[DIP-27] List NGNC/USDC LP with Incentives on Polygon

Overview:

LINK - A web3 cross-border payment infrastructure for Africa issued a Naira-backed stablecoin ‘NGNC’ which is pegged 1:1 to the Nigerian Naira with reserves held in custody at regulated authorities in Nigeria. NGNC is transferable on the Polygon and Avalanche blockchain as an ERC-20 standard token.

Oracle Risk Disclaimer: This foreign stablecoin (NGNC) and the oracle provider will be different from all other stablecoins on the protocol. NGNC will not be utilizing Chainlink, it will be using DIA which uses the 'parallel rate'. You can also think of the parallel rate as the on the ground price.

The NGNC operators have full control over the oracle and its important that DFX highlights that risk to the users. DFX Finance is not liable for oracle pricing issues.

More detailed information on this can be found under part 2 of 'Further Clarification From Link', see below.

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This is a proposal to create a NGNC/USDC on Polygon and incentivize it with rewards.

There are two options on which to vote:

Option 1: YES – Create a NGNC/USDC pool and allocate rewards.

Option 2: NO – Do not create a NGNC/USDC pool.

Because DFX’s mission is to bring stablecoins to the world, it is only appropriate that NGNC be available on the DFX protocol. NGNC is expected to quickly become one of the most traded foreign stablecoin in Africa and the world.

Motivation:

• Nigerian Naira is the official currency of the Federal Republic of Nigeria.

• Nigerian Naira is abbreviated as NGN.

• The population of Nigeria Is an estimated 218.5 million with most of the population (55%) between 15 – 65years.

• Nearly 35% of the adult population have used or currently own crypto assets, bringing the total crypto users to an estimated 40 million Nigerians.

• In 2021, Nigeria was said to be the nation with the highest ownership of BTC, (32% of the adult population owned BTC) amidst harsh regulations from the government leaving the citizens with no direct bridge into DeFi.

• 8 months into 2022, Nigerians have traded $1B in Crypto with no access to on/off ramps and identity of their currency on the blockchain.

• The world is changing, non-USD stablecoins are on the rise, LINK intends to bridge our country to the market in the next wave of global finance by teaming up with DFX Finance, the leading crypto FX trading protocol.

• Although the number of crypto users is high, Nigeria operates a stringent p2p system to on/off ramp crypto, which has resulted in a hike in prices and exchange rates.

• The current traditional infrastructure and even crypto infrastructure that exists under such high demand are still very fragmented, resulting in low FX liquidity, and self-prescribed multiple exchange rates.

• LINK offers the perfect on/off ramp platform to millions of crypto-friendly Nigerians to use NGNC.

• Building out the currency pairs on DFX supports and increases the utility of the protocol.

• NGNC is on its way to becoming the first regulated Naira-backed stablecoin

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Specifications:

NGNC Contract address: Polygon (MATIC) Blockchain Explorer

Official Website:
NGNC - NGN Coin (NGNC) | Fully Reserved Fiat-Backed Stablecoin 4

Further Clarification from Link:

1. LINK provides the payment API for peer-to-peer on and off ramps for NGNC:

• Minting NGNC on DFX would be simple, we would have our payment widget live on the dapp - Users click deposit on the frontend (we would have fetched their wallet addresses and network already via the endpoint) immediately a LINK dedicated vendor account appears to on ramp the NGN fiat, immediately that is received NGNC is minted from the treasury and sent to the user. This process should take somewhere around 3-10 minutes max, Nigeria has a fast banking system.

• Burning as well like minting would require the user to send NGNC to another vendor wallet by LINK, the user inputs a recipient bank account on the widget form, NGNC is burnt and NGN is redeemed in the account provided.

• Users must send and receive money from an account that belongs to them

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2. LINK has worked with DIA to launch the 1st and only parallel market price feed oracle in Africa to represent the real activity on the ground, if this proposal passes:

• DFX Finance would be the 1st and currently only dApp that brings local African currencies on chain with giving retail customers wanting to engage in cross border payments, yields, and other Defi capabilities direct access to scale the existing use case already being established on the continent. (This parallel rate would help us curb arbitrage)

• DFX Finance would be well on the way of mirroring the kind of traction CEX’s like Binance have on such pairs NGN/USDT (averaging $740k - $1m in volume per day)

• Supply of NGNC would definitely increase on Polygon as such value added use case like this is rolled out.

• Core reason behind using DIA instead of other popular oracle like Chainlink is simple, prices generated by this providers don’t reflect the true exchange rate on the ground and can cause pool depletion, because most countries in Africa including Nigeria have a multi-tier exchange rate system (ie the official rate which 460 and then the popular parallel market rate at 740) that’s huge right!, the official rate is only accessed by the elites and so the reality is that price needs to be controlled at the parallel market rate and DIA are the only ones to do it today.

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Important questions that were posed in the forum:

So you have dedicated vendors that guarantee minting and redemption? How does this work and who are these vendors?

Answer: There are dedicated p2p accounts handled by LINK internally to facilitate on and off ramps. Once NGN hits this account from the API NGNC is minted and vice versa

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Pros:

-NGNC is a stablecoin pegged 1:1 to the highest crypto holders and user nation in Africa.

-The utility of DFX increases as more asset pairs are tradeable.

-LINK is providing the major fiat on/off ramp solution offered to the fast-growing Nigerian market

-Will allow Nigerian users to access DFX directly and potentially onboard millions of users who wish to easily execute Forex transactions and access deep on-chain liquidity.

-The utility of DFX increases as more assets pairs are tradeable.

-NGNC will bring legitimacy to the field of foreign stablecoins. Being that DFX’s slogan is “Stablecoins for the World,” it is only fitting that the soon to-be Africa’s largest stablecoin has a proper home right here on the DFX protocol.

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Cons:

-Additional DFX rewards / emission inflation

-DFX will not get direct access to the largest crypto hub in Africa and potentially globally.

-DFX will not have one of the fastest-growing non-USD stablecoins on its platform.