Notional Finance is arguably the best fixed-rate borrowing and lending platform in DeFi or TradFi.
That’s because Notional offers users unparalleled UX assurances when it comes to simplicity and flexibility. These strengths are exemplified in the project’s new-and-improved V2 protocol.
At the heart of Notional are fCash tokens. These instruments make the project’s fixed-rate system go ‘round, as they constantly and simply keep track of who owes what to who across Notional’s stablecoin markets (DAI and USDC are currently supported!)
“Prioritizing efficiency, security, and liquidity will position Notional V2 to bring these markets to DeFi and make fCash a financial primitive that will underpin the next generation of financial innovation on Ethereum.” — Notional Finance’s Docs
In other words, one fDAI Mar 28 2022 token will be worth 1 DAI on this upcoming March 28th. In the meantime, the associated fCash token trades at a discount, and this discount implies a fixed interest rate over the specified maturity period.
Why are Notional’s fixed rates important?
To date, DeFi has been dominated by platforms offering only variable interest rates or by platforms offering only fixed-rate lending and not fixed-rate borrowing, too. Notional Finance V2 has been carefully designed to fix these inadequacies.
The big problem at hand is that the vast majority of mainstream markets revolve around fixed-rate financing. Fixed interest rates are key for helping people and institutions bring certainty and risk-minimized yields to their portfolios.
Accordingly, Notional Finance is precisely the kind of robust fixed-rate infrastructure DeFi needs in order to secure stable financing for the great TradFi-to-DeFi migration and crypto-natives for years to come.
The protocol offers fixed-rate borrowing and fixed-rate lending, and in doing so its fCash tokens serve as a new DeFi primitive for committing to value transfers at specific points in time.
“Trading fCash allows users to efficiently move value back and forth through time. This flexibility opens a new dimension in the financial design space on Ethereum.” — Notional Finance’s Docs
Zooming in some more, Notional is able to offer lenders the best fixed rates in DeFi via the premiums paid by borrowers. Call it a true DeFi win-win situation, then: Notional helps borrowers securely access fixed-rate loans and in the process helps Notional lenders securely access optimized fixed-rate yields!
What can you do with Notional’s fixed rates?
You can finance your future through fixed DeFi interest rates, that’s what!
You can do all the things with Notional that you can do with fixed rates in the mainstream. For example, earlier this year we learned the story of the first DeFi mortgage — i.e. an anonymous DeFi developer started “paying down his refinanced home loan” via Notional.
This is just a taste of what’s to come. That’s because Notional Finance V2 has in-built support for maturities stretching up to 20-year terms. We might’ve seen the first DeFi mortgage, then, but we certainly haven’t seen the last.
How to borrow/lend/LP with Notional
You’ve learned the basics of how Notional Finance works, so now it’s time to learn how to actually use the protocol. Below, we’ll cover how you can provide liquidity to Notional, as well as borrow and lend through the project.
Providing liquidity to Notional
Notional’s users borrow and lend fCash tokens through the protocol’s native automated market maker (AMM) system, which facilitates liquidity pools.
These pools are split between an fCash token and a Compound cToken, like fUSDC and Compound’s cUSDC for the USDC market. Notional liquidity providers (LPs) thus deposit fCash and cTokens to their pool of choice to receive nTokens. These interest-bearing, freely redeemable nTokens represent a user’s underlying share in a given liquidity pool across all its active maturities, e.g. nDAI for the DAI market.
To serve as a liquidity provider on Notional, you can follow these steps:
- Head to the Provide Liquidity dashboard in the Notional Finance app.
- Choose your market, e.g. USDC.
- Select a maturity date and how much liquidity you want to provide.
- Press the “Enable” button and complete the approval transaction to let Notional use your funds. Then press “Submit” to carry out the final deposit transaction.
- Now you’ll be earning through interest, liquidity fees, and NOTE token rewards as a Notional LP. Keep in mind, the project is distributing 50M NOTE via liquidity incentive emissions over the next four years.
Lending on Notional
Notional users who want to participate in fixed-rate lending can do so by buying fCash with cTokens, like fDAI with cDAI. If you’re considering this opportunity, it would entail the following steps:
- Head to the Lend dashboard in the Notional Finance app.
- Choose your market.
- Select a maturity date and how many tokens you want to supply. Notional will convert DAI/USDC as needed “under the hood,” so to speak.
- Then press “Submit” and finish the transaction. You can now transfer or redeem your fCash tokens as you please.
Borrowing on Notional
Notional users who want to participate in fixed-rate borrowing can do so by depositing fCash in exchange for cTokens, like cUSDC for fUSDC. The borrowing process entails these steps:
- Head to the Borrow dashboard in the Notional Finance app.
- Choose your market.
- Select a maturity date, how many tokens you want to supply, and the amount of ETH collateral you want to supply.
- Finish up by pressing the “Confirm and Submit Trade” button. Once your transaction completes, you’ll be borrowing through Notional! When your loan reaches maturity you can choose to redeem it or roll it to a new maturity.
Interested in converting your variable DeFi positions into fixed-rate positions? Look no further! With Notional Finance, you can do so easily in just minutes. As you continue to tinker with and explore the project, stay up to date with the very future of fixed interest by following Notional on Twitter or joining the Notional Discord.
Disclosure: This post is part of our paid promotional DeFi Pulse Drop series; We’ve partnered with Notional Finance to help educate and inform the community about fixed-rate borrowing and lending. As always, we’re committed to providing the entire community with quality, objective information, and any opinions we express are our own.