off debts. In short during a panic, the collateral (the stream of transaction fees) increase in value! This makes Havven a much more stable system. Would you rather own a bank or an exchange during a stock sell off? The banks do worse as their solvency is questioned and exchanges do better as business is booming.
- to really be powerful it needs transactions - lots of them. It will be hard to get the network effects needed.
- if something affects long term value more than shorterm it could be worse. Like a gold coin with one near term certain cash flow might be better collateral if you you knew there was no future in crypto transactions and thus no future cash flow or if you knew a new lower fee alternative was coming and future cash flows should be heavily discounted.
to sum up
I think maker will work first. As it’s widely adopted there will be shortages of Dai and they will be forced to reduce collateral rules. As they do that it makes the chance of losing your collateral higher. I think there could be scalability issues. If vol comes down it will help but I think it cants carry the load itself.
I think Havven wins if there is a long term future for crypto. If adoption proceeds steadily the transaction fee stream will seem valuable.
maker is like buying a Bank, Havven like buying visa /MasterCard. One is backed by balance sheet one is backed by a stream of transaction fees (like visa)
both companies have interesting adjacencies. Maker should add more banking services and havven should add more transaction services. There are all kinds of things they can do from he stable coin starting place.
Anyway. What are your thoughts?