DFINITY Foundation

Internet Computer Association

ICP Maximalist Network

cycledao.xyz

ICDevs.org

CryptoIsGood

Anvil

ICPL.app


 
 
# NNS Proposal: New Exchange Rate Mechanism
 
Author: Thomas Locher (DFINITY Foundation)
 
## 1. Objective
 
The goal is to replace the current ICP/XDR conversion rate mechanism with a more general, decentralized mechanism based on an exchange rate canister that will be developed if the motion proposal is accepted.
 
The exchange rate canister, running in a system subnet, will enable any canister to request the exchange rate between any pair of fiat currency and cryptocurrency - including pairs of fiat currencies and pairs of cryptocurrencies. It will further be possible to request rates in the recent past.
 
## 2. Background
 
The current mechanism relies on external conversion rate providers to provide an up-to-date ICP/XDR rate every 10 minutes.
This mechanism has several shortcomings: It creates many proposals daily, which are voted on automatically,i.e., there is no proper decentralized voting process around these proposals. Moreover, constant monitoring is required to ensure that the conversion rate providers operate correctly.
 
## 3. Why this is important
 
The new mechanism completely gets rid of conversion rate proposals. Since there is no need to use dedicated conversion rate providers to update the ICP/XDR rate, the new mechanism is fully decentralized.
 
As an added benefit, the ICP/cycles rate could be updated more frequently than once every 10 minutes if a higher level of granularity became a requirement for some applications. Finally, the exchange rate canister provides a more powerful exchange rate API, which can be leveraged by other applications, e.g., in the DeFi space.
 
## 4. Pros
 
* Exchange rate proposals are no longer required.
* A fully decentralized mechanism is used for the ICP/XDR exchange rate.
* Application canisters can request exchange rates directly from the exchange rate canister.
 
# 5. Cons
 
* The XDR rate is computed based on the received FOREX data, which will only approximate the rate published by the IMF.
 
## 6. Key milestones
 
* Complete implementation of the exchange rate canister.
* Deploy the exchange rate canister on the Internet Computer.
 
## 7. What we are asking the community
 
* Review comments, ask questions, give feedback
* Vote accept or reject on NNS Motion
 
Developer forum: https://forum.dfinity.org/t/new-exchange-rate-mechanism/14543
 
