This guide defines Notional's asset onboarding process. It defines how community members can propose the listing of new assets. It also defines the review process and the models used to select initial governance parameters.
Benefits of listing new assets
Scaling: Adding new currencies allows users to borrow and lend against a broader range of assets. The onboarding of collateral and tradable assets also allows Notional to scale its product offering and broaden its user base.
Portfolio diversification: Additional collateral assets diversify Notional's collateral portfolio, diversifying the protocol's risk. New tradable assets also diversify the protocol's trading fees across multiple assets.
Risks of onboarding new assets
Economic risks: Listing new collateral assets can increase the risk of bad debt for the protocol. If the price of collateral assets change rapidly, the protocol could accumulate bad debts as a result. This risk can be mitigated through Notional's governance parameters (Supply Caps, Exchange Rate Haircuts, and Exchange Rate Buffers).
Centralization risks: Some collateral assets bear more centralization risk (ex: asset-backed stablecoins) and could expose the protocol to blacklisting risks or single point of failure risks.
Smart contract risks: New assets, such as leveraged vault strategies, might introduce additional risk vectors to the Notional codebase.
When adding new assets to Notional, controls must be put in place to ensure that the additional risks the protocol undertakes are worthwhile. This asset onboarding framework aims to maximize value creation for Notional users while minimizing risks.