You can keep your damn money II (for today I made my own)

As the failure of the Duckaroo left me deep in debt to Uncle Donald - should I collateralise my own currency with crypto instead? 

Kain Warwick the founder of Havven thinks so. The crypto-currency he is counting on to collateralise his nUSD stablecoin is his own HAV token which exists on the Ethereum network, home to the world's number two crypto-currency. 

Lost you already? Good for you – you are a normal human being who has yet to lose a good chunk of your existence to the crypto otherworld. Enjoy it while it lasts – crypto is coming for you. If you have not done so already it might help to read some of my previous posts starting here. 

The Ethereum network is a beast of a global computer network that runs apps. Everytime a transaction is made on one of those apps a small fee is paid to the those who dedicate the huge amounts of computing power necessary to make the network function. Because there are hundreds of these apps and millions of network users the Ethereum token has value which fluctuates according to demand.

Havven is one of those apps, or rather DApps - decentralised applications that exist on a vast public network rather than on a private server in someone’s basement.

Havven exists to sell HAV tokens that can be used as collateral to issue a digital dollar called the nUSD in the same way that ducks collateralised our paper Duckaroos. 

So thanks to Havven I can have another crack at issuing my very own currency. 

The good news is that, unlike the ill-fated Duckaroo, the nUSD is not perishable and is over-collateralised at a 1:5 ratio or one nUSD to every five US dollars worth of HAV tokens. In duck-to-dollar terms it means that I would have to lose more than 80% of my ducks before the torch-and-pitchfork crowd show up at my gate.

The bad news is that for every hundred fiat dollars held in escrow I only only get twenty nUSD to play with (which reminds me of a story about the perils of investing in magic beans).

The good news is that unlike the magic bean market I am not trusting the people at Havven with anything. The escrowed HAV tokens stay in my digital wallet until I release them by paying pack the nUSD I have issued. I am entering into a contract of my own making. With myself.

The contract cannot be altered or destroyed by anyone. There are no banks or financial institutions involved. No creditors, no paperwork and no signatures. No salesmen pose as financial consultants. No one tells me lies, and no one holds my hand. 

I'm a card carrying libertarian street samurai and game as balls so I buy 5000 HAVs for 950 Australian dollars and just get down to biz. 

As I have said, using the Ether network is not free and transferring my tokens out of the vendors wallet (Coinspot) and into my private Metamask wallet cost AU$5.70. The process of locking my HAVs into the smart contract and issuing $140 nUSD is a surprisingly simple process that costs another $2. Sending my freshly minted crypto dollars out into the cryptosphere is another $1.40.

At present there is only on exchange (Kucoin) that will let me trade nUSD for other crypto in order to make a profit. Kucoin is stocked with coins unworthy of my nUSD except for Ethereum and good old Bitcoin.

Bitcoin is sleepy and unlikely to make a move while Ether is jumpy and could go up or down so I'm in a bit of a quandry. I'm here to trade but I really don't want to lose my currency - because it is mine. I made it and feel responsible for its safety. I want to teach it to swim, to fight and to use contraceptives before I wave it goodbye at the airport. 

Usually these feelings of attachment to a crypto-currency take time to manifest themselves. Over time the tokens you hold become your pets, your friends and your allies in the harsh crypto-battlespace. This is why the hardest thing to do is not buy or hold but to sell the damn things - even for a sizeable profit. 

nUSD is not a volatile store of value like Bitcoin - it is a stablecoin designed to be useful and practical as currency because, like the stuff in your bank account, it lacks volatility. So I can't make a profit or a loss by just holding onto it.

Stable coins are used mostly by traders who speculate as to the rise and fall of crypto like Bitcoin. Most exchanges will not trade in fiat currency so they use a de-facto token that emulates the dollar instead.

So if I spend my $140 nUSD on Bitcoin for and it goes up 10% I can sell it for $154 nUSD then go to bed knowing that my 14 dollar profit will not disappear should the Bitcoin price fall overnight.

Stablecoins also solve the problem faced by Bitcoin which is that its volatility makes it impractical as a day to day currency. Though there are a few stablecoins out there, none are commonly used pay for goods and services just yet.

In the simplest of terms, the nUSD is pegged to the US dollar by a whole bunch of maths and incentives for traders to buy it when the price goes below that of the US dollar and sell when it goes above. 

So if the price is stable how can an investor make money out of it? 

The same way the banks profits from our day to day transactions. Each month I will collect my share of all nUSD transaction fees from a pool. How much I will get depends upon my collateralisation status which depends on collateralisation ratios and other things I don't fully understand yet but according to the Havven Dashboard there is $2628 in the fee pool for more than a million nUSD in circulation so I won't be quitting my day job just yet.

Other than speculating on the price of other cryptos and collecting fees I can make money by helping to maintain the nUSD peg to the actual US Dollar through arbitrage, seigniorage and other fancy terms for moving money around.

Luckily Havven provides custom tools such as Swappr and Mintr that make it easy to buy HAVs, mint new nUSD, burn nUSD to release escrowed HAVs, and swap HAV, Ether and nUSD without going near an exchange.

Or I can just sit back and wait for the HAV price to go up and hopefully trade them for a metric tonne of Christmas presents in December. nUSD is a stablecoin, HAV is not. As you cannot mint nUSD without buying HAVs, the price of HAV should rise with the demand for the stablecoin.

So far the price of my HAVs has gone nowhere, I don't know what to do with my nUSD, my fees may not be enough to buy a turnip but folks this is the dream. Not the lambo-to-the-moon one but the anarcho-capitalist I am my own bank so get off my lawn libertarian dream. Right here, right now.

The banks, particularly the central reserve banks of the nation states, have little to fear from Bitcoin as high volatility, slow transfer speeds and spikes in transaction fees make it less viable as an alternative to their fiat currency. They have much to fear from Kain Warwick. 

Kain intends to have multiple currencies including the nAUD in the market by the end of this year which could create a cross border payment system to rival Paypal and Western Union and could, by default or design, create the first tokenised forex trading platform. Another world first will be establishing Havven on the EOS and Ethereum network in parallel to create a new level of de-centralisation in the cryptosphere. 

This is cutting edge crypto, and I'm damn pleased to be part of it. 

Stay tuned as we have only scratched the surface of this ground breaking project. Find out how I finally let go of my precious nUSD and turned it into gold.