Notional V3

Lending

Notional is a protocol that facilitates both fixed-rate, fixed-term and variable-rate lending and borrowing through an innovative financial instrument called fCash.

Risk Rating
Average
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Notional V3 provides users with easy access to both variable and fixed-rate lending and borrowing, enhancing flexibility and choice.
What we like less
The protocol is still currently controlled by a 3/5 multisig where two signers are the founders of Notional. Users engaging in leveraged strategies or providing liquidity also face inherent risks such as smart contract vulnerabilities, bad debt risk, and price fluctuations, which require a good understanding of the DeFi space.
What it means for you
The platform's evolution in V3 means a more seamless experience for borrowers and lenders, with more opportunities to optimize investments and manage risks effectively.
Information
Exploit/Hacks
None
Info
  • Website
  • Token: NOTE
  • Tags: Lending
Key Metrics
  • TVL: $8.2M (Rank #150)
  • TVL Ranking by Lending: #32
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $8.24M
Risk Assessment
Average
Protocol Code Quality
Protocol Maturity
  • Latest protocol version launched in 2023; maturity over six months reduces technical risk as smart contracts are moderately battle-tested
  • Top 10% by total value locked reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Solid controls to prevent oracle price manipulation
  • Cross-collateral markets are exposed to systemic risks as each asset creates incremental risks for the platform as a whole
  • Robust controls in place to prevent risky borrowing
  • Solid mechanisms in place to ensure healthy liquidations
  • Solid methods to accrue protocol reserves
Things to know about Notional V3

How Notional works

Notional V3 represents a significant upgrade in DeFi lending, introducing the prime money market for variable-rate lending and borrowing. This new feature seamlessly integrates with Notional's fixed-rate markets to enhance yields and user experience, while maintaining its core as a fixed-rate lending protocol. Variable-rate lenders in V3 earn by lending to over-collateralized borrowers, with the option for unused funds to be lent out on external markets like Compound or Aave for additional yield. Notional operates using two key instruments: fCash and nTokens. fCash is central to Notional’s lending and borrowing mechanism. When users engage in fixed-rate transactions, they either receive or owe fCash, which represents their commitment to future cash flows. For lenders, fCash is an asset signifying the amount plus interest they'll receive at maturity. For borrowers, it's a liability indicating the principal and interest they owe. When users provide liquidity to Notional’s fixed-rate pools, they receive nTokens. These ERC20 tokens represent the user's share in the liquidity of these pools. nTokens generate returns from various sources, including interest accrued on the liquidity provided (in the form of Prime Cash and fCash), transaction fees from fixed-rate activities, and NOTE incentives. nTokens offer users a more passive investment option compared to actively managing fCash positions.

How Notional makes money

Notional V3 generates revenue through transaction fees from lending and borrowing activities. There are no fees for lending at a variable rate or for nToken redemption, but fees apply for fixed-rate borrowing and leveraged vault transactions. The protocol's ability to reallocate funds to different money markets increases its capacity to optimize returns and sustain its revenue stream.

How you make money on Notional

You can earn on Notional V3 through multiple methods. You can deposit funds for variable-rate lending to earn interest from borrowers, with the flexibility to withdraw at any time without fees. You can also earn through interest and transaction fees by lending at fixed rates or providing liquidity, represented by nTokens. For more risk seeking users, you can engage in leveraged strategies for potentially higher returns, either through leveraged vaults or leveraged lending within the same currency. Each method offers different levels of involvement and risk, catering to both passive investors and those who are more actively engaged in DeFi strategies. Notional V3's diverse offerings aim to cater to a wide range of DeFi users, from those seeking simple, passive returns to advanced users leveraging sophisticated strategies for maximum yield.

Notional V3 Pools
Notional ETH Market Making
0.5%
Yield
$2M
TVL
Risk
B
Protocol
Notional V3
Chain
Ethereum
Notional USD Market Making
13.5%
Yield
$950K
TVL
Risk
C
Protocol
Notional V3
Chain
Ethereum
Notional USD Market Making
10.4%
Yield
$470K
TVL
Risk
C
Protocol
Notional V3
Chain
Ethereum