Notional Finance

Notional's core product. fCash is an ERC-1155 token representing a claim to a fixed amount of an underlying asset at a specific future maturity. Lenders buy positive fCash at a discount and redeem it 1:1 at maturity for a fixed return; borrowers mint negative fCash to receive cash today and repay a fixed amount later. fCash trades against Prime Cash in maturity-specific AMM liquidity pools where the ratio of Prime Cash to fCash sets the fixed interest rate. This is how Notional delivers fixed-rate, fixed-term lending and borrowing on-chain.

Introduced in V3, the prime money market lets users lend and borrow at variable rates, integrating with the fixed-rate markets. Deposits are represented as Prime Cash. Fixed-rate debt automatically converts to variable-rate debt at maturity with no settlement penalty, and variable positions serve as the underlying liquidity that fixed-rate pools trade against.

Whitelisted external smart contracts that execute pre-approved yield strategies (e.g. Curve, Balancer, Uniswap LP or staking strategies) funded by fixed- or variable-rate borrowing from Notional. A user deposits collateral, borrows against it, and the combined capital is deployed into the vault; vault assets are recognized as collateral against the debt, enabling leveraged (up to ~10x on some strategies) exposure while paying interest only on the borrowed portion. Positions are overcollateralized and subject to liquidation.

NOTE is the ERC-20 governance token of the Notional protocol. Holders propose, vote on, and implement changes to system parameters and smart contracts (one vote per NOTE) via Notional Improvement Proposals through on-chain governance. NOTE is also used to incentivize liquidity providers and, historically, could be staked (sNOTE) to backstop the protocol.