The Haven Protocol offers the equivalent of an offshore vault consisting of several synthetic assets. Transactions and exchanges of assets are confidential but rely on a particular mechanism.
What is the Haven Protocol?
Launched in January 2018, the Haven project began listing on crypto-asset exchanges in April of the same year. Based on Monero (XMR), of which it is a fork, it allowed in its concept to create an uncollateralized digital offshore storage.
In the latter, XHV tokens can be exchanged confidentially, i.e. without disclosing the amounts, through a “mint and burn” protocol to transform them into other supported assets.
After some difficulties with the development of the first testnet and then the departure of the first two anonymous developers with the premined funds, the project was taken over by a new team.
The first tradable asset in the Haven Vault, xUSD, launched on the mainchain in July 2020. It has since been possible to burn XHV to mint xUSD, and vice versa. Conversion rates come from oracles. The first was ChainLink as of February 2020, and since November 2020, it is Band Protocol that is primarily used.
In February 2021, a Haven debit card was announced. New assets are also added at the beginning of the year: gold, silver and several currencies. The xBTC was launched at the beginning of May 2021.
The Haven Protocol Ecosystem: The Vault
As with Monero, the Haven protocol blockchain is opaque: the wallets and amounts involved in transactions are confidential by default. The whole point of the Haven protocol is to offer, in addition, a confidential digital safe. It allows you to keep XHV tokens but, above all, to exchange them for other synthetic assets, the xAssets. And all in full discretion.
The operation of the exchange in the vault is simple. All exchange rates are determined by oracles, which is why assets are uncollateralized. The xUSD is a dollar-backed asset. If Alice wants to get 100 xUSD and the price of XHV is at $10, she burns 10 XHV to hit 100 xUSD. Later, if Alice wants to do the reverse trade and the price of XHV is at $5, she burns 100 xUSD to hit 20 XHV (20*$5 = $100). Conversely, if the price of XHV is at $50, it only hits 2 (2*$50 = $100).
By this mechanism, there is, therefore, infinite liquidity—only the amount of XHV in circulation changes. However, transaction fees and validation of exchanges must be taken into account.
What is the XHV Token Used for?
The XHV token is at the heart of the protocol. Indeed, it is he who makes it possible to mint xAssets which are synthetic representations of assets. 90,000 XHV were premined by early developers, but they were resold. As with Monero, the amount of XHV tokens mined per block steadily decreases to a tail emission of 0.6 XHV per block. However, the minting and burning mechanism of xAssets completely changes the monetary emission curve.
Various scenarios for the evolution of the amount of XHV tokens in circulation are considered in the third version of the whitepaper. This quantity depends not only on the exchanges between the XHV tokens and the xAssets, but also on the evolution of the prices of the assets represented. In any case, the protocol ensures that exchanging 1 xUSD will always yield 1$ in XHV.
Originally, the quantities of XHV and xActives in circulation were to remain unknown. This indeed seems natural for a protocol where all exchanges are confidential. However, after much thought and discussion with the community, the choice to be transparent about the amount in circulation won out. It’s a matter of trust, visibility and attack prevention.
The quantities of XHV and xActives in circulation are available at this address
How to Buy XHV?
Since its markets have better liquidity, we advise you to use KuCoin, which allows you to simply buy XHV tokens from the Haven project.
Creating a Haven Chest
A Haven Chest is the go-to place to store, convert, and transfer XHVs and xActives. Three types of vaults exist: a web interface, a desktop application, and a version for developers and advanced users. For web or desktop applications, the process is the same. After launching the application, you must create a safe by assigning it a name and a password.
Chest creation page, available here
A 25-word seed phrase is then generated in order to be able to recover the content in the event of loss of the password or loss of the device used. In both cases, the safe must then be synchronized with the blockchain.
For the web application, the first synchronization may take a few hours. It will then be faster provided that the site or session data is not erased manually or automatically by the browser. You should also not use the incognito mode of your Web browser so as not to have to redo all the synchronization.
The desktop app must also sync with the Haven network. To do this, after having created a safe and having identified yourself, you must then choose a node. It is possible to create a local node, but this requires using the developer application, which also requires more hard disk space.
Using the Haven Chest
Once identified in one of the applications and the synchronized blockchain, several actions are accessible from the dashboard: view details of account assets, convert assets, transfer assets and settings. If the functionalities seem trivial, however, it is necessary to pay close attention to a subtlety of the asset transfer and conversion protocol.
Like Monero, the Haven protocol is based on the CryptoNote protocol. In order to ensure the confidentiality of transactions, the way these are processed on the network is different from more traditional cryptocurrencies.
XHV token deposits pending on the Bittrex platform
In the case of Bitcoin, wallets show “available” funds but also, often, “pending” funds. Indeed, after having carried out a transaction towards an address, it is necessary to wait for a certain number of confirmations (of mined blocks) so that the funds can be spent. The same is valid for receiving transactions of XHV tokens or xAssets.
It is for sending funds that the specificity of the CryptoNote protocol is important. The operation of funds transactions is analogous to that of banknotes. Not counting fees, if Alice sends 10 XHV to Bob, Bob has a 10 XHV note. If Bob then wants to send 5 XHV to Alice, he must send his 10 XHV and wait for the change of 5 XHV. The exchange transaction must therefore have a sufficient number of confirmations so that Bob can then transfer his remaining 5 XHVs if he so wishes. Currently, it takes 10 confirmations or about 20 minutes. This constraint is fundamental to ensuring the confidentiality of exchanges.
Funds from blockchains that use CryptoNote may be on hold when receiving and sending. To show this subtlety, the display of funds is then divided between those which are “available” and those which are “blocked”. It is possible to circumvent this limitation of simultaneous spending of funds by dividing the deposits. Instead of sending 10 XHV to Bob, suppose Alice sends 2*5 XHV. In this case, Bob can simultaneously spend 5 XHV twice without having to wait for the change. The division of funds, however, requires as many additional transactions and therefore accumulates the fees.
Conversion of xAssets
It is not possible to make a direct exchange between XHV and xActifs: it is necessary to go through xUSD. In addition, conversions from XHV tokens to xUSD or from xUSD to xAsset, and vice versa, use, in addition to the standard transaction fees, a conversion fee. All of these fees are paid in the original currency of the transfer or exchange.
The conversion between xUSD and xAssets incurs a fee of 0.3% of the converted amount. The transaction is recorded as a classic transfer, and the funds are locked in the same way.
The operation of the conversion between XHV and xUSD, and vice versa, is more complex. Since everything is confidential except the quantities of XHV and xActives in circulation, it is difficult to identify attacks. For example, rapid conversions can help manipulate prices, including significantly changing the amount of XHV tokens in circulation. A special fee system has therefore been put in place to deter such attacks.
The conversion fee between XHV and xUSD depends on the speed of the transaction, i.e. the time the funds lock. The fastest, 6 hours, requires paying a 20 % fee, while the longest, 7 days, costs only 0.2% of the converted currency.
Table of conversion fees between XHV and xUSD, available here
In addition to this specific lock, the conversion uses the same mechanism as other transactions. Exchanging part of a deposit from XHV to xUSD, or vice versa locks the entire deposit until the end of the lockout period. If Alice only had one deposit of 500 XHV and she pays the minimum fee to exchange 1 XHV to xUSD, the other 499 XHV are also locked for 7 days!
All conversions are made when the transaction is issued. Users, therefore, know exactly the conversion rates and fees at that time. However, prices may vary significantly until the funds are released. All conversion costs accrue to the project governance portfolio. They are used, like 5% of the standard transaction fees, to finance the development, infrastructure and marketing of the project.
Our Opinion on the Haven Protocol
After a tumultuous beginning, the Haven Protocol seems to have taken a new turn. The features offered are similar to some other protocols, but the main innovation is absolute confidentiality.
The protocol’s few subtleties compared to public alternatives, however, can make adoption difficult for people who are not concerned about privacy. Conversely, it is a major asset for people who see it as additional security or wish to speculate through reserves of value indexed to different assets.