Providing Liquidity
When you provide liquidity on Notional you mint nTokens. nTokens are ERC20 tokens that represent your share of the liquidity in Notional's fixed rate liquidity pools. Notional's liquidity pools hold cTokens and fCash. There is one nToken per currency.
nTokens earn:
- Notional's variable interest rate
- Transaction fees from fixed rate lenders and borrowers
- NOTE incentives
But nTokens can also have a small amount of IL as fixed rates change. nToken IL is much less than ETH/USDC Uniswap V2 LP tokens, but a bit more than stablecoin LP tokens on Curve.
nToken yield comes from variable rate interest, transaction fees, and NOTE incentives. When you put your capital into Notional's liquidity pools it will automatically be converted to cTokens and start earning Notional's variable lending rate.
In addition to the interest you earn, you will get transaction fees paid by fixed rate lenders and borrowers + NOTE incentives paid by Notional.
nTokens are usually redeemable, but if the utilization of Notional's liquidity pools is too high you may be temporarily unable to withdraw immediately.
When you redeem your nTokens, you can choose to take your money out all at once or hold onto some of your money as fCash. If you choose to take your money out all at once, you will pay a transaction fee. The size of this fee depends on the utilization of Notional's liquidity poola. The higher the utilization, the larger the fee.
Collateral - nTokens are collateral on Notional. That means you can provide liquidity in one currency and then borrow against it in a different currency!
Last modified 2mo ago