First, the fees are designed to be low enough that most users shouldnt notice them, so they will not in general be strongly motivated to switch to a marginal and less trustworthy alternative. Additionally, transfer fees will still be charged upon deposit into and withdrawal from token-wrapping contracts, which partly constrains the utility of the wrapper. Second, network eects are tremendously important for currencies; in order to have utility a token must be accepted for exchange in the marketplace. This is challenging enough in itself, but a wrapped token must do this to the extent that it displaces its own perfect substitute: the token it wraps. In Havvens case, this would undermine its built-in stabilisation mechanisms, which become more powerful with increased transaction volume. Consequently, as a wrapped nomin parasitises more of the nomin market, it destroys the basis of its own utility, which is that nomins themselves are stable. Finally, it is unlikely that a token wrapper wi

Even as token wrapping may appear unlikely to the authors, there are at least two remedies which can be instituted to resolve this. It would be a simple matter to implement a democratic remedy, weighted by havven balance, by which havven holders can freeze or conscate the balance of any contract that wraps assets. Those havven holders are incentivised not to abuse this system for the same reason that bitcoin mining pools do not form cartels to double-spend: because abuse of this power would undermine the value of the system, and thus devalue their own holdings. The credible threat of such a system existing is enough to discourage token wrappers from being used, even if they are written, since any user who does so risks losing their entire wrapped balance.

An alternative solution is to institute a hedging fee, charged on static nomin balances. Such a fee could be discounted against transfer fees so that it encourages general token velocity, and imposes a cost on those who buy nomins simply in order to hedge, and are thus a risk for the network. Under this model, a token wrapper would not dodge this fee: the full balance that was wrapped will not be available at the time of unwrapping. 13 3.3

Issuance Case Study In this section we illustrate how Havvens incentives encourage havven holders to maintain stability. In 3.3.1, we rst present a simplied example the practical issuance dynamics for a havven holder, Bob, if he targets Copt. In the second part, 3.3.2, we examine the optimality of following this strategy with a more sophisticated model of the mechanism as a two-player game. It should be noted that these are simply illustrative examples to give the reader a feel for the nature of the systems issuance dynamics. This section is partly an adaptation of the calibrated analysis results presented in much greater depth in as part of the economic analysis of Havven performed by cryptecon, which can be found in its entirety here.