Notional Finance — an Ethereum-based protocol that facilitates the lending and borrowing of fixed-rate, fixed-term crypto assets, using a new financial instrument, called fCash.
About Notional Finance
Notional was developed and launched in early 2020 by a team of stakeholders with expertise in technology, commerce, security and design. Fixed rates provide confidence and minimize risk for market participants, which is why most US debt is issued, using fixed rates. Notional brings fixed interest rates to the Ethereum decentralized financial system and gives cryptocurrency users the same access to stable funding.
fCash trading allows users to move value back and forth effectively in time. This flexibility opens up a new dimension to the financial design space on Ethereum. Notional V2 is operated by NOTE token holders. The conditional group will provide analysis and parameter recommendations within a short period of time after the protocol is launched. As the protocol becomes more decentralized, the conditional group will relinquish control of the protocol.
Important terms:
| fCash | These are transferable tokens that represent a claim for positive or negative cash flow at some point in the future. |
| nTokens | This is the main way users provide Notional liquidity and ERC20 assets that can be exchanged for a share of Notional's total liquidity. |
| cTokens | These are interest-bearing assets, embedded in the Compound protocol. cTokens are used in Notional to increase the profits. |
Notional makes fCash available for trading in its built-in AMM-enabled liquidity pools. The notional liquidity pool contains fCash along with the settlement currency (e.g. cDai along with fDai). Liquidity providers capitalize Notional's liquidity pools. They contribute cTokens and fCash to liquidity pools and act as a counterparty to lenders and borrowers who are active on the protocol. In exchange for their contribution, liquidity providers receive a commission each time a lender or borrower trades between cTokens and fCash.
On-site lending and borrowing
Users who want to borrow their currency at a fixed interest rate can buy fCash. The lender exchanges its currency during trading for a larger fixed amount of that currency at some point in the future. The exchange rate the user receives implies a fixed interest rate on their loan between the time they trade and the time their fCash expires.
Users who want to borrow at a fixed interest rate can issue their fCash and sell it for foreign currency. By selling fCash for currency, borrowers receive currency in exchange for an obligation to pay a fixed amount in currency at a specified time in the future.