Onchain Solutions for Transparent Exchange Rates in Emerging Economies

LINK
3 min readFeb 29, 2024

Recent events in Nigeria, where popular centralized exchanges (CEXs) and even self custody wallets like Binance, Luno, Onboard etc halted trading of USDT/NGN and USDC/NGN pairs due to government pressure, highlight the vulnerability of traditional financial systems in emerging economies to manipulation and control. This raises concerns about transparency, accessibility, and trust in these markets.

However, blockchain technology offers a potential solution through on-chain infrastructure like Onchain Orderbooks (OCBs), Decentralized Exchanges (DEXs), Onchain P2P and Decentralized Oracles (DOs). These tools can help mitigate the risk of price manipulation and promote greater transparency and accessibility in exchange rates, particularly in emerging economies like Nigeria.

On-chain Orderbooks (OCBs) record all buy and sell orders directly on the blockchain, creating a public and immutable record of market activity. This eliminates the possibility of off-chain manipulation and ensures that all participants have access to the same information.

Decentralized Exchanges (DEXs) facilitate peer-to-peer (P2P) trading without the need for a central authority. This removes the single point of failure that traditional CEXs introduce, making the system more resistant to censorship and manipulation.

Decentralized Oracles (DOs) provide reliable and verifiable data feeds to smart contracts on the blockchain. This data can include exchange rates, allowing for the creation of trustless and transparent DeFi applications that are not reliant on centralized sources.

Onchain P2P Protocols like WAVY developed by the team at LINK strapped with DO’s tracking the real price of the currency pair can be used as tools for transparent trading activities .

One notable company building this infrastructure today is LINK , a global end-to-end onchain payments network. Developing amongst other financial tools Onchain Market Data Infrastructure (OMDI), which combines OCBs, DOs, and other tools to create a transparent and trustworthy ecosystem for financial data and trading in Africa with early traction already.

On Market Price manipulation, onchain open systems like this solve the problems around fragmentation of liquidity which is one of the biggest bottlenecks that can lead to this manipulation.

By adopting onchain infrastructure, emerging economies like Nigeria can move towards a more transparent and inclusive financial system, one that is less susceptible to manipulation and control. This can foster greater trust, attract new investment, and ultimately, empower individuals and businesses to participate in the global financial landscape.

Note: This blog post does not constitute financial advice. Please conduct your own research before making any investment decisions.

--

--

LINK

web3 Cross Border payments Infrastructure for the World