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Contents
Notional (notional.finance) is a revolutionary DeFi platform where you can borrow and lend digital assets at fixed rates.
There are plenty of DeFi lending platforms out there, but most offer variable interest rates. That means the rates constantly change, so borrowers can’t really assess risk and lenders have no idea how much interest they’ll receive at the end of the loan term. That’s where Notional comes into play. The revolutionary platform lets crypto traders borrow and lend digital assets at fixed rates and terms, giving users peace of mind. For everything you need to know about Notional, keep reading.
What Makes Notional Unique?
For Notional to work, lenders gather funds on the one end and deposit funds into borrower accounts on the other end. There must be liquidity on both sides for this to happen. To provide a high level of liquidity for lenders and borrowers, the platform utilizes fCash tokens.
fCash are transferable tokens that act as an internal accounting unit to track who is owed at any given time. They represent a claim on a positive or negative cash flow, effectively transferring value to a future date:
- Positive fCash balances are assets that can be redeemed for currency at maturity.
- Negative fCash balances are debts that must be settled at maturity.
The use of fCash is designed to minimize slippage when trading, as any small changes in the exchange rate can create large fluctuations in interest rates.
Notional for Borrowers
Borrowing with Notional is easy and intuitive, especially if you’ve had experience with other DeFi lending platforms. Simply select your loan term (up to one year), the amount you want to borrow, how much collateral you want to deposit (minimum 140%), and confirm. The borrowed amount will automatically post to your Ethereum wallet.
When you choose to borrow with Notional, you are minting fCash tokens at a chosen maturity, selling them into the liquidity pool, and getting currency in exchange. Once you receive the currency, you can withdraw it but you must repay the amount, either in the currency you borrowed or the collateral used to back the loan. If needed, you can extend the loan term.
Please note that although the interest rate is fixed, the collateral is not. You can deposit or withdraw collateral as you see fit, but it must be maintained at a minimum of 140% of the loan amount.
Notional for Lenders
Lending digital assets at fixed rates is also a simple process with Notional. You must first exchange currency for fCash tokens. The exchange rate determines the interest rate from when the loan is initiated to when it matures. Once the loan matures, you can redeem your fCash and exchange it for currency.
Notional lets you lock in your yield for up to one year, and you can exit early at the market rate without penalty.
Liquidity Providers
Liquidity providers deposit currency into the liquidity pool to provide funds for borrowers and lenders to leave the system. Deposits are used to mint nTokens to provide liquidity. In return, you earn interest, trading fees, and NOTE incentives. The more trading that occurs in your liquidity pool, the more you earn. You can also borrow against your nTokens to get cash while earning liquidity pool rewards.
Bottom Line
Notional is a platform that allows users to take out loans and lend digital assets at a fixed rate, similar to traditional banking institutions. It’s a good solution if you’re a crypto investor looking to borrow or earn profits with certainty.
Other similar crypto lending platforms include YouHodler and Nexo. See more cryptocurrency promotions here.
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