To mint nTokens, a user deposits cTokens into the nToken account. The nToken account then distributes the user's liquidity into the underlying liquidity pools for that currency and holds the resultant liquidity tokens which represent the nToken account's claim on the user's deposited liquidity.
The nToken account distributes a user's liquidity to individual markets based on a set of governance parameters called deposit shares. Deposit shares are percentage figures that tell the nToken account how much of a user's total liquidity to deposit into each individual market.
Deposit shares allow Notional governors to direct liquidity to the maturities where there is the greatest end-user demand for borrowing and lending. For example, governors may decide on a set of deposit shares which would direct more liquidity to long-dated maturities and less liquidity to short-dated maturities, or vice versa depending on relative demand.
The nToken account provides liquidity to an individual liquidity pool in the same way as any other account. The nToken account mints a pair of offsetting fCash tokens, places the cTokens along with the positive fCash into the liquidity pool in exchange for liquidity tokens, and holds the negative fCash alongside the liquidity tokens in its portfolio. At any time, the nToken account will hold cTokens, fCash, and liquidity tokens from different liquidity pools.
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