What are nTokens

nTokens allow liquidity providers an easy and passive way to provide liquidity to Notional.

nTokens are the primary way that users provide liquidity to Notional. Each asset that Notional supports for borrowing and lending has its own nToken account ex. nDAI, nUSDC, nETH, nWBTC. An nToken account is proportionally owned by users holding nTokens in that currency.

nTokens enable users to passively earn returns from providing liquidity across a currency’s active maturities without having to interact with the individual liquidity pools in any way. nTokens are non-maturing ERC20 assets and are redeemable for a share of an nToken account underlying assets.

Liquidity providers mint nTokens by depositing cTokens into an nToken account. The nToken account then distributes the liquidity provider’s cTokens among Notional’s liquidity pools in accordance with the protocol’s deposit shares. Read more about deposit shares here. As an example if a user adds cDAI to the nDAI account, the nDAI account will provide 25% of the user’s cDAI tokens as liquidity to the 3 month pool, 25% to the 6 month pool and 50% to the 1 year pool. In exchange, the liquidity provider will receive newly minted nDAI tokens representing a claim on a proportional share of all the assets sitting in the nDAI account.

nToken accounts provide liquidity to individual liquidity pools 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 in a given currency.