Protocol Explainer Series: Notional Finance
In our previous exploration within the Protocol Explainer Series, we delved into Lido Finance, unraveling its innovative approach to liquidity and staking in DeFi. The journey continues as we navigate through another groundbreaking protocol in DeFi — Notional Finance. Notional carries the torch of innovation further, focusing on fixed-rate, fixed-term lending and borrowing of crypto assets.
Join us as we unveil the distinctive features and capabilities of Notional Finance, illustrating how it crafts a more secure and simplified pathway for investing in crypto!
Exploring Notional’s Fixed-Rate Lending
Notional Finance stands out with its unique lending products that offer fixed interest rates. Central to this are fCash tokens, which make lending and borrowing straightforward and reliable. These tokens are like IOUs for a set amount of money that will be paid in the future.
In Notional’s system, lenders and borrowers can easily make deals, creating a busy and efficient market. Here, people can make smart financial plans because the interest rates are set and stable. This stability is a big advantage, helping users to avoid the ups and downs that often come with crypto investments, making their financial planning more secure and predictable.
Where Does The Yield Come From?
Notional Finance offers a unique approach to earning yield in the DeFi space. Here’s a breakdown of how users can earn yield through various instruments and strategies within the protocol:
Fixed-rate Borrowing and Lending
Notional Finance’s fCash is a pivotal instrument where users can earn yield. Borrowers receive fCash representing their debt obligations, accounting for the principal and the accrued interest. Lenders, in turn, receive this fCash, which can be held until maturity or traded, offering a flexible yet secure way to earn yield.
Transaction Fees
Liquidity providers (LPs) play a significant role within Notional. By providing liquidity, LPs receive nTokens, representing their share in the liquidity pool. nTokens, apart from being collateral, allow LPs to earn trading fees and interest. The integration of cTokens from the Compound protocol enhances returns for liquidity providers, allowing their assets to continuously earn interest, amplifying the overall yield.
Penalties and Liquidations
Borrowers who do not meet their repayment obligations are subjected to penalties, feeding into the protocol’s earnings. Additionally, collateral that falls below required thresholds may be liquidated, with the proceeds (minus debts and penalties) contributing further to the yield landscape within Notional Finance.
Notional also employs a rigorous risk management framework. Borrowers are required to maintain a collateralization ratio, and failure to do so results in liquidation, ensuring the protocol’s health and sustainability, thereby protecting lenders and the yields they earn.
Integrating with Dezy’s Builder
Pairing Notional’s fixed-rate lending products with Dezy’s Builder opens you up to further yield opportunities! With Dezy’s Builder, users can leverage Dezy’s Builder to seamlessly navigate and execute their fixed-rate lending strategies on Notional, pairing it with other protocols like Aave and Uniswap easily.
The integration simplifies the user journey, allowing for strategic execution from a unified dashboard, enhancing the efficiency and effectiveness of user interactions across the platforms.
Here’s a simple strategy you can consider implementing using Builder:
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About Dezy
Dezy brings the power of DeFi to your fingertips enabling you to access more while doing less. Generate yield, batch transactions, earn fees, dollar cost average and more from a simple to use interface.
We believe simple is better and that making DeFi more accessible benefits all market participants. Whether you are native to the space or just getting started, Dezy offers something for you to make your DeFi experience more efficient and rewarding.
