The Libra/Diem saga showed us one thing: sovereign states will not sit by and watch people and businesses route around the local financial system in a way that makes local policy powerless. To preserve fiscal sovereignty, they lock all unseen money out of the Currency Perimeter; the boundary of rules that determines what regulated entities are allowed to treat as money, where it clears, when it settles, and when it is permitted to exit into a harder unit of account.

If the perimeter doesn’t admit it, it won’t become infrastructure.

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But liquidity is like water. It finds the path of least resistance. In 2021, the Nigerian government turned crypto into a landmine for institutions. The command to institutions was clear; you cannot touch crypto. So the market routed around them. Importers, treasurers, and consumers moved onto the Shadow Rail: OTC desks, WhatsApp agents, and informal coordination layers that were riskier, less legible, and harder to control, but still preferable to getting trapped inside the formal system.

Regulators quickly realized the perimeter was leaking. They saw USD stablecoins becoming the de facto unit of account. The state’s first response was the eNaira—a defensive attempt to regain visibility and control through a state-backed digital currency. It failed because it had no differentiated interest, no additional FX access, running on a permissioned chain that offered users nothing the naira couldn’t already do. But a less-obvious reason why it failed was that the CBN tried to build consumer distribution from scratch, bypassing the fintechs and payment companies that had spent decades figuring out how to reach Nigerians where they actually are. The result was a ghost town: a year after launch, 98.5% of wallets had not been used even once in a given week despite being the second-largest CBDC project in the world.

The eNaira was a failure, but it was also a signal. It showed that the powers that be understood the power of digital currency and still refused to surrender the perimeter. More importantly, it revealed the form a local stablecoin would need to take to be admitted: digitally native enough to modernize the system, yet legible enough to leave power anchored in the local economy.

cNGN is that middle ground.

Between the regulator and the market

People in African fintech like to name-drop and claim to be “close to regulators.” Usually, it means someone in the CBN is their mutual on X, or they shared a panel three Africa Fintech Summits ago. While others are collecting business cards like infinity stones, Convexity, the team behind cNGN, are active contributors to policy discussions.

Deji, co-founder of cNGN, is the kind of person the powers call on when something goes wrong that they don’t fully understand. As co-founder of A&D Forensics and Chainalysis’s sole investigative partner across Africa, he spent years in the sewage of financial crime: training officials of the Economic and Financial Crimes Commission on crypto investigation, working with Zambia’s Financial Intelligence Unit, helping the Nigerian Army’s CyberWarfare command understand “what is this blockchain thing.” He helped shape the IVMS101 messaging standard that global crypto AML runs on. When the SEC needed to draft Nigeria’s virtual asset regulatory framework, Deji was in the room. He’s not your average crypto bro — high on hype. Deji’s real power is an obsession with the boring parts that others are too impatient to acknowledge, let alone try to fix.

Uyoyo, another co-founder of cNGN, is a lawyer by training—banking, corporate, and securities law—who moved through asset management and an investment fund before arriving at Convexity. Before cNGN, he led CHATS.Cash, a humanitarian aid distribution platform designed to cover hard-to-reach places. Additionally, he co-led a project that the CBN and Ministry of Humanitarian Affairs contracted Convexity to build, ensuring donor funds reached beneficiaries in low-income communities onchain. That work put him in direct relationship with the CBN for a product that had nothing to do with stablecoins. He walked into cNGN with relationships already earned.

Charles, co-founder of Convexity and founding architect of cNGN, spent years as a blockchain solutions architect—including work with Sterling Bank—which gave him an early view into exactly how traditional financial institutions think about blockchain risk before they’ll touch it. He is the builder underneath everything Deji and Uyoyo take into regulatory conversations.

When cNGN applied for its SEC Approval-in-Principle under the Regulatory Incubation Program, the team had spent years helping regulators solve their hardest problems. In markets where the perimeter is enforced by humans, that depth of relationship is the only currency that matters.

What they built

cNGN is a locally pegged settlement instrument that lives on public rails while remaining redeemable into local banking money. It is designed to sit inside the Currency Perimeter, making it touchable for regulated balance sheets. Launched in February 2025, it already reports roughly ₦2.5 billion in circulation.

It is not just a token that mirrors the price of legal tender. cNGN combines the approvals, controls, redemption paths, and operational discipline that make a local digital unit usable under scrutiny:

• infrastructure that makes the naira programmable and compatible with digital rails

• an approval path that gives counterparties a defensible reason to touch it

• onchain forensics and incident response posture that reduces regulatory fear

• redemption and oversight processes that can be explained under pressure

In Nigeria, compliance is more than a checklist, it is a set of relationships and escalation paths. When things break, somebody has to pick up the phone. Convexity has been that somebody for years.

When a business moves into USD₮, they are draining the local system. When they move into cNGN, they are strengthening it. Because cNGN is an onshore asset with reserves sitting in Nigerian commercial banks and local T-bills, it allows institutions to participate in the digital economy without triggering capital flight.

The obvious objection is that a locally pegged stablecoin doesn’t eliminate the incentive to flee to harder currencies; it just makes the exit more convenient. cNGN doesn’t try to reverse that incentive. What it offers instead is a cleaner way to move through the NGN side of that trade. Compared with informal OTC channels, it gives businesses and fintechs an onshore, auditable, and easier-to-reconcile settlement rail—one that does not depend on after-hours coordination, fragile trust networks, or stepping outside the perimeter. Its role is not to stop demand for harder currencies. It is to make digital NGN usable in a form regulated actors can hold, settle with, and defend. For a full case on why dollarization matters and what’s at stake, read our earlier piece here.

Schrödinger’s Payment

Picture this: It’s Friday evening, and you receive a payment of ₦50M. The credit alert pings, and the number shows up in your app—except it’s not really there. Nigeria’s Instant Payment system is a Deferred Net Settlement system, which means that actual settlement between banks only happens within specific windows—2:00 AM and 2:00 PM daily. The money sits in limbo: visible in the app, but dead on the bank’s ledger until the next window opens. In an economy where prices swing before you can get a response back for “what’s the dollar rate?” Twelve hours of holding the wrong currency is a very serious risk.

This creates two needs that the Shadow Rail previously monopolized;

1. After-hours settlement: the structural need for institutions to reconcile and move value when the formal windows are shut; and

2. Overnight hedging: the strategic need for merchants to move funds to avoid waking up to a devaluation on Monday morning.

cNGN provides a touchable answer to both. Because it is 1:1 backed and SEC-allowed, it functions as a 24/7 vault that businesses can justify holding. Businesses pay for that hedge because the alternative is bearing FX risk overnight.

The market is already responding. Uyoyo estimates that 70–80% of circulating cNGN is actively moving, used for treasury parking and settling trades. What’s more telling is the shape of the movement: small and mid-sized wallets represent over 95% of holding addresses, with the smallest wallet cohort making up 75.2% of addresses. This shows broad participation and repeat distribution, not a small cluster of whale wallets moving massive blocks of capital once a month. Money behaving like money.

For institutions, cNGN offers a settlement leg that stays usable outside banking hours, is traceable end-to-end, and doesn’t require a phone call to reconcile. “Cross-border” here doesn’t mean replacing correspondent banking. It means cleaning up the NGN leg—the part that usually gets messy at the edges.

For consumers, the value proposition is simple: fewer “will this work?” moments thanks to always-on NGN settlement that doesn’t inherit bank constraints, lower-friction NGN legs for apps routing stablecoin flows, and more defensible last-mile rails for merchants who need NGN exposure without living inside informal coordination.

For the Naira to catch up to the internet, it had to become programmable. cNGN is the shape of that adaptation.

Nigeria is hard mode proof

Nigeria is hard mode. Volatile currency, a shadow economy moving billions the formal system can’t see, and regulators whose default answer is no (and whose second answer is also no). If you can crack the perimeter here, you can crack it anywhere. cNGN cracked it, and in doing so created proof that it can be done—and a map for how. Across Africa, the problem repeats: different central banks, different political constraints. Yet, it’s the same shape of demand, the same potential upside if it works.

The code ports easily. Every team building a local stablecoin knows this. The difficult part—that most teams overlook—is everything else: the years of relationship-building, the compliance grunt work, the explaining and explaining again. Getting the actors who control the perimeter to align around one instrument requires trust that cannot be rushed and coordination that cannot be shortcut.. There is no alternative path to the same outcome, and there is no faking admission into the perimeter. That’s where most local stablecoin attempts die. Coordination is the moat, and regulatory credibility is what makes coordination possible. Convexity spent a decade earning both before cNGN was even a conversation.

Where this breaks—or compounds

We made a bet that cNGN will do well over the long run, yet it’s too early in the game to tell if it is a clear winner. To become true infrastructure, it must clear three constraints that every touchable settlement instrument eventually runs into.

1. Liquidity cold start: liquidity depth beats coverage early. The tell is whether liquidity consolidates in defensible venues with tight spreads, so cNGN can graduate from “available” to “referenceable.”

2. Operational reliability: institutions keep routing through an asset only if redemption, reconciliation, and incident response stay predictable under stress. If that trust breaks once, institutions won’t come back.

3. Dollar gravity: ​​USD will likely remain the de facto store of value in volatile economies. The worry for any local stablecoin is that it becomes merely a bridge to USD—a unit nobody wants to hold, only pass through. cNGN doesn’t fight that gravity, nor does it need to. Whether people park overnight value in USD, tokenised gold, or something else entirely, they still need to exit and re-enter NGN at some point. That crossing point—fiat in, fiat out, clean and auditable—is where cNGN lives. It works both ways: stronger domestic settlement, and a faster path into harder currency when that’s where people are headed anyway. The settlement layer stays the same regardless of what sits above it.

We backed cNGN because it addresses the problem nobody else wanted to solve: the point at which institutions decide what counts as money and regulators decide what they can tolerate. If the handshake holds, the Naira becomes a settlement API—always-on, auditable, and easily reconcilable.

The long-term implication is larger than Nigeria. If this works, African economies can show up as themselves and participate in digital commerce without having to borrow someone else’s currency.

By making the unit touchable, cNGN can be three things at once: fast enough for the internet, constrained enough for the state, and liquid enough for the market to treat as real money.

While we are committed to our chosen investment thesis: “simple finance” and “trust infrastructure”, we will occasionally step a little outside of this if we find founders who exhibit the sort of world-class talent we know exists in Africa. Ikenna Orizu is one such founder.

Ike led engineering teams at Roku and NewsCorp. He has a depth of experience in content creation and media tech (both hardware and software) that is difficult to equal anywhere in the world, and he is uniquely positioned (both in terms of skills and personal network) to produce something interesting, different, and valuable.

Jamit revolves around an age-old human practice, with deep roots in African soil: story-telling. This is one area in which Africa might actually have qualitatively better and quantitatively more talent than anywhere else on the planet, but that talent is only realised–only made really meaningful and valuable–when it is shared.

Ike has built an AI-native storytelling platform, powered by a custom AI model called Magic Producer, where anyone can create studio-quality audio stories and recordings with one click and at the same time scale their original IP globally. It’s like webtoons for audio, powered by intuitive tools that understand how you speak and how to make it sound captivating and beautiful to your audience.

Originals

As engineering lead at Roku, Ike had a front row seat as Netflix Originals was built after Disney pulled their content. This is the other side of Jamit’s play: longer form, fictional “Jamit Originals” with well-known actors voicing the content.

He has already seen surprising success with this content format in multiple global markets. While long-form, non-fiction podcasts with celebrity hosts (think: Joe Rogan Experience, Call Her Daddy, etc.) have already saturated their market, there is an appetite for long-form fictional content that people listen to while commuting, doing menial tasks, or when relaxing. This is especially true in the Indian and Asian markets.

Licensing the IP for this kind of content, if it is successful, is an attractive way to extend Jamit’s reach beyond the app, enhancing discoverability and enabling Ike to achieve success even if people remain in their current favourite places when listening to content.

There is a potentially potent flywheel effect here: find a great Jamit Original in your current favourite place for listening, get curious about what Jamit is, and discover a whole world of user-generated content (that is studio-quality) in the app, including using the best of web3 features to power global payments to creators, making it easy (and rewarding!) to engage more.

Augmented

Magic Producer–Jamit’s proprietary model that edits audio–performs on a par or better than the best commercially-available ones from studios Ike has worked with, who specialise in this. But models are not a moat, and the exponential curve we are on will likely make a lot of this obsolete by next month. What we’re most excited about is the data. While we can improve the programming, mathematical, and scientific skills models exhibit by using synthetic training sets produced by previous generations, it is unlikely we can get LLMs telling great stories with only the same synthetic training sets. Our contrarian take is that telling great stories matters more to widespread, economically valuable use than novel mathematical proofs.

The logic here is roughly the same as E. O. Wilson used in Consilience: the “social” sciences (everything from economics through the rest of the humanities) are much harder to do than the “hard” sciences. Consequently, if models are to do more than programming, math, and the physical sciences, we need better data. In fact, the need for better data has been clear since the Chinchilla Paper from DeepMind in 2022. We feel this is something African founders can meaningfully contribute to, and we feel that Ike is the best-placed one we have found so far.

We are more bullish on AI tools that augment human intelligence, connection and cultural practices, rather than those that seek to displace the need for thinking, reasoning, or consulting others. While Magic Producer can produce stories from a prompt, the best results we’ve seen in our own testing revolve around cleaning up recordings of human speech to make it sound professional. Watching how people collaborate with Jamit’s custom models to refine their stories, and then make their recordings sound that final 10% smoother (which generally takes 90% of the effort), will be fascinating.

With over 500M global podcast listeners and double-digit annual ad growth, the opportunity for a new storytelling infrastructure is massive.

Secondary Orality

In addition to the technical skills and background Ike has, he has also been involved in the global media scene for his entire professional career. He knows the story behind the story of IrokoTV because, as the teenage founder of Truspot, he was raising funds at the same time.

Having been humbled by these early experiences, he knows how to avoid similar errors; who to deal with and how to do so fairly; and how to create technologically-enhanced communities that actually empower creators and help people get their voices heard.

The rise of podcasting is one more proof of Walter Ong’s notion of “secondary orality”: a term he coined to describe the communitarian effects that electronic media can induce. Jamit turbocharges these effects with powerful tools for augmentation, and a world-class level of crypto abstraction to make the boring financial stuff (payments, subscriptions, profit shares) and the rewards for listener loyalty easy to navigate for anyone, anywhere.

We’re excited to invest in Jamit and learn more about how to create successful consumer applications with frontier technologies that augment what humans have been doing here since time immemorial. From Africa, for the world.

Dune Replication: Lava VC - USDT/USDC Payment Analysis

Artemis and Lightspark recently published an analysis quantifying stablecoin payment usage by filtering out trading activity. We replicated their work for August 2024–August 20251. We have published position pieces on stablecoins (USD and local) and onchain FX, and now add a more data-driven layer to our work in this domain.

We find a material discrepancy in the paper’s reported “typical” payment size and go further by labelling top addresses by volume to understand what kinds of “payments” are actually driving stablecoin flow.

1. The “Whale” in the room: correcting the median

The original Artemis report suggests a median adjusted payment size of $24,415. Our replication of the 64.5 million transaction dataset reveals that the median payment size is ~$355.

The mean transaction size remains high (~$57k) due to large-volume entities, but the median points to a retail-sized transfer. The gap between the reported figure ($24k) and our replication ($355) likely reflects differences in what “adjusted” includes (filters, exclusions, token coverage, and/or snapshot details). Either way, it reinforces a core takeaway: lower-value transfers occur frequently, and typical payment size is highly sensitive to classification.

That said, median transfer size on its own does not tell us who drives volume—which is where the picture becomes clearer.

2. Who accounts for volume?

The report correctly identifies that the Top 1,000 wallets drive 84% of volume. We pushed further: the Top 100 wallets account for 66%, and the top 2,000 account for 90% of all payment volume.

At this point, the paper stops at a high-level question—whether stablecoins will evolve into an intermediary-led or P2P system. To understand what this volume actually is, we audited the Top 25 addresses (>$150B combined) by cross-referencing identity labels and analysing behavioural fingerprints (median transfer size and unique receiver counts).

We classify these top-volume actors into three primary categories.

Category A: Exchange hubs

This category includes 9 of the Top 25 wallets (e.g., Binance 14, OKX 180, Kraken 7, Crypto 2) and accounts for approximately $82B (53%) of analysed volume. The fingerprint combines very high activity (170,000+ transactions) with low median transfer sizes ($106–$492), consistent with retail-sized movement.

But these flows are a black box in terms of intent. It is difficult to distinguish commercial payments (User A paying User B via an exchange) from self-custody withdrawals (User A moving funds to a Ledger) or internal exchange operations. While significant, it is likely an overstatement to treat all 53% as end-user “payments” in the everyday sense.

Category B: Institutional sweepers

This category includes 7 of the Top 25 wallets (Ranks 8, 9, 15, 17, 18, 19, 25), accounting for ~$33B in volume. These actors are characterised by extremely high transfer values (median $20M–$640M) and a pattern of interacting with a single unique receiver. This behaviour is consistent with internal liquidity sweeps or wholesale settlement rather than merchant or P2P payment activity.

Category C: The treasury layer

This category includes issuers and institutional exchanges such as Circle Treasury, Bitfinex Tether Treasury, and Coinbase Prime. Together, they account for ~$40B+ in volume. Their profile—high median transfers ($10k–$30M) and moderate transaction counts (1k–6k)—reflects the wholesale supply management layer of the ecosystem.

If you remove these 25 wallets, half the “payment” volume disappears. The network is currently a wholesale settlement layer that supports an opaque retail withdrawal ecosystem.

3. Identifying methodological blind spots

The current industry standard for measuring “payments” remains imperfect. To truly understand stablecoin payments in 2026, we have to account for:

• The L2 Migration: Current methodology focuses on Ethereum L1, excluding bridge contracts. This likely misses the “real” payment migration to Layer 2 networks (Base, Arbitrum, Celo etc.) where fees are lower.

• Self-Custody vs. Payments: The EOA-to-EOA (Externally Owned Account) filter cannot distinguish between a merchant payment and a user moving funds between their own wallets (e.g., Exchange to Ledger). This becomes increasingly meaningless as more people and products adopt “smart accounts” based on Account Abstraction.

• The Visibility Gap: ~$33B of volume (Category B) lacks public identity tags. Without these labels, institutional rebalancing is frequently miscategorized as “Peer-to-Peer” activity.

In conclusion

The Artemis/Lightspark methodology is a helpful step towards sanitizing onchain data, but it remains true that you are better off verifying things for yourself.

Stablecoins today are a tale of two cities: Institutions drive the volume, but users drive the transaction count. The ~$355 median is the most optimistic data point for the future—it shows that programmable money is working at scale (even if that money remains pegged to a fiat currency). However, the fact that 53% of volume is trapped in exchange hubs suggests we haven’t disintermediated payments; we’ve just swapped banks for (arguably more opaque) exchanges.

This is a historical anomaly.

Before 1973, global trade was peer-to-peer. It ran on Telex—a messy, decentralized network of teleprinters where banks messaged each other directly. It was inefficient, but it was open. Then came SWIFT. It promised to standardize the chaos, but in doing so, it centralized trust. It replaced a mesh network with a gated club.

For half a century, if you weren’t in the club, you didn’t move money.

Today, that centralization is breaking. The club is shrinking. Driven by a trend euphemistically called “de-risking,” global banks have severed over 20% of their correspondent banking relationships in the last decade. In plain English, they fired their poorest customers once they did the math on compliance costs versus remittance fees. Emerging markets were no longer profitable enough to serve. The cost of this exclusion is staggering; sending $200 to Sub-Saharan Africa still costs an average of 8.78%, according to the latest World Bank data. That is more than double the G20’s target and the highest rate in the world.

Underneath those numbers is a second, less visible system: “The Shadow Rail”.

The scale of this shadow economy is often obscured, but it would be remiss to ignore it. Considering Africa’s formal remittance volume of nearly $100 billion per year, the money flowing through informal channels is conservatively estimated to be anywhere between $35 to $75 billion on top of that—making it one of the largest financial rails on the continent.

This is a documented reality in some markets like Ethiopia which relies heavily on its diaspora. The Commercial Bank of Ethiopia (CBE) reports that formal channels capture only 22% of the nation’s remittances, meaning the informal market accounts for a staggering 78% of the total flow.

This money moves through OTC dealers running order books out of WhatsApp and Telegram groups, P2P agents with their own mini-treasuries, and local FX desks quietly solving routing for their own networks. On paper, value moves through banks, PSPs, and consumer apps. In practice, a significant share of high-value flows still clears through these grey-area networks because they are faster, cheaper, more flexible, and more responsive to real-world liquidity.

The anatomy of a Shadow Rail transaction

While formal banks rely on “official” rates and hefty spreads to cover their overhead, the Shadow Rail is a ruthlessly competitive marketplace. In a WhatsApp group with hundreds of dealers, liquidity is deep and price discovery is quick.

• More liquidity equals tighter spreads: Because these agents are moving large volume daily, they can operate on razor-thin margins that banks cannot touch.

• Better rates mean lower all-in-cost: Even if a formal app claims zero fees, they often hide a 3-5% markup in the exchange rate. The Shadow Rail offers a nearest-to-real market rate.

But it is brittle. In the current informal OTC markets, liquidity providers are constrained by trust. An agent can only trade as much volume as their counterparty trusts them not to steal. They must trust that they are solvent, trust that they won’t ghost you after the wire hits, and trust that their bank account won’t get flagged tomorrow.

The market has decentralized liquidity, but it lacks atomic settlement.

Paycrest is the orchestration layer for the WhatsApp economy.

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Paycrest is being built by Co-founders Chibie and Francis, both engineers with experience spanning crypto-native infrastructure (ConsenSys, Gitcoin) and high-scale backend systems (Kinship, including payments and high-volume APIs). They’ve chosen to build where the constraints are real—liquidity, trust, and settlement.

Paycrest takes the existing, high-trust networks of local liquidity providers—who currently operate manually with spreadsheets and text messages—and upgrades them into a programmable rail.

Think of it as codifying the social contract.

• Today: An OTC agent in Nigeria operates on probabilistic trust. They take a risk every time they pre-fund a trade or send a wire based on a WhatsApp screenshot. Their volume is strictly capped by how many people they trust.

• With Paycrest: That same agent operates on deterministic proof. They plug into the protocol, still using their local bank accounts to move liquidity, but the Escrow Layer acts as the trust anchor. They don’t need to trust the counterparty; they just need to check the chain.

By effectively wrapping these informal agents in smart contracts, Paycrest allows them to scale from a contact in a phone book to a node in a global network.

For Paycrest, the WhatsApp OTC market isn’t a broken system to be fixed; it is the natural state of trade re-asserting itself—a decentralized market routing around the artificial barriers of the SWIFT club. Paycrest’s job is not to replace it, but to give it atomic settlement, capital efficiency, and code-enforced trust.

Dead capital vs. Just-in-Time execution

To understand why the current system is failing, and why the Paycrest model is interesting, you don’t have to look any further than the balance sheet.

To facilitate instant payments in Nigeria today, a fintech or traditional bank acts via a Nostro account. They wire $1 million to a local partner in advance, where it sits idle, earning zero yield, exposed to local currency devaluation and counterparty credit risk. This is the “cost of doing business.” It is why fees remain high and liquidity remains thin.

Paycrest harnesses a structural advantage native to stablecoins: Just-in-Time Liquidity.

Because stablecoins settle atomically 24/7, Paycrest eliminates the need for pre-funding. A Liquidity Provider on Paycrest—whether a treasury in Nairobi or an OTC desk in Vietnam—keeps their capital in their own (possibly yield-bearing) accounts until the specific second a trade is executed.

They do not send fiat to the protocol. They only automatically execute a payout when there is a funded, escrowed order on-chain.

This unlocks massive capital efficiency. It transforms “dead” capital into “live” potentially yield-bearing assets, allowing providers to quote tighter spreads than incumbent banks who are weighed down by the cost of idle float.

Paycrest unbundles the role of the bank into three distinct, programmable layers. It is a routing daemon that lives on the blockchain.

1. The Escrow Layer (Trust): A Sender (e.g., a payroll app) locks stablecoins into the Paycrest Gateway smart contract. This replaces the “credit risk” of the Telex era with cryptographic certainty. The provider knows the money is there because they can verify it on-chain.

2. The Routing Layer (Intelligence): An Aggregator node scans the network for verified providers. It matches the order not just on price, but on reliability and speed, routing around outages in real-time.

3. The Settlement Layer (Finality): A Provider node executes the fiat payout via the connected local banking rails. Once a cryptographic proof of payment is submitted, the smart contract releases the stablecoins.

This architecture achieves Zero Counterparty Risk at the routing layer. The protocol never takes custody. The Sender never loses custody until the fiat is delivered. The Provider never releases cash until the crypto is locked. A trustless swap engine for the world’s fiat currencies. For a deeper treatment of trust trade offs, see What is Trust Worth?

This is what Chibie, one of the founders, means when he says “it’s not ‘don’t be evil’; it’s ‘cannot be evil.’” The design eliminates protocol-level counterparty risk rather than promising good behaviour.

Proof of work: Noblocks and the street price

The theory is sound, but the streets demand proof. The team is validating the thesis with two pieces of software that attack the friction of the informal market: Noblocks and the Noblocks Rates App.

1. The Execution Engine: Noblocks

The scale at which a protocol succeeds is orders of magnitude above the scale at which an app succeeds. Paycrest is a protocol, but protocols don’t take off by themselves. They need a playbook.

The team’s strategic answer to this GTM challenge is Noblocks, an open-source reference implementation built entirely on the public Paycrest protocol.

Prior to Noblocks, it was difficult for people to really “get” Paycrest. The protocol was too abstract. Noblocks functions as a showroom and volume driver—it proves the technical possibility and drives the volume required to stress-test the rails. Though other apps are built on Paycrest, Noblocks currently drives the majority of the volume, acting as the necessary catalyst for adoption.

It serves as a live blueprint for any developer to see exactly how to build on top of the rail.

Noblocks stripped away the dashboard, the wallet balance, and the complex sign-up flows of traditional remittance apps. It proved that if you solve the routing and liquidity problem, the user experience can become delightful.

When the team released a recording of a MetaMask transaction settling into a Nigerian bank account in seconds, the viral response was immediate proof of what users really cared about—rates, reliability, and speed.

Critically, Noblocks is fee-free for consumers. The revenue model is entirely at the protocol level (a ~0.5% fee charged to the provider side). This strategic choice turns Noblocks into a pure volume driver, stress-testing the protocol’s capacity. As of today, it has quietly processed over $2 million in volume, serving as the reference implementation for the 30 active business senders currently integrating the API.

It handles the complexity so the user doesn’t have to, and does this via:

• Gasless Transactions: Users don’t need ETH or MATIC for gas; they just sign and send.

• Compliance Shield: Integrated with tools like Shield3, it screens wallets for OFAC sanctions instantly.

2. The Truth Machine: Noblocks Rates App

If Noblocks is the engine, the Noblocks Rates App is the dashboard.

In the traditional “WhatsApp Economy,” FX rates are opaque. A trader in Lagos might quote 1,500 NGN/USD while a desk in London quotes 1,480. The spread is pure friction. The Rates App acts as a real-time, public ticker for the protocol’s liquidity. It aggregates quotes from the decentralized network of KYB-verified providers, offering a “mid-market” rate that is often tighter than formal fintechs.

• For the User: It provides the transparency of a Bloomberg terminal with the execution of a street trade.

• For the Provider: It creates a competitive marketplace. To win volume on the Noblocks front-end, providers must tighten their spreads, driving the entire network toward efficiency.

This seemingly simple tool validates Paycrest’s core hypothesis: if you provide a transparent routing layer, local liquidity providers will compete to compress the cost of remittance.

Compliance at the edges

The lazy critique of decentralized rails is that they are incompatible with anti-money laundering (AML) laws. Regulators demand to know who is moving money.

Paycrest’s answer is a proposed design philosophy known as Aggregated Compliance.

Rather than centralizing sensitive user data in a global honeypot—which creates a single point of failure and liability—Paycrest is building the infrastructure to push compliance to the edges, where the fiat actually touches the banking system.

• The Aggregator verifies the KYB status of the Provider.

• The Sender captures KYC on the end-user.

• The Protocol coordinates the transaction.

By using Verifiable Credentials and Proxy Re-encryption, the goal is to ensure that identity data travels with the transaction but remains accessible only to the specific Provider fulfilling the trade. This satisfies the local regulator without forcing the protocol itself to become an instrument of surveillance. It is a subtle but profound shift: enabling compliance without centralizing control.

Why this matters now

We are at a unique convergence point in financial history. What makes Paycrest interesting is that it aligns with three macro shifts happening in parallel:

1. Stablecoins are becoming a de-facto settlement asset: Stablecoins clearly have product-market fit as dollar proxies in emerging markets, but the bridge into and out of local fiat is still a patchwork of exchanges, P2P chats, and single-point-of-failure fintechs. The onchain economy has achieved escape velocity. Stablecoins settled an estimated $27.6 trillion in 2024, effectively flipping the combined transaction volume of Visa and Mastercard.

2. Global regulators are explicitly targeting cross-border payments. The G20 has made cost, speed, transparency, and access in cross-border payments a formal policy target, and current systems are still far from those goals—especially in Africa.

3. Africa’s “shadow” liquidity is digitizing. From OTC desks to local stablecoin issuers, more of the real economic action is happening off the balance sheets of traditional banks and onto programmable, API-driven rails. Market mapping of Africa’s stablecoin payments ecosystem puts Paycrest in a small cluster of teams building the underlying plumbing rather than just the apps.

For years, the narrative has been “formalize the informal sector.” But liquidity continues to flow through informal channels because they optimize for what people need—speed reliability, and human trust. Paycrest treats that behaviour as infrastructure—and uprgades the settlement layer beneath it.

The convergence creates a narrow window: Regulators are increasingly hostile to centralized exchanges but have not yet fully grokked protocol-level infra. This provides a limited opportunity where a credibly neutral, compliance-aware routing layer can be adopted by banks, PSPs and crypto apps before existing players ossify into de-facto gatekeepers of stablecoin FX.

The founders aren’t trying to build a better remittance app or replace the WhatsApp economy. They are trying to finish what Telex started: a global, peer-to-peer financial network that no single entity can control, and no single failure can stop.

There is more to build (and validate) at scale

Elegant design does not eliminate execution risks. There are hard questions Paycrest must answer:

• Aggregator incentives: Currently, Paycrest runs the primary aggregator in a “federated” model. Transitioning to a fully permissionless network—where third parties run aggregators for profit—requires solving complex mechanism design challenges regarding fees and incentives. The trigger for this transition remains undefined

• Liquidity Cold start: To win, Paycrest must offer better rates than Binance P2P or local black markets. This requires massive volume to attract market makers, but market makers won’t come without volumes.

• Regulatory whack-a-mole at the edges: While the protocol is neutral, the edges (bank accounts) are vulnerable. If a regulator aggressively de-banks the providers in a specific corridor, liquidity vanishes. The protocol is censorship-resistant; the local banking system is not.

These are non-trivial problems. Yet they are precisely the set of problems that, if solved by the team, create a global financial primitive. Paycrest is a bet that the future of money isn’t just about minting tokens; it’s about making that money spendable, anywhere, instantly, without asking for permission.

You won’t “use” Paycrest any more than you “use” TCP/IP. You will simply send dollars, and they will arrive as Naira, Pesos, or Shillings and the friction of the last mile—the 8.78% tax on the global poor—will finally disappear.

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“Why does it matter?”

We received submissions, mostly written but some videos, from across the continent and beyond. Over four months, we went back and forth with candidates—emails, calls, and rewrites.

Today, we’re sharing the final of three winners: Tosin, who's been demystifying the latest and strangest crypto incantations for years, writes "Interoperable money as the next layer of value."

She picks up onchain FX and local currency stablecoins to drive home the point that geographical proximity doesn’t guarantee financial interoperability. And that there are already some building blocks in place that attempt to solve financial fragmentation across Africa, at scale. We loved the depth and specificity of this piece that showed how onchain innovations solve everyday problems big and small.

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Interoperable money as the next layer of value

How Mento Labs is rethinking cross-border money with oracle-priced FX, and code that respects local utility.

Between Nigeria and Ghana, the distance is barely an hour’s flight—shorter than the average home-to-work commute within Lagos on a regular day. The two countries share everything from trade routes and pop culture to family ties. You’ll find Nigerian students in Accra ordering food from home multiple times a week, and Ghanaian workers in Lagos paying fees back home in cedis.

Yet for all this closeness, moving money between them feels like crossing an ocean. The same bank names—Zenith, UBA, Ecobank—exist on both sides, and both nations have hacked instant local transfers. But interoperability remains non-existent. The real economy—the one that actually moves—runs on WhatsApp agents at odd hours, black-market rates, and hand-carried cash across the border. This isn’t a unique story; it’s the norm for sister countries across the continent: Zimbabwe and South Africa, Kenya and Tanzania.

Even for those who turn to stablecoins like USDT, the problem doesn’t end. You still convert into a foreign currency, taking on FX risk the moment you leave your home denomination. A Ghanaian worker paid in Naira but transacting in USDT is exposed to the same volatility that destabilizes small businesses and local credit markets.

This is financial fragmentation up close. And it’s the gap projects like Mento Labs are trying to bridge by rebuilding what cross-border money should be.

Their work builds on stablecoin infrastructure, but its power is in preserving one-to-one parity with local fiat. Mento’s framework lets digital versions of currencies like NGN, KES, and GHS move across ecosystems, settle instantly, and neutralize the settlement/FX basis risk that defines cross-border transactions.

The answer is an FX layer native to the internet—one that respects local value while ensuring its mobility. Mento’s platform already reaches millions through Celo wallets like Valora and Opera’s MiniPay, a fact underscored by its over 400,000 monthly active users—an unmistakable proof of core demand.

The goal is interoperable money, not homogeneous money. It’s about making money useful everywhere while preserving local meaning.This is the crucial distinction between financial innovation and financial erasure.

The Mechanics: Interoperability via the Fixed Price Market Maker (FPMM)

Mento’s core innovation is its Fixed-Price Market Maker (FPMM), an oracle-anchored mechanism that executes swaps at real-world FX rates. Unlike curve-priced AMMs, this model avoids complex mechanisms and value-draining risks like Loss-Versus-Rebalancing (LVR). It’s backed by a diversified, transparently managed reserve and differs from curve-priced AMMs in three main ways:

• Oracle-driven pricing: The FPMM doesn’t discover price via liquidity curves like a standard AMM, it imports it. Decentralized oracles feed live, institutional-grade FX rates directly to the protocol. This provides a verified, real-world reference price for each currency pair (say, cNGN/cGHS), rather than routing through a USD pair.

• Deterministic liquidity: Instead of user-supplied pools, trades draw from the Mento Reserve—a diversified basket (e.g., BTC, ETH, CELO) that absorbs volatility, restores balance when demand skews, and acts as counterparty of last resort. The result is low-slippage execution that’s capital-efficient, transparent, and composable with other on-chain apps. When demand skews, the system can rebalance inventory (e.g., mint/burn against the reserve) to keep pairs liquid without drifting from the oracle price

• Atomic Cross-Currency Swaps: Powered by those oracle-anchored rates and reserve liquidity, a Ghanaian worker in Lagos can swap their earnings from a digital Naira to a digital Cedi for a relative in Accra at the current interbank rate. The transfer settles in seconds, costs a fraction of what it would with the traditional flow, and never touches a single SWIFT code or correspondent bank—digitising a complex, multi-day swap into a single, instant command.

Most digital money today still travels through the dollar. Mento rewires that logic, letting value move directly between local currencies, without detour or dependency.

When global money breaks local credit

The true test of a foundational financial primitive is not whether it can move money, but whether it strengthens the local economy beneath it.

The global stablecoin regime dominated by USD is a poor fit for emerging markets. This creates a critical currency mismatch risk. If an African micro-entrepreneur whose revenues are in local currency takes a loan in cUSD, any local currency depreciation instantly increases their debt burden when measured against their local income. This FX risk is a ceiling on local credit. It destroys trust and makes productive lending—on-chain or off-chain—hard to scale for the people who need it most.

Mento’s model flips this dynamic. By creating stable, digital representations of local currencies, it provides a reliable digital denominator for local value that eliminates FX risk for the end user.

Proof points in local credit: From Kenya to Ghana

This isn’t just theoretical. The model is already being proven on the ground:

In Kenya, the adoption of cKES provides a critical proof point. A micro-credit pilot program with Haraka disbursed over 1.5 million cKES to 150 micro-entrepreneurs, 85% of whom are women. These individuals were not borrowing a foreign currency; they were borrowing the digitally stable version of the currency in which they earn their income.

In Ghana, a similar pilot with Mercy Corps Ventures, Haraka, and the Grameen Foundation used Mento’s digital Cedi (cGHS) to disburse loans to over 500 women in village savings groups. The impact was immediate: loan disbursement times dropped by 99.7%, from an average of one week to under five minutes.

In both cases, this model:

• Reduces reliance on predatory local money lenders who charge exorbitant rates.

• Decouples local credit from the volatility of global reserve currencies.

• Empowers local growth by ensuring entrepreneurs can plan and repay their loans without the spectre of sudden, crippling FX swings.

The demand for this local utility is clear. A separate partner project with Fonbnk demonstrated that users making initial cKES transactions were 25% more likely to continue with additional transactions, highlighting strong engagement and preference for a local digital currency.

The human cost of friction

I once spoke with a Nigerian student at a university in Accra who described how trying to pay her tuition when she first arrived became a week-long nightmare of apps that didn’t work, failed bank visits, and dead ends with traditional remittance – finally resolved only through an informal P2P agent on WhatsApp.

This agent, a Nigerian living in Ghana for decades, doesn’t compete with the formal system; he exists because it’s broken. He uses his own float in both countries to clear transactions and sets his own rates because he has no efficient competition. He is the human API of a fractured network.

The sheer absurdity of this friction highlights the human cost. It’s blocked potential, stressed families, and missed opportunities.

Mento’s rails are built to replace the human API. They digitize the value that, until now, has been trapped in WhatsApp chats, finally letting it flow as freely as the people who earn it.

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“Why does it matter?”

We received submissions, mostly written but some videos, from across the continent and beyond. Over four months, we went back and forth with candidates—emails, calls, and rewrites.

Today, we’re sharing the second of three winners: Imani, who is a engineer by day and writer by night, took a detour from his usual "stablecoins, bitcoin, and defi in Africa" to write "Jia: Bringing Onchain Capital to SMEs."

Imani tackled a startup we were aware of but never dove into. Especially of note is how he meticulously thought around comparing Jia to other fintech co's, banks, and onchain lenders, then communicates that through clear writing. His piece stirred up our curiosity about the uncanny boundary between on and offchain credit and left us wanting more.

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Jia: Bringing Onchain Capital to SMEs

SME Financing in Africa

Across Dar es Salaam, you’ll find dozens of open markets bustling with countless vendors - mostly women - selling fresh fruit and vegetables. Arrive too early or too late, and their shelves are often bare. Many can only afford to buy stock one day at a time - their supply begins when their supplier arrives not when demand does.

A business can only grow as far as its balance sheet allows. If these vendors had a small line of credit they could purchase inventory for the full week, make more sales, and potentially expand. When you zoom out you find that this is a common story for SMEs in Africa.

These SMEs make up 95% of enterprises in Africa and account for 50% of the continent’s GDP, yet face a shortage of over $500 billion in financing. The capital that is available is expensive and often tied to strict collateral obligations. Those who do secure funding frequently find themselves in a debt trap - often leaving them in a worse position than before.

Jia

Jia was created to solve this exact problem, providing small businesses in emerging markets access to capital. The way it works is: on one end Jia partners with suppliers to source data on the SMEs they sell to - this includes but is not limited to data from PoS and inventory management software - which is then analyzed to evaluate credit worthiness. On the other end, Jia sources capital from various onchain lending pools.

Borrowers use this capital to pay off invoices or acquire inventory. When a borrower repays their loan, they are rewarded with JIA tokens, which serve several purposes:

1. They can be used to unlock rewards such as lower interest rate or larger loan amounts.

2. They onboard borrowers into the web3 world.

3. For Jia, these tokens serve as an incentive for timely repayments and help drive user retention.

Jia’s data-driven method of underwriting businesses has enabled an incredible default rate of less than 0.1%, with over $12 million in loans disbursed from onchain credit protocols. Fintech lenders, who’ve deployed a similar methodology, like Ramani in Tanzania and OmniRetail in Nigeria have both had great success as well.

Why Banks Struggle to Lend to SMEs

You might be wondering, if this works so well then why don’t banks do it?

1. It’s safer to lend to the government and large enterprises. Banks can lend in large volumes to the government by purchasing bonds or to large enterprises, and have the peace of mind that they’ll be paid back on time. The smaller the borrower, the higher the risk.

2. One size fits all models. African banks often assess the credit worthiness of SMEs using the same framework they apply to large businesses. With limited information to evaluate an SME, banks default to issuing collateralized loans at high interest rates - essentially pricing in the risk.

3. Access to data. Fintechs like Ramani spent years building out infrastructure to collect and analyse data, such as object detection software layered on top of CCTV to accurately track inventory. Banks generally don’t have the expertise to build out such infrastructure.

Without banks, there is limited capital available to SMEs. For fintechs there’s a puzzle around where to efficiently source capital. Ramani and OmniRetail have managed to partner with banks, but the lengthy process has limited them to only a handful of relationships.

By sourcing capital onchain, Jia is able to tap into yield seeking global liquidity pools; unlocking capital at scale. Unlike banks, this capital comes with a few advantages:

1. Fast disbursement. No slow bank transfers or currency restrictions.

2. Scalable and programmable. Lending vehicles are enforced by auditable smart contracts, making it straightforward to connect with additional onchain lenders.

3. Protected from local currency risk. Borrowers can hold funds as USD stablecoins, shielding them from local currency devaluation.

Why Other Onchain Lenders Have Struggled

What Jia is doing isn’t necessarily new, but onchain lenders have found it incredibly difficult to build successful business models.

Goldfinch, for example, which originated over $100 million in loans, saw its default rate rise from near zero to over 10% as it scaled SME financing in emerging markets. This was a result of sub-par underwriting as well as scaling too fast.

DeFi can enable trustworthy coordination among independent parties, but using these rails to sidestep traditional underwriting doesn’t work in markets where reliable public borrower data is scarce.

Goldfinch made this mistake, opting to rely on third parties for sourcing, and liquidity pool participants for consensus on decisions. This model was scaled rapidly across markets in Africa and South-East Asia. What resulted was three major defaults from loans to intermediaries lending across Kenya, India, Indonesia, and the Philippines.

How you scale credit matters. Both the timing as well as scaling vertically vs horizontally.

Jia has robust data pipelines and boots on the ground in the two markets - Kenya and Philippines - it currently operates in. When they raised a $4.3 million seed round two years ago the focus was to double down on these markets rather than expand.

Looking Forward

The convergence of Africa’s growing SME sector and global onchain liquidity will play a key part not only in Africa’s long term economic growth, but also in creating value within the global crypto industry. Crypto provides the capital, SMEs provide the yield - aligning incentives on both sides. Jia is slowly becoming a leader in this space, and it will be exciting to see how they scale long term.

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“Why does it matter?”

We received submissions, mostly written but some videos, from across the continent and beyond. Over four months, we went back and forth with candidates—emails, calls, and rewrites.

Today, we’re sharing the first of three winners: Jolade, who shifted gears from her usual technical writing to write "The Untapped Liquidity of Human Capital: How Web3Bridge Turns Potential into Global Impact."

Her writing is the most comprehensive piece written about Web3Bridge (we've read thus far) and a pure labor of love. She goes inside the Ikorodu compounds—how they run, who shows up, what actually happens there, and builds the story from the ground up. She digs deep to pull from alumni stories, X Spaces, and goes as far as reaching out to Web3Bridge alumni directly to better understand their lived experience.

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The Untapped Liquidity of Human Capital: How Web3Bridge Turns Potential into Global Impact

The rarest resource in the global Web3 economy is not capital - it’s talent.
Developers who truly understand smart contract security, token economics, and protocol design are in desperate demand.

Since 2019, Web3Bridge has been transforming raw, overlooked potential into world-class developers that the global ecosystem desperately needs.
Over 880 students on blockchain development, with 300+ graduates now working for companies like Polygon, Nestcoin, Nahmii, Aavegotchi, Nethermind, and Consensys. While others have launched startups.
The training model is straightforward: remove infrastructure barriers, provide hands-on protocol experience, and connect graduates to the global opportunities.

When Starknet distributed 728 million STRK tokens to 1.3 million wallets worldwide in 2024, Web3Bridge alumni collectively received tokens worth over $2 million worth of tokens. Not as airdrop farmers, but as developers who contributed code to the protocol.

Events like this reflect a bigger reality.

By 2030, Africa will have the largest youth workforce on the planet. Millions of young people are digital-first, mobile-native, and hungry to build. What they lack isn’t ambition, it’s access.

Web3Bridge was designed to remove that friction through its immersive 16-weeks bootcamp with five-hour sessions daily, where participants across the continent live together, code together, and learn blockchain hands-on. Everything – accommodation, 24/7 electricity, food, and internet is provided free of charge.

In a region where blackouts can kill ambition overnight, this consistency is transformative – not charity, but infrastructure for the untapped capital. This is liquidity provisioning at its purest.

Building the Bridge

The curriculum focuses on production-level skills. Students learn blockchain basics, Ethereum architecture, Solidity for smart contracts, libraries like EtherJS and Web3JS for interacting with contracts, development tools like Hardhat and Foundry, and NFT implementation.

But the real work happens through protocol contributions. Students fork repositories, audit smart contracts, and contribute to live codebases for protocols like Ethereum, Lisk, and Arbitrum.

Ayodeji Awosika, Web3Bridge’s founder, started the program after seeing Ethereum’s “One Million Devs” initiative. His background wasn’t computer science, he studied hospitality and business management, then entered blockchain in 2017 as an airdrop hunter and community moderator. What he discovered was a gap: African developers wanted to build in Web3, but most lacked the Web2 programming foundation to transition.

Web3Bridge began with Web3 training but soon realized many entrants lacked Web2 development skills. The program evolved to include a 12-week remote track teaching HTML, CSS, and JavaScript for complete beginners before the main blockchain cohort. After all, you can’t write smart contracts without first understanding how code works.

Take Aisha, a 22-year-old computer science graduate who once streamed coding tutorials on a dying phone battery. Her degree wasn’t enough to break into the job market, and constant power cuts made learning impossible.
When she joined Web3Bridge, everything changed, surrounded by peers as curious as she was. Within weeks, she began writing her first DeFi smart contract, collaborating with peers to audit code, and contributing to an Arbitrum-based project.
Upon graduation, Aisha had landed a remote role with a Web3 startup, her income now supporting her family, her code securing live protocols and her story fuels dozens of other women to follow.

Beyond training, Web3Bridge also organizes the annual Web3Lagos Conference, a gathering of developers, founders, and innovators across the continent. Through keynotes, workshops, and hands-on discussions, it extends the same ethos of access and belonging into the real world. For many alumni, the conference isn’t just about innovation, it’s a community in motion where mentorship deepens, collaborations begin, and a sense of shared mission takes root.

It’s where Africa’s blockchain story becomes visible, loud, and confident.

The Scarcity This Actually Solves

Now, Web3Bridge is expanding beyond Solidity. Its new curriculum introduces ZK (zero-knowledge proofs) and Rust – the languages powering the next generation of scaling solutions.

It’s also partnering with the University of Nigeria to train computer science and ICT students during their six-month industrial training period. Students learn smart contract development, ensuring graduates return to school job-ready.
Founder Awosika Ayodeji believes fixing education, infrastructure, and mobility could solve 70% of Nigeria’s problems and Web3Bridge is proving that through code.

Proof of Impact, Not Promise

Web3Bridge measures success not in certificates, but in deployed contracts, startups, and economic mobility.

Alumni-led ventures like CoinSafe, HostIT, Stormbot and Guild Audit prove the model works.

Each startup tells the same story: when opportunity meets access, potential becomes impact. Together, these founders mentor new developers, build local ecosystems, and expand Africa’s presence in the global Web3 economy.

Industry partners have taken notice. Collaborations with Lisk and Starknet connect alumni to grants, hackathons, and job placements, creating a virtuous cycle: learn, build, earn, reinvest.

For Web3 to scale, liquidity in tokens isn’t enough. The ability for knowledge and skill to move fluidly across borders is just as critical. And when unlocked, human capital becomes the most valuable liquidity Web3 can have – renewable, scalable, and decentralized by design.

The next Ethereum-scale innovation might come from Nairobi

The breakthrough in decentralized identity could emerge from Lagos.

The next evolution in DeFi could be prototyped in Cape Town.

With initiatives like Web3Bridge, Africa is not just a passive participant, it becomes an active co-author of the decentralized web.

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Foreign Exchange (FX) is the largest market in the world: the Bank for International Settlements estimated that the daily average in 2022 was around $7.5 Trillion.

However, popular services like Mama charge 10% for sending money between South Africa and Zimbabwe and they quote you R18.24 for each dollar, while the Google exchange rate (which is not always accurate) is R17.881. Sending money across other direct borders like Kenya and Tanzania (even though both have MPesa!) can cost up to 36%.

Imagine there was a way to give ordinary people like you and me access to similar rates as institutional trading desks get, without extractive fees? Imagine how much money could actually get to its intended destination, rather than being siphoned off in inefficient and unfair markets?

Bringing FX markets onchain could help us achieve this, if done well. This is not a new claim: read a 2023 academic paper from Uniswap and Circle here.

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That said, don’t believe all you read: blockchains don’t settle instantly; “immutability” is an economic tradeoff not a physical guarantee; and the transparent, public nature of transactions some tout as a benefit can be asymmetrically costly.

However, they do excel at providing collusion- and censorship-resistant, global environments in which actors with competing economic incentives can still coordinate. In the context of FX, this means we can set three goals which would make FX “better” if it were done onchain:

1. credibly neutral markets where no-one can collude to fix rates;

2. markets that settle everyone at very similar prices regardless of sophistication;

3. markets that route trades intelligently and transparently, finding the cheapest execution paths and sharing any profits with users, not intermediaries.

Why Does This Matter?

The size of the market itself is indicative of the impact any gains in efficiency and fairness would have. What is “fair”, though? Firstly, it certainly means that no-one, or no small group, can collude to fix rates to their benefit. This is exactly what happened with LIBOR.

Any market we design should be resistant to such behaviour not just by virtue of post-facto legal battles, but a priori by virtue of how trades are created, communicated, and settled.

Secondly, “fair” probably means that the maximum payoff for any actor should not diverge significantly from the average. Removing centralized intermediaries helps achieve this, though there is more nuance we will consider in what follows.

Just removing the ability for anyone to fix rates and giving everyone very similar rates are already meaningful improvements to FX market structure.

Now, if you buy the case the USD stablecoins serve a need and are here to stay for the next decade, then onchain FX begins to make more sense. If you also buy the case that local stablecoins help maintain monetary sovereignty, ease payments within countries, and can help intra-country trade between emerging economies experiencing dollar shortages, then onchain FX really makes sense. This is because onchain FX markets not only resist rate fixing and offer everyone the same rate, they route trades more efficiently than current markets can.

Programmable Money

One level deeper: FX is one of the most basic ways we can leverage programmable money. Programmability means that you can associate specific conditions with any FX trade you make and that any trade (regardless of how it is programmed) can be routed intelligently and transparently: meaning that you can always see who settled it, at what rate, and how any profits from the trade were distributed.

What kind of conditions?

• time (only trade between 9am and 5pm WAT),

• counterparty (only trade with non-OFAC-sanctioned addresses),

• volume (only trade if volume > $10m),

• limit orders (only trade KES <> USD if KES >= 0.008 USD),

or more exotic conditions like:

• only trade KES <> USD iff USD <> CNY shifts by 10 basis points.

And this is just the tip of the iceberg2.

Consider that trading between Kenyan Shillings and Nigerian Naira in traditional markets means going through USD. There is a good reason for this: liquidity. The KES <> USD and NGN <> USD markets are much more liquid than KES <> NGN, and so going through USD gets you better rates, even when you account for the fees you have to pay for the extra hops.

Programmable conditions and intelligent routing mean that, when it makes sense and meets your specific requirements, your trade can be routed through a different pair, or even traded directly, if the market is in a state where that results in a better outcome for each participant.

How To Make It Happen

Because the money moving in onchain FX markets is programmable, there is a computational universe of ways to enact such trades. This section is therefore not exhaustive: it will just describe two overarching methods for achieving our stated goals, with a few examples of each.

AMMs

Automated Market Makers (AMMs) like Uniswap discover the price of one asset relative to another by virtue of their liquidity ratio. This is a novel, transparent, and (arguably) more fair way of handling exchange. The tradeoffs are multiple, though.

In return for guaranteed settlement with no counterparty risk, we get less efficient use of capital and Loss-Versus-Rebalancing (LVR). Prices only update once every ~12seconds on Ethereum, but are discovered continuously on centralized exchanges, which creates significant arbitrage opportunities. If you decrease block time–even to ~250ms like Solana–this still happens, just faster. It is a necessary result of discrete block times. It can be mitigated, but not removed if this is the manner in which markets are made.

Lots of people have therefore asked if it is possible to use prices from other sources onchain (in a credibly neutral way), rather than letting the ratio of collateral determine them. Bancor V2 Dynamic Market Makers and DODO’s Proactive Market Maker are good examples of different ways of trying to navigate this particular trade-off space3. Uniswap v4 hooks also include new ways of integrating oracles.

Mento’s Fixed Price Market Makers (FPMMs) are another alternative. On the surface, these are relatively simple: use a system of oracles to set the price for a given pair, implement numerous checks to ensure that that price does not deviate too far from reference rates block-by-block, and automatically rebalance pools in which one-sided trading is happening, with some incentives for doing so.

In the trading pool itself, there are no complex mechanisms, no price curves, no LVR; yet settlement is fast and guaranteed. This is easier for traditional FX traders to understand. It’s attractive, not just because of quick, guaranteed settlement, but also because–with easy access to multiple currencies–you can essentially write your own Forward Exchange Contracts (or other kinds of Futures) without having to go to a bank. This means you can create cheaper, more dynamic hedges, with less counterparty risk (because banks are counterparties too).

So what is the counterparty risk here, exactly? It depends on how prices are set, and by whom.

Price Discovery

The “oracle problem” has haunted cryptocurrency projects for some time, but we think there are interesting solutions, some of which are in production as open source protocols like Chronicle. This means that the first people to create a legitimate FPMM with a resilient oracle system such that prices are set in a transparent, credibly neutral manner may capture a large part of the nascent onchain FX market.

How big is that market?

Daily trading volumes–especially for African currencies–remain very low at the moment. Other networks actively targeting emerging markets, like Stellar, produce fairly similar metrics. The opportunity remains up for the taking.

Even with the low liquidity above, FPMMs execute trades at prices that match the “real world” reference rates, they remove LVR without introducing another intermediary, and they provide a way of bridging onchain and offchain markets that otherwise operate in quite distinct ways.

There is the additional problem, though. Is the rate for a volatile currency like the Naira the Central Bank quoted rate, the open market rate, or somewhere between? Are prices really discovered onchain, offchain, or some mix of the two?

In practice, Uniswap and other successful Decentralized Exchanges (DEXes) have shown that onchain discovery is difficult because prices are updated discretely each block, whereas they change continuously offchain. However, these DEXes are attracting increasingly significant amounts of liquidity; the prices they discover cannot be manipulated (without significant financial risk); and the prices are the same for all participants (especially with the advent of private RPCs).

Most importantly, the prices are “always-on” and so do not suffer from the same kinds of risks that arise when markets close4.

FPMMs that are open to any liquidity provider, that programmatically ensure no manipulation and thereby provide the same price for everyone will likely play a significant role in the future of onchain FX. As more local stablecoins get created, FPMMs will also be able to offer more pairs, and to route trades between them all more efficiently, while retaining the same basic guarantees for all parties.

Resilience to price manipulation translates directly into an ability to scale.

RFQs

Prices that cannot be manipulated attend directly to our first two goals, but we haven’t yet discussed how to route trades intelligently and transparently, finding the cheapest execution paths and sharing profits according to some pre-agreed program. This goal would seem strange to a traditional market convenor, because they don’t have programmable money to work with.

The first people to think about how to route onchain trades at scale were 0x. 0x v3 enables market makers to post offchain quotes that takers can fill cheaply onchain. This has blossomed into a whole industry of different kinds of Request-For-Quote (RFQ) systems, which has had a big impact on how we transact onchain, right from trading in various applications all the way down to how blocks themselves get built.

0x v3 guarantees tight spreads and atomic, trustless filling. However, it requires market makers to stay online to sign quotes; it doesn't aggregate liquidity across market makers unless routed via a separate aggregator; and it isn’t optimized for MEV (which was still a new thing in 2020).

CoW Swap took the work done at 0x and extended it. Traders sign “intents” offchain, and “solvers” compete for the right to fill them in batch auctions, rather than on an order by order basis. These solvers compete to match orderflow, aggregate liquidity, and minimize slippage, thereby acting like MEV searchers. CoW Swap is better at aggregating fragmented liquidity and crossing flows, and it enables anyone to be a solver. However, it is less gas-efficient than 0x and latency with batch auctions is less predictable.

There’s also 1Inch Fusion, Paraswap, UniswapX, and Blur (RFQ system for NFTs), to name a few. There is a move towards generalized intents for everything from trading (web applications, Telegram bots and everything in between) to block production. The same pattern is being applied in interoperability work across most Ethereum L2s.

As you can see from these links, one of the key features is that solvers, searchers, and fulfillers refund part of the profits they make with users.

This is unprecedented, because it is impossible without programmable money.

Similar RFQ systems can be constructed for FX, and we’re already seeing some. A decentralized network of solvers, all competing to settle any trade at the best price, with the lowest slippage, while arb’ing across multiple chains and venues is also a really positive environment in which to implement better and more fair FX. Whether this can be made legible enough to traditional FX desks and financial institutions remains to be seen.

Summing Up

With FPMMS, we rely on the quality of the oracle network to provide accurate prices, in a credibly neutral and transparent manner. With RFQs, we rely on the quality of the solver network to settle trades quickly and optimally. Both of these can be made competitive, and incentivised so that the dominant strategy is to settle at the true price, such that neither solution introduces new counterparty risk.

RFQs are good at aggregating fragmented liquidity and crossing flows, and sharing profits from doing so back to end users. FPMMs don’t need a great deal of liquidity to function correctly, and can also be structured to share profits with users (via a token). They make different trade-offs in pursuit of the same goals we stated above5.

For ordinary users in Africa (and all emerging markets) the implications of onchain FX markets are simple, but profound:

More of our money gets to its intended recipients, more quickly.

No more different prices for institutional FX desks vs small retail customers. We all can access and use the same markets.

If someone earns from settling our trades, we see a portion of that profit, rather than watching fees escalate in corridors owned by one or two large institutions.

Lower capital requirements and markets which do not create unfair arbitrage opportunities, or losses for liquidity providers, is a potent combination. We think Mento has the best chance of establishing FPMMs as a legitimate solution for onchain FX and have therefore invested in them: more on the team and specifics in a follow-up post.

The programmable nature of the money now being exchanged means that the scope for innovation is huge and, for African builders, opportunities abound. Mento (and other teams like them) cannot solve all outstanding issues discussed above, nor serve the entire FX market. We need:

• more, and more accurate, oracles

• local stablecoins, and not only those backed by volatile fiat reserves

• merchant networks that accept those stablecoins

• keepers, solvers, fulfillers

• relays on the continent and better block building algorithms

• research into auction mechanisms and their properties in different production conditions like high latency intra-Africa trade

• AI agents, and other intelligent algorithms, to operate in less liquid markets and keep them in line with global standards, even when big institutional desks have closed or taken holidays.

FX is such a large market that we’ll continue looking at other players in this rapidly developing space. RFQs definitely have a role to play in all this, and we’re excited to one day see traditional FX institutions celebrating returning $1M to their customers in the same way that Ethereum-based Telegram bots do today.

USD stablecoins don’t solve Africa's USD shortage problem at scale, nor do they reduce Africa's ~$400B USD leakage we identified in Part I.

While crypto enables a sophisticated digital economy, its success in Africa could become its failure if it just makes dollarization more efficient.

Intra-African trade reached $208 billion in 2024, outpacing trade with the rest of the world. However, approximately 95% of African trade is cleared outside the continent through global banking institutions. This depletes already scarce USD reserves, while adding friction and costs.

In Part I, we discussed how stablecoins solved Africa's USD liquidity fragmentation problem between the banking and parallel markets. 

In Part II, we examine why USD stablecoins alone aren't enough, how local stablecoins can transform intra-African trade and credit markets, and the best implementation approaches.

We argue that local currency stablecoins represent the next evolution of financial innovations in Africa - while USD stablecoins create significantly better plumbing for global value exchange, local currency stablecoins promise better plumbing for local economies. These two forces go hand in hand in driving a digital economy revolution. 

The Cost of Dollarization

Some ask, "Why can't we use USD stablecoins for everything?"

Locally issued currencies remain entrenched in society and commerce worldwide. They facilitate buying/selling local goods and services, paying taxes, receiving government services, accessing debt, and conducting daily transactions. Importantly, governments use their own currencies to stimulate economies - something no government will willingly surrender.

Very few countries have dollarized their economies and use USD as their primary currency; Zimbabwe is one example following periods of hyperinflation.

When a country fully dollarizes, what does it surrender?

• Monetary sovereignty: the ability to print currency to finance government spending or stimulate the economy

• Monetary policy: the ability to set interest rates, have the central bank serve as lender of last resort, and adjust currency value to influence trade competitiveness

• Debt issuance: the ability to issue domestic and international debt in their own currency, creating harder budget constraints

This represents economic and financial amputation, surrendering core instruments ALL countries use to prosper, including USD's issuer.

Even if we don’t go as far as full dollarization, using USD in all aspects of cross-border trade adds extraneous pressure that traps African countries in a vicious cycle of currency devaluation. 

Routing regional trade through USD and global institutions carries high transaction costs (8-20% fee for SME cross border payments, or 4-5% for large scale transactions).

When central banks maintain large foreign reserves to cover import needs, paradoxically, it can contribute to further depreciation of the local currency - demand for foreign currency to accumulate reserves often puts downward pressure on the local currency. There are opportunity costs for the USD sitting in reserve versus deploying it in the productive economy.

USD stablecoins offer better pipes for the same broken system - they don't fix the inflow/outflow imbalance or prevent dollarization risk. If Africa's most sophisticated financial solutions only use USD rails, dollarization will grow exponentially.

The Genius Act accelerates USD stablecoins integration into traditional financial markets - a positive move for stablecoin adoption. The same liberalization of USD stablecoin issuance also centralizes USD flows through US financial institutions, putting African users back under blanket blacklisting or sanctions risks for entire populations  - either as a result of geopolitics, low trust in African financial institutions, or real AML risks. We risk repeating the exact same patterns of the old gated financial system. The promise of internet native money that transcends borders and institutional biases could be squashed fast.

USD stablecoins will keep being powerful in plumbing African economies with the rest of the world, and that is a net positive. But dollarizing Africa cripples those economies, which is bad for the people who live there, and bad for Africa's trading partners who have much to benefit when Africa’s economy is 10x.

In a stablecoin-dominated digital finance world, the best chance for African currencies to survive and maintain relevance is to bring them onchain.

Stablecoin advantage over CBDCs

Digitizing African currencies on blockchains is not a novel concept. In fact, Nigeria ran the world's second-largest CBDC experiment: the eNaira.

Launched in 2021, the eNaira's implementation has been widely regarded as a failure, predominantly based on lack of large-scale adoption. By 2022, only 1.15M Nigerians had ever used the eNaira (0.5% of the population), with an average of 14,000 transactions weekly.  Reports indicated that 98.5% of eNaira wallets remained inactive within a year of launch.

The eNaira failed because it did not interoperate with existing financial tools people use. It was built on a private database that didn’t communicate with other databases. It offered nothing special compared to banks: no differentiated deposit interest, no additional forex access, or different limits than banks have. Instead, the eNaira offered a more complicated and worse user experience. Bad and inconsistent rural internet in Nigeria made the eNaira less appealing.

A government-controlled platform for cash circulation didn't attract user trust. "People don’t trust the government to hand over their financial transaction information directly to them." For the world's second-largest crypto adopter, the eNaira was worse than fiat because of high government control and oversight risks. The market preferred trading Naira fiat with crypto instead of eNaira.

The eNaira experiment showed that central banks aren't best positioned to drive financial innovation and lead public distribution. CBDCs also face security risks because of how centralized they are. Downtimes, hacks, breaches, or contract failures are all existential risks for monolithic, centrally-managed local currency implementations.

The Local Stablecoin Opportunity

What new market coordinations are possible with stablecoins that were otherwise difficult to achieve? We focus on two key areas: powering intra-Africa trade with stablecoins while unifying formal and informal markets, and unlocking new forms of credit through better currency devaluation risk management.

Where can stablecoins create more efficiencies within existing capital flows? We focus on improved payment rails within African economies, and better streamlined fiat to USD orchestration.

1. Intra-African Trade

The most compelling case for local stablecoins lies in transforming intra-African trade, where existing USD dependency creates unnecessary friction and cost.

Intra-Africa trade already dominates the USD stablecoin flow through major African stablecoin services: HoneyCoin sees 40% of its $100M-$150M monthly volume, while other orchestrators report up to 90% of flows settling between African countries.

The $208 billion of intra-Africa trade is about 15% of all trade activity, but it’s growing at 8% a year versus 5.8% with the rest of the world. African countries spend about ~$5B USD a year on intermediary fees to trade with one another. FX infrastructure powered by local stablecoins can shift a significant amount of these trades to local currencies instead of relying solely on USD.

Below is a simplified example of two way trade between Tanzania and Kenya.

Kenya export to Tanzania (2023): $451M

Tanzania export to Kenya (2023): $334M

Currently, both countries’ central banks must buy and maintain USD reserves to fulfill these trades. USD-to-local currency conversion occurs across multiple financial institutions and informal Forex networks.

To illustrate one of the many ways stablecoins can be used here, let’s look at transactions in sKES for Kenyan Shillings and sTZS for Tanzanian Shillings - both example tokens for this illustration. One approach is to create a liquidity pool, with ratios set by respective value against the USD exchange. At current rounded estimates, 1 sKES = 20 sTZS, where 1 USD is roughly 130 KES and 2,600 TZS. This ratio is balanced based on exchange rates at a given time.

With ample liquidity in the pair and distributed volume throughout the year, the vast majority of the trade flow between the two currencies can happen without touching USD. To balance the difference, Tanzania would need to acquire a minimum of 15.2B sKES (worth $117M USD) through USD stablecoins, while the remaining $334M in bilateral trade could settle directly through the sKES-sTZS pool. Similar to DeFi Automatic Market Makers (AMMs), liquidity pools can maintain pre-determined ratios while arbitrageurs ensure market-aligned pricing.

USD continues as a powerful unit of account (how each local currency is valued), but less relevant as a medium of exchange for the majority of this trade corridor.

How these systems get implemented determine the type of liquidity attracted, incentive mechanisms to all participants, and role for arbitrageurs (if any). Ultimately, mechanisms that empower price discovery and full market participation from the largest banks to small shop holders stand a high chance of success.

The mechanism for Kenya-Tanzania trade can be scaled across other African corridors.

While research and experimentation is already happening with onchain FX, we need more in order to scale these infrastructures to serve the majority of trading corridors.

There is enough incentive to explore this direction further, especially considering the existing high fees everyone pays for cross-border transactions, USD scarcity within banks, and the growing number of market-driven liquidity providers already participating in fiat-USD stablecoin pools. 

Closed or open systems?

When designing systems for trade flows, a natural inclination for governments is to build internal systems, which promise the type of legibility and control that states are used to.

One example is PAPSS (Pan-African Payment & Settlement System), a centralized platform on a private ledger that facilitates payments between African banks. Its stated goal is to tackle USD dependence for intra-Africa trade.

PAPSS works through multilateral net settlement: instead of settling every transaction individually, it aggregates all payments between participating central banks every 24 hours, with final settlement in USD/EUR only for net positions. Coordinating multiple institutions at scale is a remarkable achievement on its own. Other efforts are attempting to reach similar goals.

Better coordination amongst central banks is a net positive for the continent, as a lot of liquidity flows through them. However, initiatives like PAPSS have structural challenges that get in the way of achieving their intended goal. Local stablecoins on open and permissionless rails address these challenges:

1. Stablecoins can unify the banking and parallel market liquidity where all types of players can participate in open markets. When African currencies already have multiple rates, closed systems breed price fixing and manipulation, which inevitably drives liquidity out (see Part I). Markets prefer true price discovery. Two separate systems are more likely to fail, with liquidity gravitating toward the path of least resistance: USD.

2. Open systems are more resilient because they can be credibly neutral. Open systems are governed by rules and protocols, so competing parties can participate without fear of rules being rigged, transactions being censored, or exclusion. Everyone from central banks to small scale market actors can participate, which is precisely what reduces the cost of coordination amongst multiple sovereign nations.

3. Open systems utilize the full capacity of programmable money to facilitate atomic swaps that have no counterparty risk, to automate flows based on pre-defined rules and conditions, customizable fee structures (e.g. specific slippage rates for exotic corridors), and build regulatory compliance into smart contracts. Parties can manage multiple interests, incentives, and risks (e.g. 5%+/- range between sKES-sTZS pools).

4. Open and private databases can be composable with each other while maintaining privacy and sovereignty. Using Zero Knowledge Proofs, participants validate information from a private database (e.g. balance, transaction history) and only communicate that proof without requiring counterparty trust. High compliance and verification standards can be achieved without compromising privacy for individuals, institutions, or governments.

Africa’s best chance to address dollarization risk is to create systems for all public and private actors to participate openly. 

2. Unlocking credit markets

Currency risks impact credit access 

Africa has a significant credit gap across all sectors, and currency risks directly affect how much credit is available and its cost. The African Development Bank (AfDB) estimates a $402.2B annual financing gap to increase Africa’s productivity. In addition, an annual $68B - $108B infrastructure financing shortfall and a  $140B SME credit gap limit Africa’s growth.

SMEs seeking credit turn to fintech startups, table banking networks, and micro-lending enterprises for credit. Those in Nigeria and Kenya pay between 3%-30% monthly interest for uncollateralized loans. Lenders who raise capital in foreign currency convert it to local currencies and pass on inflation risk to borrowers, leading to higher interest rates and higher chances of default.

Inflation and devaluation drives even the best performing infrastructure investments into Africa to negative returns, where financing happens in USD but revenues are in volatile currencies.

As a result, demand for borrowing in local currency grows higher when there is currency devaluation. Some within the AfDB suggest large scale projects that generate revenue in local currency, instead of borrowing in USD / EUR, to pool natural resources and “facilitate borrowing in African accounting units”. In crypto terms, this is equivalent to the tokenization of local assets.

De-risking African credit with stablecoins

Local stablecoins have a pivotal role in unlocking credit markets by offering better ways to manage devaluation risk, especially when capital originates in another currency, and by creating more ways to utilize Africa’s untapped assets.

Let’s break this down with an example: 

1. A foreign pension fund uses Collateralized Debt Positions (CDPs) to lock $10M USDC as collateral and mint 1B sKES at 5% annual interest paid to the protocol. They need to pay back 1.07B sKES in 12 months to redeem the $10M USDC.

2. The fund lends the sKES to Kenyan SMEs and earns 12% annual interest, while also earning 3% yield on their locked USDC collateral.

3. At maturity, the fund’s exposure to FX risk is limited to the 7% interest differential rather than the full $10M  principal.

In this example, we replace the need to convert USD to local currency at the point of lending, mitigating currency devaluation risk. 

Opening new credit marketplaces

Different mechanism designs allow all parties to play along the risk curve in more ways than previously available. Stablecoins facilitate more avenues to pool, distribute, recoup value and manage risk. We can pool debt positions across tens of thousands of borrowers and trade them in secondary markets - potential liquidity incentivizes more lender participation. Collateralized USD stablecoins can yield low risk interest while serving as collateral.

Africa has $4 Trillion of untapped assets (e.g. pension funds, sovereign wealth funds, forex reserves, gold etc.) often deployed into short-term and low risk assets. Could Africa’s pension funds deploy into longer term financing deals if there is a liquid secondary market? Can locked USD serve as leverage to mobilize untapped local capital, and have secondary markets to attract even more liquidity? These are interesting problems to solve.

Participation in Africa's growth will be more efficient with local currencies than foreign currencies, as that's where deeper local liquidity can be accessed. Tokenized securities (e.g. stocks and bonds, minerals) can be pooled, used as collateral, leveraged, fractionalized, tracked and easily transferred to facilitate new forms of financing. The “African accounting units” that the AfDB colleagues shared suddenly shift into an executable concept.

Stablecoins don’t single handedly change credit markets. They allow for open marketplaces where the smallest of the small players and the largest players can all participate, where new business models are possible.

USD stablecoins have proven the speed and scale for financial coordination that is possible. We can now use local stablecoins to reshape how money moves and how financial services are delivered across Africa.

3. Affordable and Accessible Payments

Mobile money in Africa represents the closest concept to stablecoins - the digital equivalent of cash on private databases. Easy movement between cash and mobile money have created the conditions for mobile money transactions to reach $1.1 trillion.

But mobile money and online banking aren't cheap. The chart below shows a cost comparison between three payment networks and stablecoin payments on leading L2s.

Beyond high price points, payment networks experience network issues during high loads. The two mobile money providers in Ethiopia (TeleBirr and MPesa) aren’t interoperable because they’re competing, so a user needs to transfer funds from one to a bank and then to the other.

Why will stablecoins offer better means of payment than private databases?

• Cheaper for users, where payments on major L2s currently cost under $0.0016 - 20x cheaper than the lowest fee quoted above - regardless of the transaction amount, and can be even lower if stablecoin L3s launch for specific transaction types.

• Instant settlements with less need to manage float across different payment providers, infrastructures, and geographies. If platforms use different stablecoins for the same currency, merchants can use AMMs to withdraw in their preferred stablecoin, protecting users from large monopolies incentivized to keep users on single applications.

• Programmable money to facilitate smarter escrow services and creates clear, deterministic payment conditions. For example, escrowed prepayments indicate demand for milk in Kenya, and payments to smallholder dairy farmers happen at point of delivery.

• Increased transaction capacity on public blockchains can reduce the type of network congestion issues that Web2/payment companies currently face.

There are a number of challenges to solve in scaling stablecoin payments. Distribution will be critical, because monopolies have less incentive to interoperate. Payment reversals are major components of existing payment networks, and currently not seamless with stablecoins.

4. Orchestration Efficiencies

Local stablecoins reduce friction in crypto-to-fiat exchanges. Current platforms that process billions of on/off ramps (e.g. Binance P2P, MiniPay, HoneyCoin, YellowCard, and more) would benefit from smoother swaps, moving high-friction manual processes to AMMs.

Local stablecoins can further reduce counterparty risk on P2P platforms. By using protocols like Paycrest to automate fiat-stablecoin transfers, liquidity providers can better hedge exchange rate fluctuations through auto orders instead of manual processes.

Trusted parties (an exchange or the stablecoin issuer) are still needed to redeem local stablecoins to fiat and vice versa 1:1. Aggregating trust and reducing friction for P2P on/off ramps can have multiple downstream effects for isolating risk.

How to Stablecoin?

The path to local stablecoins involves strategic trade-offs between speed of implementation and meaningful scale.

1. Reserve-Backed Stablecoins

The most scalable way to meet regulators' and market needs seen so far is reserve-backed stablecoins. There are tried and tested templates with USDC and USDT. cNGN, a consortium of financial and technology players, was created in Nigeria as the only licensed stablecoin issuer, soon after the eNaira failure.

Government bonds, treasuries, and money market funds (MMFs) act as reserves for stablecoins, where each unit of stablecoin is backed with 1:1 circulating money or a liquid asset. The regulator maintains monetary policy controls without significant added burden on central banks to drive mass market adoption. This strategy plays to regulators' and central banks' core strengths, and leverages private sector players to drive distribution.

The reserves are yield-bearing, creating high participation incentives. Multiple stablecoins will likely be issued per local currency instead of a single player. Even big players like MTN and M-Pesa could switch their current digital cash equivalents into stablecoins without significant disruption to user experience.

Our bet is that stablecoins which most seamlessly interoperate with different public and private databases will scale most and provide composability benefits.

There are also strategic upsides beyond stablecoin utilities. Tokenized bonds and treasuries can be made accessible in online marketplaces, potentially attracting more Foreign Direct Investment and USD into government coffers to buy African government debt. Currently, foreign institutions go through brokers to buy African bonds, which adds friction and cost (e.g. Harvard endowment). More evidence is needed to prove sufficient global demand for capital flow in and out.

Reserve-backed stablecoins offer existing financial institutions and new startups many roles across the value chain, so we expect fewer deterrents in this direction.

Launching reserve-backed stablecoins requires a conducive regulatory framework, especially to ensure the reserve asset exists at all times and risks are managed.  

2. Crypto backed stablecoins

Crypto asset-backed local stablecoins are 'easier' to launch by deploying contracts but harder to scale to the size of a country’s economy. There are tested templates such as DAI and RAI.

The idea is simple: use some token (or basket of tokens) as reserve collateral and mint a stablecoin pegged to local currency as debt against that token. This requires liquidation mechanisms and collateralization ratios. Companies like Mento have been driving experimentation and scaling such mechanisms across multiple currencies.

The big value proposition is a permissionless way to issue local stablecoins, which can then be distributed to existing crypto users and beyond. The ideas of onchain FX can be tested with faster feedback loops, and scaled with resilient foundations.

The systemic risk for crypto backed stablecoins is that it is inflationary of local currency, introducing 'new' money into the system, and regulators don't have monetary policy control. It would be negligible in smaller amounts (even at $100Ms of volumes) but more problematic with higher issuance rates. Another risk lies in maintaining the peg, managing liquidation risks depending on reserve tokens used, and prevention of smart contract attacks to maintain user trust. 

However, crypto backed stablecoin issuers can later swap (or complement) crypto reserves  with tokenized bonds and treasuries, or other assets that meet regulatory needs in order to scale.

The Path Forward

Africa’s current financial systems interoperate over walls. Decentralized systems facilitate greater cooperation and participation, giving money powerful network effects.

If local stablecoins carry a fraction of their promise, our monies become equipped with such network effects that unlock new layers of economic activities.

What conditions are needed to test the hypotheses and reap the potential benefits of local stablecoins? Below are potential starting points.

Holistic Regulation, Not Just Compliance

The world hails MPesa as one of the greatest innovations in digital payments to come out of Africa. But when it started in 2007, MPesa operated in a legal gray area. There wasn't a comprehensive regulatory framework specifically for mobile money ready and waiting for M-Pesa's launch. Instead, the Central Bank of Kenya (CBK) adopted a ‘test and learn’ approach, where they allowed M-Pesa to operate and grow, observing its development and assessing the risks. Formal regulation for mobile money payment systems came in 2011.

A similar regulatory approach is needed for what stands to be a highly consequential digital economy innovation. We need to look at local stablecoins beyond mere compliance, and through the lenses of economic development, financial sovereignty, dollarization risk, digitizing financial services, and market structure.

It’s critical for governments to look at the risk and rewards from first principles, including lost upside and price of inaction. Local stablecoins also bring up fundamental questions about the roles African governments see themselves playing in a digital economy. Will they drive innovation at the forefront and take responsibility for executing on digitization of their economies? Will they set the rules of the game for the market to drive, and collect tax to reinvest it back in their economies? Or other combinations? A proactive approach is needed.

Sandboxes that enable experimentations of all types are going to be critical to offer insights on what and how to regulate.

Network Effects Strategy

Liquidity and distribution will continue to be key driving forces for any success in local stablecoins. A cold start creates the chicken and egg problem - how to bootstrap liquidity before demand?

Onchain FX could be a starting point to reach critical mass distribution, especially with the significant volume of USD stablecoin flows going into intra-Africa payments.

Powering traditional payment distributions could also offer different starting points. Be it powering the PAPSS network to facilitate intra-Africa trade, or enabling MTN, MPesa, or Orange to let users send and receive money across borders without leaving their native apps.

Large farming cooperatives could use stablecoins' programmability to indicate demand by escrowing funds into contracts, and release payments when orders are delivered, so producers have predictability and buyers have security.

Major lenders could use local stablecoins to offer credit and use their additional earnings from lower devaluation risk as well as additional yield on their reserve asset to significantly undercut the credit market.

Wherever stablecoin use meets actual demands, embedding network effects into the strategy allows greater liquidity coordination and gives participants first mover advantage.

Future Experiments

While local stablecoins’ long-term benefits  are clear, it’s not certain where short-term traction is going to come from. For that reason, different types of experiments are needed.

As a startup or government, experimenting on multiple fronts carries greater risk too, and can confuse noise for signal. Within each experiment, keeping most variables consistent without boiling the ocean, and pushing boundaries on critical aspects can offer a path to scale.

We are seeing startups at different stages already pioneering local stablecoin innovations across Africa and many emerging markets (including cNGN, Mento, ZARP, Virtual Finance, NedaPay). We are looking forward to seeing more startups driving stablecoin experiments, from the short-term use cases to actualizing local stablecoins’ long-term promise.

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Special thanks to cryptowanderer and See Eun for feedback and review.

More than 90% of Nigeria’s USD liquidity flows outside the banking system, according to the Nigerian Forex Bureau Association. This isn’t a bug - it’s a feature of major African economies.

Today, USD stablecoins have become the primary coordination mechanism for this massive parallel USD economy.

The story isn't that Africans use stablecoins instead of banks. The story is that stablecoins finally solved Africa's decades-old USD coordination problem, in and out of the banking system. If you're a major energy company, import/export business in Africa, or even Starlink, you're more likely to access USD for your day-to-day operations through stablecoins than through banks. 

USD stablecoins make up 43% of all recorded onchain transactions in Africa (2024). While USD stablecoins became popular in the West more recently, Africa has been a pioneer in leveraging stablecoins as core plumbing for global trade, payments, and treasury management.

Why did Africa become the testing ground for this financial revolution?

Three converging forces created the perfect storm: chronic USD scarcity in banking systems, fragmented parallel USD markets, and widespread mobile money infrastructure. The result? $50B of USD Stablecoin transactions that are faster and cheaper than traditional banking or informal Forex services. Beyond the numbers, how embedded USD stablecoins have become is a powerful indicator of where we are headed.

Africa’s USD crisis created a large parallel economy

Nigeria - Africa's most populated country - saw major banks suspend USD transactions with their debit cards for 3-years (starting 2022). Customers would buy USD in parallel markets, then deposit it for the privilege of spending through official channels - including to keep their Google and Microsoft subscriptions, travel, and transact in the internet economy. Even when restrictions eased, limits remained at just $500/month - $1000/quarter and $20 a day. Furthermore, foreign airlines operating in Nigeria were owed over $700M due to matured foreign exchange obligations (2024). 

Ethiopia - Africa's second-largest country - has seen USD trade at 100%+ premium. The official rate stood at 55 Birr per $1, while open markets charged over 120 Birr. Import restrictions have affected essential commodities for years, and at certain points during the crisis the government made it illegal for Ethiopians to physically hold more than $3,000 USD. This continued until the National Bank of Ethiopia secured a substantial IMF loan in 2024, which will contribute to future debt and interest cycles.

These aren’t isolated cases: they represent a continent-wide crisis.

Africa faces a multi-decade USD shortage, driven by simple math: more dollars leave than enter.

Major inflows: export revenues ($682B in 2024), remittances (~$100B in 2024), Foreign Direct Investment ($97B in 2024), and development assistance aid ($42B in 2024. Major outflows: imports ($719B in 2024), multinational repatriation of proceeds ($275B estimate for 2022), external debt service ($89.4B in 2024), corruption and illicit flows ($238 Billion, according to the African Development Bank).

African debt has doubled over the last decade, alongside rising interest rates - 14.8% of export earnings serviced debt in 2023, from 4.5% in 2011. While exports are rising and GDPs are growing the fastest in the world, aggressive money printing by African governments devalues local currencies, reducing purchasing power and increasing USD demand. In Nigeria alone, the official USD price rose from 449 NGN (2022) to ~1,560 NGN (June 2025). COVID-era oil price hikes and economic slowdowns have further exacerbated these challenges.

The result? Systemic USD scarcity that forces even legitimate businesses into parallel USD markets.

The recurring pattern: when scarcity hits, governments implement stricter capital controls, resulting in banks rationing USD access. This creates a vicious cycle: the more controls are imposed, the more USD flows outside the banking system. Such a pattern affects everyone from retail users, SMEs, to large institutions.

Enter the parallel USD economy: Forex bureaus, Hawala networks, and informal traders became the primary USD distribution channels. 

This parallel economy operates through a fragmented network: small Forex shops, or traditional businesses that run Forex services off the books, or even known individuals in communities. Some bureaus are regulated, many are not. Some are networked, such as the Hawala, who has developed internal communication channels across the world. These fragmented networks handle 90% of USD liquidity in countries like Nigeria.  They are expensive, slow, and require high levels of trust.

Stablecoins solve for the liquidity fragmentation problem

The parallel economy services some USD liquidity needs, but is inefficient. When banks can't or won't provide USD access, businesses turn to alternative channels. A company that deposits $1M USD might wait weeks or months to withdraw it, forcing them into parallel markets that rely on trust networks, charge high fees, and involve manual processes.

USD stablecoins enable the emergence of coordinated marketplaces for this fragmented system. Many startups are already capitalizing on this opportunity.

A simplified explanation of how it works: instead of a person going to a physical Forex bureau with cash, or a business approaching multiple banks or Forex shops with large amounts of USD, they can now access aggregated liquidity through online stablecoin marketplaces and exchanges. Individuals/companies use their local currency or convert USD into stablecoins to provide liquidity to on/off ramp platforms, and earn yields while serving the other side of these more open marketplaces. 

The impact is measurable: In 2024, $59B worth of crypto was transacted in Nigeria alone - equivalent to 31% of the country’s $188B nominal GDP (IMF). Across Sub-Saharan Africa, onchain transactions  totalled $125B according to what Chainalysis was able to trace. We believe actual volume likely exceeds this significantly based on WhatsApp/Telegram activity, our portfolio data, and centralized exchange liquidity flows.

Most telling is how the USDT price on Binance’s P2P marketplace has been used as the reference rate for USD in Nigeria’s parallel market. 

As a consequence, stablecoins offer the first large-scale USD liquidity coordination mechanism in Africa.

Mobile money laid the digital foundation

Sub-Saharan Africa processed $1.1 trillion in mobile money transactions in 2024 across 1.1 billion unique accounts and 165 live services.This creates three critical advantages for stablecoin adoption:

First, many Africans already trust digital money. After two decades of mobile money penetration, where in countries like Kenya more than half the economy runs on M-Pesa, users have learned that phone-based digital value is reliable and useful. 

How does mobile money work? Telecommunications companies deposit cash in bank trust accounts, creating corresponding "digital float" for mobile service customers. Phone numbers become default 'bank accounts', with USSD messaging facilitating value exchange. Extensive "agent" networks–retailers, kiosks, and shops–provide cash-to-mobile money exchange services and share fee revenue.

Second, the infrastructure to move between fiat and stablecoins already exists. The capacity to do 24/7 settlements that appear within seconds (including for feature phones), and the ability to match a user’s registered name to that on the crypto marketplace, significantly reduce friction to settle fiat-stablecoin transactions instantaneously.    

Third, the behavioral patterns are already established. Users are comfortable with digital-to-cash conversions, peer-to-peer transfers, and phone-based financial services. 

Moving from mobile money to stablecoins requires minimal behavioral change - just switching from local digital currency to global digital currency.  On/off ramping is possible without touching physical cash, and without those conducting the exchange needing to meet in person or go to a shop. 

In countries like Nigeria, banks caught up with mobile money and leaned into mobile banking for 24/7 settlements within seconds. The same patterns of on/off ramps with mobile money are reflected with mobile banking.

Three waves of innovation brought stabelcoins mainstream

USD stablecoin adoption has moved beyond the parallel market and is eating into the banking sector at scale.

Wave 1: Basic exchange infrastructures. Early adopters used exchanges like Binance’s P2P marketplace, where merchants can process $5 to hundreds of thousands in USDT transactions. The Nigerian government claimed Binance processed $25B worth of crypto in 2024. Startups such as Luno, Quidax, BuyCoins, Valr, BitMama, Paxful, Ovex, and many others offered exchange services through central order books and P2P.

Whatsapp and Telegram OTC groups captured medium to large sized transactions, where buyers and sellers meet in closed groups and transactions are settled using escrows under supervision of the trusted group host.

Wave 2: fiat-to-stablecoin orchestration. Companies like HoneyCoin, KotaniPay, Busha, YellowCard, Fonbnk, and others built sophisticated APIs and fiat-stablecoin orchestration for businesses and retail consumers. 

With companies like Bridge, combined with Circle and Tether mint facilities in the West, African startups are able to offer end-to-end services that integrate local fiat directly into global financial systems, all via stablecoins. To illustrate, HoneyCoin offers business clients USD denominated virtual bank accounts in the US / Europe, payment processing in 8+ African currencies (hosted by local banks), and manage their treasury in stablecoins.

Bridging traditional banking, parallel market liquidity, and USD stablecoins together, while serving non-crypto users has unlocked a significant share of the African market.

Almost all crypto products that interface with fiat have embedded KYC, AML, and additional compliance requirements, derisking it for larger institutions. 

Wave 3: consumer wallets and embedded finance. Products like MiniPay serve millions of users through a browser-based interface, on the most used browser in Africa. Products like Onboard offer a consumer-tailored wallet with multiple apps for professionals and remote workers. Blockradar has created wallet infrastructure for Web2 fintech companies to offer USD accounts powered by stablecoins. Protocols like Paycrest and Accrue’s Cashramp automate fiat-crypto exchanges by pooling both sides of the liquidity market. There are many more innovations that are bringing core financial services directly to where users already are, including non-financial tools.

The results these waves? Cross border payments that cost 8%-20% through Western Union or Forex services now cost <1%. Settlement times have dropped from T+5 days to seconds for most transactions, or under a day for very large volumes that would normally take longer than a week. Fast settlements provide immediate working capital to users and protect them from currency devaluation risks that might happen during long wait periods. These value propositions are very attractive to all types of users who need to make cross-border payments.

Where are we going?

Based on patterns so far, here are a few speculations of where the USD stablecoin landscape could be in the next 3-5 years. 

Bypassing SWIFT for global payments

With the structural advantages that stablecoins offer, we expect to see financial service providers to completely bypass SWIFT and traditional intermediaries entirely for certain payment types.

Stablecoin orchestrators like HoneyCoin and KotaniPay serve regulated Payment Service Providers to access stablecoins so they can offer more products to their customers (bypassing traditional rails). As greater regulatory clarity approaches, we expect more institutional adoption, and at a larger scale.

The global stablecoin infrastructure is getting more sophisticated and integrated into the global financial system (e.g. Visa, Mastercard, Stripe, the Genius Act, and the Hong Kong Stablecoin Bill), and liquidity flows between Africa and the rest of the world will keep getting more streamlined with less friction.

Regulatory clarity

African governments are creating clearer frameworks rather than fighting the market. South Africa was one of the first to regulate crypto assets and exchanges, which attracted a number of African companies to acquire licenses there. Nigeria, Kenya, Ghana, Mauritius, Rwanda, Seychelles, and many other countries are developing licensing frameworks and regulatory sandboxes. The overarching recognition is that crypto’s growth cannot be ignored.

The long-term dilemma for regulators to navigate is balancing capital controls, possible USD leakage through stablecoins, and growing their central banks’ Forex reserves. If USD access becomes frictionless, users would move their liquid assets to USD when their local currencies devalue fast, which can further exacerbate currency devaluation. Managing that well is going to put regulators to a test.

Product positioning

As on/off ramp and orchestration services become commoditized, we believe competitive advantages will concentrate around liquidity depth on each platform and distribution strength. 

More liquidity means more competitive pricing, which attracts more users and drives even more liquidity onto the platform. While specialization in specific markets helps products get off the ground, we anticipate more aggregation of services, be it through company consolidations, product integrations, or companies building multiple products in-house. ‘’One-stop-shop” experiences that bring solutions together is a pattern we expect to see. 

Products like Onbaord are showing us integrations of wallet + payment functionalities + issuance of debit cards to spend stablecoins + on/off ramp + invest / save, all on a single platform.

Global players and local advantage

Major players like Stripe, Coinbase, PayPal, Visa, and more who are betting on stablecoins still don’t have the rails to integrate the African market and its long-term potential.

As an example, Stripe’s stablecoin accounts cover 101 countries, but are missing all the critical African markets, including Nigeria, South Africa, Kenya, Ghana, Ethiopia, DRC, and Egypt: over 730 million people combined.

Local startups have a 3-5 year head start in integrating dozens of payment infrastructures, compliance requirements, user trust, and two sided liquidity access. For global companies seeking effective entry points into Africa, we expect partnerships or acquisitions will be more cost effective than starting from scratch.

Beyond USD: the next frontier

USD stablecoins solved Africa’s USD liquidity fragmentation and proved that blockchain-powered money can work at continental scale. But there isn’t evidence yet that they are solving for the USD flow imbalance - the fundamental problem African countries face. Still, $208 billion in intra-African trade routes through expensive USD intermediaries: a major problem that keeps depleting USD reserves for those countries, and ultimately affects the end users.

Complete dollarization through stablecoins would be counterproductive. We think that would be a failure mode for crypto’s success in Africa long-term. 

In Part II of this series, we explore how local currency stablecoins could unlock even greater efficiencies and actually tackle the USD flow imbalance, while preserving monetary sovereignty.

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We’re excited to invest in Butter as they begin their first Conditional Funding Market with real money, for the Uniswap Foundation.

These markets are similar to the prediction markets you’ll find on Polymarket, but they are used to determine the most impactful way to allocate funds from a treasury. In general, conditional funding markets help organisations make better decisions about how to allocate resources, and they do so without recourse to any committee. They form the backbone of a new kind of CFO.

This matters to African founders and builders, who routinely go unnoticed by committees and grants councils generally made up of people from the Global North who can neither see the significant work Africans have done to get where they are, nor understand the markets in which they operate and the scope of opportunities that exist.

Rather than rule by committee, CFMs get traders to put their money where their mouth is, buying or selling tokens that represent different outcomes if (or if not) a given project is funded. In this manner, Butter is able to generate more valuable signals about which projects will actually have a meaningful impact than any other current method.

Crypto needs Africa, and part of fulfilling that need is creating effective, credibly neutral mechanisms for allocating funds, in which cultural legibility is not a dominant factor. Butter’s Conditional Funding Markets are a significant step in this direction.

We find it meaningful to help ensure that the playing fields are programmed in a more level and open manner for the future of all things financial.

Scaling Trust

We’ve written before about the second pillar of LAVA: trust infrastructure. This term specifically diverges from the common narrative of “trustlessness” associated with cryptocurrency. By reducing the frictions that exist when people are forced to trust critical parties, or removing the barriers that exist when systems are designed around centralised providers, we arrive at a world with more trust, not less. We think more interpersonal trust, and less institutionalised force, is a Good Thing^TM.

We think it is a worthy goal to design and implement systems that help us trust each other directly, and that help us trust more people than we could without technological augmentation. We think that trust infrastructure should help us discover the “uncommon ground” shared by large, diverse groups of people, and then coordinate around that–without force–in a profitable manner. Casting this in terms of economic incentives is interesting because it protects against the meaningless relativism and fragmentation that might result otherwise.

And we think that Butter creates the markets that enable organisations with lots of divergent opinions and different stakeholders to make better decisions, where “better” means “can be trusted by all participants”. This is different from the kind of motor vehicle infrastructure we used to illustrate our ‘trust infrastructure’ visions, but it is critical nonetheless.

Layer 0: The People

Most of our investments as a pre-seed fund are premised on talent.

Vaughn McKenzie-Landell is a seasoned founder, who strikes us as having both the grounded experience and grand vision required to create something truly valuable. He was responsible for the first rollout of a blockchain network in the IP industry (around music), was listed on Forbes 30u30, and scaled a fintech company as CPO from £33m in payments in 2019 to £240m in 2022.

Alex Hajjar went to Télécom Paris, one of the top French Grandes Écoles in engineering and computer science, worked on open source at beta.gouv.fr (which serves as the Digital Services Incubator for the French government) and has produced meaningful research on Mechanism Governance. He has proven his ability to implement some of their less trivial ideas in the form of innovative smart contracts that build on (and extend) industry best practices. He also previously built and scaled a legal tech company to 150 people and €20m in revenue.

They are in the process of building an incredible team and network of relationships around themselves, and have folks like Robin Hanson, Bo Waggoner, and Yiling Cheng actively advising them. Robin was the originator of Futarchy as a concept, and there are very few people in the world, if any, who are better placed than the three listed above to help Butter implement better, more trustworthy decision making at scale.

At LAVA, we invest in businesses involved with “simple finance” and/or “trust”.

Simple finance is easier to explain: it covers any financial products or services that empower ordinary people in Africa. This includes everything from enabling people to send and receive money freely, to accessing cheaper and less predatory lines of credit, to diversifying their savings and hedging against inflationary currencies. This also includes products grounded in local realities and culture that connect Africa to the world and the world to Africa.

Trust is a more nuanced word. In the world of cryptocurrency, people often call blockchains “trustless”. But what they really mean is that shared ledgers which no-one owns remove many of the assumptions required to consider any system “trustworthy”.

Trustworthy is defined as “able to be relied on as honest or truthful.” Truth has two roots: the Latin word veritas and the Old Norse word truwe. We often focus on veritas, which has to do with verification. Anyone can–in theory–verify for themselves that a public blockchain is operating as intended. This is often interpreted to mean that its operation is “trustless”. However, access to the education, tools, and compute power to actually verify the operation of any blockchain–especially in Africa–makes this a questionable interpretation at best.

We’re more interested in truwe, which means reliable, strong, stable. We’re looking for businesses who are creating more trustworthy infrastructure and applications which do not require that we assume trust in any single owner, operator, agency, institution, or government.

In truth, we see a deep interplay between the ability for any individual to verify the operation of technology we invest in; and their stable, reliable, shared operation in the communities who use and are empowered with them.

Shared Registries

In order to demonstrate this interplay, we’ll present a case study of the sort of “trust infrastructure” we’d like to help grow. This is intended as an instigation, more than a statement of an exact product we want to see in the world, though we will lay it out in such a way that it demonstrates the sort of attention to detail we look for, even in pre-seed projects.

Our case study will be a registry of motor vehicles. This is not a new idea. Registries for vehicles and property were among the first “not explicitly financial” use cases presented by advocates of Bitcoin (the thinking being that one could use “coloured coins” or a similar approach).

However, it has been difficult to make these registries a reality because current registries are all managed by governments and–in Africa–tend to be dysfunctional. Making their operation trustworthy therefore requires interfacing with said governments, alongside a few technical tricks which have only recently become viable.

The need to interface with governments is where a lot of the theory around trust-as-veritas falls short. Technology is a human phenomenon and so, while we can create code whose operation can be independently verified by anyone, actually having people use that code in a meaningful way still depends on who you can convince to run it.

Getting people–especially institutions and governments–to run the sort of trustworthy code we’re interested in here requires aligned incentives, and is greatly assisted by preexisting relationships. Such relationships are a strategic advantage we consider when doing diligence on any business we see as fitting into this category, though we remain most interested in aligned incentives, precisely because these are more stable and reliable in the long term.

“Aligned incentives” here generally translates to the need to have multiple different parties all participating in a system, often with divergent economic interests. If each one can potentially earn a profit from the system running as intended, then the incentives are aligned in that each party will of their own volition ensure the veracity of each transaction and all resulting state changes.

Individual verifiability operates hand-in-hand with communal reliability.

Case Study: Motor Vehicles

This is why we choose a vehicle registry to illustrate what “trust infrastructure” could look like in Africa. There are a great deal of different parties who could benefit from the trustworthy operation of a shared registry, from manufacturers, to insurers, repair shops, car dealers of all kinds, rental companies, individuals, and government services.

Problems to solve

In many places in Africa, there is:

1. No digital proof of ownership of motor vehicles (“MVs”).

2. No digital collateral and related exposure management facilities for financiers.

3. Without a trustworthy and publicly accessible registry, MVs cannot currently be pledged as collateral for loans, leases, instalment sales, rentals or other vehicle finance instruments.

4. Without a trustworthy and accessible registry, third parties cannot upload data which is relevant to the value of the MV, such as mileage, condition, service history, major parts replacements, repairs by panel beaters, accidents, towing, insurance write-offs, border crossings, entrance/exit from parking garages, etc. A Book-of-Life with verified data would improve the accuracy of vehicle valuation.

Technical requirements

1. Each MV is different from each other MV, even if both are the same model, and are made by the same OEM in the same year. MVs are thus non-fungible. In particular, identifiers for each vehicle can include the VIN, as opposed to some existing registries on the continent that only register make, type, and year.

2. Non-fungible tokens (“NFTs”) are fit for purpose here. A particular way of using NFTs, defined in KSPEC, enables large amounts of data to be attached to an NFT through the use of the `data` parameter in the safeTransfer() function of the ERC-721 standard. This data exists not in contract storage, but in the transaction logs.

3. The technical idea is to structure the contract such that any party could “transfer” the NFT so long as that transfer sends it from the current owner to the current owner, and no-one else. These acts therefore do not affect ownership, but enable anyone to attach large amounts of data to the NFT, without bloating the contract state and paying exorbitant gas fees, while nevertheless having this data remain verifiably on-chain.

4. The data uploaded may use zero-knowledge proofs to achieve three distinct goals: keep asset, ownership, and price data private where required by law; keep data to a reasonable size (even though it uses calldata); and ensure that only relevant third parties can upload data without requiring complex access controls in the contract itself.

5. As is invariably the case with trust infrastructures, the code is still the easier part. The real challenge lies in meaningfully linking each NFT to its respective physical asset, i.e. the MV in question, in a secure and efficient way.

Non-technical requirements

1. Example Company (“EC”) needs to provide a custody service so that owners can lodge the original vehicle registration certificate, plus a blank signed ownership transfer form, against which the NFT could be minted and issued, much like a Depositary Receipt for shares. This is how EC can link each NFT to each physical asset, or, at least, to its paper-based proof of ownership. Linkages to the physical asset itself would arise intermittently as third parties upload data gathered from physically interacting with the MV.

2. A trustworthy Custodian with a national footprint would add value, given that it is still essential to retain conventional controls over the issuance process because the holder of the NFT will be entitled to reverse the process by presenting the NFT and taking away the papers (which constitute proof of ownership plus an open-ended ability to change ownership). The NFT can then be burned.

3. EC, or the Custodian, should also provide a service to transfer ownership in the relevant National Registry when the respective NFT changes hands.

Who are the first customers?

This is a critical question when we look at trust infrastructures. The customers of “simple finance” applications tend to be retail users and the businesses who serve them. Ideally, such services enable end users and MSMEs to serve each other directly, in a peer-to-peer fashion without the need for bureaucratic intermediation.

However, the first customers of improved trust infrastructure–ironically–may be banks and governments and other large institutions who all stand to benefit the most from accessible, public systems which incentivize all players in a given market to cooperate.

1. Let’s assume EC has strong relationships with the banks that finance MVs. The key problem for such banks is that the owner of a MV can sell it, pocket the full proceeds, conceal the encumbrance, and fail to repay the bank, which means banks stop lending, credit becomes more constrained and the economy falters. The new owner also suffers a surprise when the bank eventually claims the MV. An NFT could solve this problem by immutably recording the encumbrance from inception, and the smart contract could direct the proceeds, or part thereof, to settle the debt and lift the encumbrance.

2. NFTs may enable banks to securitise their Vehicle Asset Finance (“VAF”) portfolios. This would allow banks to maintain their relationships with their clients without having to hold the regulatory capital and liquidity. Enabling VAF securitisation at scale would be incredibly valuable to banks. VAF is just one product in a broad and deep client relationship. Understanding these dynamics is how EC could create a networked marketplace with aligned incentives for many different actors with divergent interests.

3. Looking more broadly at other potential market segments: an outstanding loan which is secured by an NFT is determinable and visible to the debtor at all times. The value of the collateral is also visible at all times if we are able to provide improved real-time valuations based on the latest history of that specific vehicle.

4. However, using NFTs as collateral presents a privacy problem on both sides of the ratio. Reference prices (for the numerator) may link assets to people, which is prohibited by personal information laws in many African jurisdictions. Loan balances (for the divisor) are also private between the banks and their clients, and settlement balances often differ from outstanding balances by reason of early settlement penalties. This necessitates careful thinking about how the data uploaded through the safeTransfer() function is encrypted and will require, at the least, some application of zero-knowledge proofs in order to remain compliant in the jurisdictions we’re interested in.

5. Online Classified Advertisements are generally where prices are set in more established markets on the continent. They offer the prospect of peer-to-peer sales of second-hand MVs, but transferring ownership and receiving payment present risks which scare off most potential peers. NFTs and local stablecoins (another example of trust infrastructure we’re interested in) offer the prospect of instantaneous delivery-versus-payment (“DVP”). Initially, market-making and price discovery should remain where it currently occurs. The evolution of a market for the NFT itself lies in the future, but creating legitimate NFTs will make the journey there a more natural progression.

6. NFTs might provide the holder with other facilities, such as immobilising the MV or gaining admission to parking at an event or at a shopping centre.

7. A service for repossessing MVs from defaulting borrowers, selling such MVs to repay the financier and returning any residual equity to the borrower is also valuable in this context. Today, finance is supplied by banks, who have in-house repossession and realisation departments. Starting the registry may give EC an information edge which might enable EC to outperform such in-house functions. In the new world of peer lending and securitisation an outsourced repossession and realisation service will be highly valuable.

Insurance

1. Financiers may insist that the MV is insured but may not insist on that being done by their in-house insurers because conditional selling is prohibited.

2. Where insurance is procured from a third party, proof can be given to the financier before the finance is paid out, but such insurance can lapse, mainly on account of non-payment of the premium, or be cancelled.

3. Ongoing proof would be required for investors in securitised VAF agreements or for peer lenders. This requires leveraging existing relationships with said financiers, who could start the ball rolling.

4. High quality vehicle valuations are clearly valuable to an insurer when it comes to a claim, and for the ethical ones who decrease the cover, and hence the premium, in line with the decreasing value of the MV.

Your Thoughts Here

Of course, this covers only the superficial aspects of what a trustworthy registry for motor vehicles might really look like. We are sure that we’ve missed important architectural details, technical requirements, and non-technical insights all of which would be required to make something like this viable. We invite you to add your own thoughts to this and use it as you will, or adopt this as a basic template for your own work while improving and extending it as needed.

We can only make truly trustworthy systems together, collaborating in the open as we all, in our individual and unique ways, drive the future of coordination on the continent.

Drive It Home

We hope that this level of detail gives you some insight into what we mean when we talk about “trust infrastructure” at LAVA. This is just one suggestion about how to build “trust" infrastructures, and our primary intention is to illustrate the nuance held in such a term. There remain many, still unexplored ways, that we can, together, shift behaviour and incentives at scale.

For instance, the vehicle registry in Kenya is digital and more advanced than what we have described here. For companies there, we’re more interested in specific local realities around how public transport works and what this means for alternative means of vehicle financing. In South Africa, private companies handle most of the interactions with the national registry and provide web2 versions of much of what is described here, which makes this kind of thing more difficult to create in the face of fairly entrenched competition with established relationships. Each country comes with its own particular nuance, and opportunities.

We often ask ourselves, "Who can effectively leverage frontier technologies and build generational businesses?" We believe it is the founders, builders, and businesses who are willing to search for the truth of how these systems can genuinely serve all the people who share them.

Often, doing this sort of work will mean sacrificing some ideological purity about the value of fully decentralised systems, while simultaneously requiring even more skillful use of the technologies available to us. What it requires most of all is a deep attention to the way things are, coupled with the practical optimism that arises from such attention and committed focus on the particular details of a problem real people really face today.

Trustworthy technologies are not built with abstract visions: they require relationships with other people and right perception of how and why things are the way they are. Genuine and lasting trust is a function of attentive care and skillful implementation, in combination with maturity. We’re looking for the people who can bring this kind of maturity, nuance and balance to the way they implement cutting-edge technologies in Africa.

Together, we aim to be the sort of participants who inspire global excellence.

The transformative trajectory of Web3 is a few steps shorter in Africa than anywhere else in the world. This became quickly evident when I started Borderless Africa years ago, in the trenches with founders building for Africa’s market needs. These founders have a clear goal: to build products and services that offer lasting utility for retail users and businesses in ways incumbent players aren’t able to. Their work is turning into the plumbing of a new economy.

Through Borderless, a public goods initiative, we focused on nurturing soil – creating fertile conditions for innovation by bridging global and local talent, research, and technologies.

From this foundation, magma was born - a bi-annual founder program that has become a key coordination point for founders building Web3 tools in Africa. Today, 40+ startups within magma are building finance and trust tools at the leading edge of crypto adoption. Instead of rebuilding banks the old way, they are breaking down the functions of a sophisticated financial system, and creating modular, composable legos that work together.

Capital is another coordination tool and a powerful force in scaling these solutions.

Enter LAVA

LAVA is an early-stage venture fund backing exceptional founders who are building foundational infrastructure for Africa’s economy. We make thematic bets in simple finance and trust.

Simple financial products and services represent the financial plumbing that economies rely on to grow, both for retail and business users. These include payments, stablecoins, on/off ramps, insurance, savings, credit, escrow, treasury, and insurance services. We believe there is an open field for highly scalable products in any of these categories across Africa that offer comprehensive and sophisticated user-centric services.

Tools that reduce trust frictions, such as identity, reputation, and verifications, unlock significant value and create room for new economic activities. We believe there is room to build tools that solve for coordination in the traditional economies, while also opening up the crypto economy to a much wider user base.

This thesis is built on Africa's unique position in the global economy, and the opportunity to build companies that can scale to other emerging economies around the world.

Why Africa, Why Now?

Africa represents unprecedented opportunity: 1.5 billion people, doubling in a generation; the world's youngest population (median age 19); the fastest-growing economies; and accelerating tech adoption. But beyond statistics, what's happening on the ground is more compelling.

Web2 innovations like mobile money laid a strong foundation, with 80 billion mobile money transactions worth USD $1.1 trillion happening in Sub Saharan Africa last year. Yet, when it comes to regional and global integration, these systems quickly hit scaling limits due to global banking restrictions, liquidity fragmentation, and high costs to serve the “unbanked”.

The first crypto wave, driven by centralized exchanges, proved the demand - users repurposed trading platforms for banking services. While the rest of the world debates crypto use cases, 5%-15% of people in major African economies are already using crypto tools to solve real financial challenges such as payments and savings. For example, stablecoins accounted for 43% of Africa’s transaction volumes in 2024.

Now, a new generation of startups is processing billions in stablecoin transactions, building market-specific financial tools for businesses and individuals alike. They're building the technical infrastructure, distribution channels, and liquidity these markets need – and they're succeeding.

What excites us most are the emerging solutions: user-centric applications bridging traditional and crypto economies, finance infrastructures built for country specific contexts, and innovations that overcome existing trust barriers.

Utility continues to be the biggest usage driver, so startups in Africa are building with strong fundamentals. Without entrenched legacy institutions that have saturated our markets, Africa offers a low barrier to entry where startups can reach significant scale quickly. Just as mobile money became embedded in African economic life, these Web3 solutions are becoming core infrastructure, unlocking new economic activities that weren’t possible otherwise.

Early Momentum

This is why we launched LAVA. We invest $100k - $500k in early stage startups, where we meet founders in the trenches, and play hands-on roles in building and scaling the ecosystem.

In just a few months, we've backed 9 startups that collectively processed over $1.6B USD last year, growing at 300%+ YoY with hundreds of thousands of daily active users. Check out our portfolio here.

And this is just the beginning. More founders are building everything from local currency stablecoins to user friendly credit services, to entirely new financial coordination tools that reimagine ancient community practices in the context of shared, global ledgers. Once founders refine their products in Africa, many are expanding to other emerging economies worldwide.

Building Soil, Growing Forests

Our approach is deliberate: LAVA deploys capital strategically to back exceptional startups building scalable financial and trust infrastructures.

magma provides the coordination and support network founders need to succeed. As an independent initiative with a broad scope and surface area, magma serves as an experimental ground for new innovations and space to grow talent.

Together, they're creating both the building blocks of a new financial system and the environment for builders to thrive.

Our Partners

The LAVA vision is backed by partners who bring more than just capital.

Our founding LPs include industry leaders Brian Armstrong (Coinbase founder & CEO), Fred Ehrsam and Matt Huang (Paradigm founders), Dylan Field (Figma founder & CEO), alongside founders of Notion, Centrifuge, Base, Polygon, Celo, Huobi, Nonce, TADA, and more.

This foundation is strengthened by strategic investors spanning market leading VCs, hedge funds, multi-family offices, sovereign wealth fund managers, market makers, bank executives, core developers, and researchers.

80% of our backers are startup founders themselves, with the majority having built billion-dollar ventures and protocols.

Through these carefully curated relationships and our global fund partners, LAVA portfolio companies gain access to unmatched resources for each stage of their journey.

Join the Momentum

We’re not just building a portfolio - we’re helping shape the foundation of tomorrow’s economy. As a hands-on team, we bring founder operator experience and strong technical expertise to support startups in meaningful ways. We are motivated to support generational businesses, and we strive to be the best partners oriented towards long-term success.

If you're an early stage founder reshaping finance and trust in Africa, or an investor who sees what we see, Andy and I would like to hear from you!

The future is being built at the frontier, and LAVA is here to fuel it.