Haven is a project that makes it possible to issue synthetic assets in a completely private manner. Stablecoin xUSD and the XHV token play an important role in the Haven project. This guide explores Haven’s history, introduces the XHV token, and explains how the project issues synthetic stablecoins and assets.
Haven is an improved version of Monero
At the time of writing the article, there are more than ten thousand different cryptocurrencies in the market. We have traditionally divided cryptocurrencies into three clearly different subcategories: currencies, platforms, and tokens.
The purpose of currencies is to transfer and store value. The best-known currency is Bitcoin. Other well-known projects are Monero and Dogecoin.
Platforms serve as ecosystems for smart contracts and decentralized applications (Dapps). Platforms can be thought of a bit like Android and iOS. The best-known project in the platform category is Ethereum. Other popular platforms include Solana, Avalanche, and Polkadot.
Tokens do not have their own blockchain. They are always issued on an existing platform. Tokens are either utility tokens or governance tokens. Well-known tokens are for example DeFi tokens Aave, Uniswap, and Chainlink.
Haven can be placed into the currency category, although it does not directly compete with Bitcoin.
The XHV token is practically a copy of the private coin Monero. The biggest difference is that by using XHV, an algorithm can be used to issue less volatile and synthetic assets.
Haven project was re-born in 2019
Haven’s history is interesting and turbulent. Two anonymous software developers announced the project in February 2018 on the Bitcointalk forum. Haven was described as a Monero fork that could be used to issue various assets from stablecoins to precious metals.
However, the plan was considered impossible with a fully encrypted blockchain such as Monero. It wasn’t possible to create tokens on top of private blockchains as it was possible on Ethereum, for example.
The Colored Coins implementation (developed in 2013 to create synthetic assets on Bitcoin) required transparency to work. This was incompatible with Monero’s private blockchain.
In the early days, the project also lacked resources. It did not raise private funding or hold a public ICO. The two founders quickly realized the hopeless state of finances. They dumped their pre-mined XHV tokens on the market in late 2018 and abandoned the project.
Some active members of the community took over Haven in January 2019. The new team forked Haven’s original code and made it public. The aim was to fulfill the founders’ original vision of Haven as a private digital offshore bank that could be used by anyone.
At the moment Haven’s two most active developers go by the nicknames Dweab and Neac. Dweab is a mathematician and Neac is a cryptographer. Both of them are also software developers with over 20 years of experience. The core team is introduced on havenprotocol.org/team.
A major breakthrough in the development was seen in May 2020. Haven’s new team managed to add the Colored Coins to Haven’s encrypted blockchain with the help of Monero developers.
Haven’s first synthetic asset, xUSD, was released in July 2020. At the time of writing this article (10/2021), approximately USD 20 million of xUSD stablecoin has been issued.
Earlier this year Haven also launched private synthetic versions of gold (xAU), silver (xAG), Euro (xEUR), and Bitcoin (xBTC). Haven also plans to launch a debit card that would allow paying with xUSD private currency. Haven’s technology allows funds to be published if the user wishes so.
In September 2020 Haven’s team announced they had established the Haven Foundation in the Cayman Islands. The mission of Haven Foundation is to increase the adoption of XHV tokens and other Haven assets, for example through stock market listings and with improved fiat connections.
The volatility and transparency issues of traditional cryptocurrencies
How do xUSD (and other synthetic assets) remain secret and manage to follow the value of the underlying assets? What role does the XHV token have in all this? Why do we even need a project like this? Aren’t Bitcoin, Ethereum, and other more than ten thousand cryptocurrencies enough? Is full privacy even a good thing if the aim is to improve the transparency of the economic system?
We’ll find answers to these questions when looking at the weaknesses of popular cryptocurrencies, such as Bitcoin, Ethereum, and USDT. Many investors consider Bitcoin and Ethereum as good investments because of their scarcity.
A maximum number of 21 million coins is programmed into Bitcoin’s code, and it would take a significant consensus to change this. Ethereum inflation is more flexible, and ETH gets its scarcity according to the Ethereum blockchain utilization rate.
What Bitcoin and Ethereum have in common is that they are volatile assets. The price of Bitcoin changes often 5-10% per day, so it’s not very suitable as a currency.
Stablecoins solved the problem of cryptocurrencies volatility. However, centralized stablecoins like USDT and USDC have their own weaknesses. The reliability of USDT reserves has long been under suspicion, while the USDC stablecoin has been suspected of censoring wallet addresses.
Haven aims to solve the above problems by supporting private versions of both stable and volatile assets. Practically any asset can be made into a synthetic private asset.
Haven (XHV) is a Proof of Work cryptocurrency
Haven is a Proof of Work cryptocurrency like Monero. This means it is mined with physical mining equipment. Since Haven is basically a Monero clone, it also shares several features known from Monero.
Both projects support 1,700 transactions per second. Theoretically, however, both of them support an unlimited number of transactions per second since the block sizes are flexible. Both have the same transaction costs, and a new block is created in 2 minutes in each blockchain.
In other words, Haven’s XHV tokens can be successfully mined on a normal home computer. However, it is better if the computer is relatively new.
The only significant difference between Haven and Monero is the already mentioned Colored Coins. It was originally developed as a way of adding certain features for Bitcoin with the aim of using the Bitcoin protocol to create synthetic shares. One could say it’s an early version of NFTs.
The problem of using a public blockchain
Haven and Monero solve the publicity problem of blockchains.
Bitcoin’s blockchain is completely public. Transactions are performed from one public key (one address) to another. These addresses are public for everyone to see on the blockchain. Only the wallet owner knows the private key, which allows them to access Bitcoins in their address. This is how most cryptocurrencies work.
For example, Ethereum transactions are also public. When a user shares their Ethereum address, anyone can see the user’s financial history from a blockchain explorer like Etherscan.
In addition to the public and private keys, Haven and Monero have a so-called view key that is known only by the user himself. Though, it may be given to a third party for example for audit purposes.
The privacy in Haven and Monero is reached by using a so-called stealth address, which hides the identity of the payment sender. Ring Signatures also have an important role. It combines other random blockchain addresses with the sender’s address.
RingCT, which comes from the words Ring Confidential Transactions, fades the transaction amount. RingCT was one of the main reasons why Colored Coins was so difficult to implement in Monero.
All this means that Monero and Haven can hide the transaction sender, receiver, and amount being sent.
xUSD and other synthetic assets
Haven’s algorithmic xUSD stablecoin has an important role in the protocol. It is issued by burning (removing) an equal number of XHV tokens from circulation. For example, if 1 XHV is 1 USD, issuing $100 worth of xUSD would require burning 100 XHV tokens.
The same works the other way around. xUSD can be burned to issue a corresponding amount of XHV tokens. For example, if the value of the XHV drops to $0.50, burning one hundred xUSD would create 200 XHV tokens.
This minting and burning keep xUSD stable because one xUSD can always be replaced with an equivalent number of XHV. Unlike many other stable cryptocurrencies, xUSD is not backed by the U.S. dollar or any other similar asset. It only mirrors the value of the asset it is supposed to track using Chainlink and Band protocol.
xUSD is also used when the Haven protocol issues synthetic versions of other assets. You cannot create xBTC by burning XHV. This is because the protocol has been kept technically simple. The US dollar as the world’s reserve currency is generally used as a measure of the value of oil, gold, or Bitcoin, for example.
The protocol does not set limits on what assets can be created and there is no maximum amount of liquidity. In practice, you can create as many synthetic Tesla shares as you want by burning enough XHV.
This function is similar to the algorithmic stablecoins of the Terra ecosystem. This is also how the Synthetix protocol issues assets. The more assets are issued by burning XHV, the smaller the supply of XHV tokens gets. This should theoretically increase its price on the market.
However, a significant difference between Synthetix (& Terra) and Haven is privacy.
The image above shows how Synthetix operates. Haven doesn’t work exactly the same way, but the image also illustrates very well Haven’s way of issuing synthetic assets. Image source: DefiPrime
Haven Web Vault
Haven’s XHV tokens and synthetic assets can be stored and swapped in Haven’s Web Wallet (Vault). Users can log in with a password and seed phrase.
The user can switch between XHV and xUSD without slippage. Haven’s Vault is completely private. There is no price slippage when swapping assets as the transactions are not public.
Despite Haven’s quick transactions, it is necessary to pay an unlocking fee in the vault depending on how quickly you want to make the transaction.
Unlocking times vary between 6 hours (highest unlocking fees) and up to 7 days (lowest unlocking fees). The purpose of the unlocking fees is to prevent the manipulation of Haven’s mint and burn mechanism.
The XHV token
The mining inflation of Haven’s XHV token can be compared to Monero. Miners receive one XHV every two minutes as a mining reward. After May 2022, Haven will move to the so-called tail emission phase, after which the mining reward will forever be 0.6 XHV tokens.
The inflation rate in Haven’s XHV token is therefore constant, which encourages miners to ensure the safety of the blockchain in the future as well. Of course, Haven may also change its mining algorithm and the mining reward in the future if it turns out that some other algorithms increase the privacy and the resistance to ASIC miners.
Unlike in many other blockchains, the transaction fees from Haven offshore vaults go to Haven’s team instead of miners. They also receive 5% of all the mining rewards. Haven had no private funding, no ICO, and no pre-mined coins for the team. This is why the team collects funding from transaction fees and mining rewards.
The team probably holds a significant amount of XHV tokens too, so its members have the incentive to increase the price of the token. However, the governance of the project is in the hands of the miners. The team can be considered as a kind of executive branch and the miners are the legislative branch.
Considering the problems and challenges most cryptocurrencies are facing, Haven seems like a promising project. One would assume that the average user of cryptocurrencies does not care about privacy, but on the other hand, there is a big and loyal user base for private cryptocurrencies.
Privacy may well be the next great narrative in the world of cryptocurrencies. If a big part of the world’s financial sector will be built on blockchains technology in the future, it can be expected that all this will not be an open ledger that anyone can view. The banking world has been operating under secrets for centuries, and there is hardly any desire to change this.
Despite what many regulators’ say the privacy of cryptocurrencies could bring more security. For those with significant amounts of cryptocurrencies, public address doxxing could become a significant security threat.
For example, a data leak of a cold wallet manufacturer Ledger in the summer of 2020 revealed the names, phone numbers, email, and home addresses of more than a million customers. Fortunately, the data leak did not reveal the balances of these customers’ wallets.
Stablecoins have been another emerging narrative for a long time. The market value of USDT, the most popular stablecoin, has already reached $74 billion in November 2021. It’s up from just $4 billion in November 2019!
There is clearly a demand for stablecoins and the USDT has been partly responsible for why Bitcoin’s adoption has been weaker than expected in the past year in high-inflation countries such as Venezuela and Zimbabwe.
Haven 2.0 and upcoming ThorChain integration
There are still question marks over Haven. In addition to being a smaller Proof of Work cryptocurrency and therefore potentially vulnerable to 51% attacks on the network. The mint and burn algorithm can be also manipulated due to low liquidity.
That’s why Haven should grow its popularity and more x-assets should be issued by using XHV. This would make it more difficult, riskier, more expensive, and therefore less attractive to try to manipulate the protocol.
Until now, however, liquidity growth has taken a lot of effort. XHV is hardly available on major exchanges and switching between XHV and x-assets can only be done in Haven’s own web wallet.
Haven’s partnership with ThorChain can make a significant change by bringing ThorChain’s liquidity into Haven. ThorChain and Haven could be used to switch Bitcoin or Ethereum to a private dollar without centralized exchanges and KYC authentication. The video below briefly explains how ThorChain works:
Haven has suffered from various difficulties and paid a lot of dues. In the summer of 2021, hackers managed to create XHV tokens and x-assets from scratch. However, the team started to work after the hacking and released Haven 2.0 in November 2021.
Many projects are strengthened by hacking cases and the Haven 2.0 version also includes a bug bounty program to prevent possible future hackings.
Some kind of a question mark is also a $1 million donation received by the Haven Foundation in September 2020 from an anonymous source. According to the Haven Foundation, the donation was made with no strings attached.
Haven price and how to buy XHV
If you want to invest in Haven, XHV is the token you should pay attention to. XHV is burned to issue synthetic stablecoins and other assets. The more this happens, the greater the upward pressure on XHV price gets. X-assets always reflect exactly the price of the asset on which they are based.
The best way to buy is KuCoin, which offers XHV/USDT and XHV/BTC trading pairs. Haven is not yet listed on the biggest exchanges, such as Binance or Coinbase. Many other private cryptocurrencies also have the same problem.
At the moment, only Haven’s own native wallet is suitable for storing XHVs and x-assets.
If xUSD achieves even one-hundredth of USDT’s current market cap, the price of XHV would go up 100x from the current price of about $10.
The CTO Larsson video below gives a clear overview of Haven’s policy and potential. CTO Larsson has been following the project for years. By following him you will certainly stay up-to-date on Haven’s development and related news.