Emerging markets are notably plagued by currency volatility. Nigeria’s naira, for example, has claimed both the best and worst performer titles against the dollar—in 2024 alone. For many individuals and businesses, especially those seeking to export profits, the swipes in the value of local currencies often result in significant losses. Not seeing a way out of this, several multinationals are fleeing Africa. Now, imagine a world where these devaluing currencies could turn into profits for stakeholders. That’s what Canza Finance is doing through BAKI.

Baki is an exchange that allows users to short local currencies against stablecoins pegged to the U.S. dollar. The concept is simple yet ingenious. Traders deposit US dollar-pegged stablecoins like USDC as collateral on Baki. They then mint zUSD, Baki's native stablecoin, and use it to borrow tokenized versions of local currencies like the Nigerian naira (zNGN) at prevailing bank exchange rates.

If the local currency devalues against the dollar, as often happens in emerging markets, the value of the borrowed tokens decreases in dollar terms. However, the trader still holds the same amount of the local currency tokens they originally borrowed. This allows them to repay their loan using fewer zUSD than they initially borrowed, pocketing the difference as profit. A step-by-step guide to using the Baki platform:

"Baki's cashback system might just be the best way to leverage currency devaluation," boasts Oyedeji Oluwoye, co-founder and CTO of Canza Finance.

The cashback mechanism is a key selling point, catering to the ever-growing community of "Degens" - decentralized finance enthusiasts seeking innovative ways to generate yields. By providing an implicit short on local currencies,

Baki offers a unique value proposition that appeals to traders looking to capitalize on emerging market volatility.

Unlike traditional forex trading, Baki operates on decentralized blockchain rails, providing users with greater transparency, self-custody of funds, and the ability to bypass bureaucratic hurdles common in mainstream finance.

"For businesses in Africa, foreign exchange transactions can be a slow, tedious, and expensive process," explains Oluwole. "Baki allows them to perform slippage-free swaps at official central bank rates, retaining value and reducing transaction costs."

Source: Bloomberg
Note: Chart depicts the 10 worst-performing currencies against the US dollar in 2023

While BAKI currently supports major African currencies like the naira and CFA franc, Canza Finance plans to expand to other emerging markets in due time.

"Baki's cashback system might just be the best way to leverage currency devaluation," boasts Oyedeji Oluwoye, co-founder and CTO of Canza Finance.

As decentralized finance continues to disrupt traditional finance, platforms like Baki demonstrate the immense potential of blockchain technology to unlock new investment opportunities and profit avenues. There’s no substantial indication that the trend of devaluing currencies will shift anytime soon, so converting it to yield remains a huge value proposition for the blockchain platform.