Notional V3

This document defines the governance parameters used in Notional V3 to mitigate economic risks while optimizing for capital efficiency.

Notional V3 introduces multiple key innovations in the DeFi Lending market space:

  • Prime Cash Variable Rate Borrowing & Lending markets allowing users to borrow and lend at variable rates.

  • Fixed Rate Borrowing & Lending markets allowing users to lock in a fixed rate for a given maturity at high capital efficiency.

  • Leveraged Interest Rate Trading for users to borrow at a fixed rate and lend at a variable rate or vice versa with leverage while remaining delta neutral.

  • Leveraged Vault Trading for users to borrow fixed or variable to enter whitelisted yield strategies (e.g. Convex or Aura) with leverage.

To enable these use cases while keeping the protocol secure, Notional enforces multiple risk management measures:

  • Collateral haircuts to mitigate the risk of collateral assets declining in value.

  • Debt buffers to mitigate the risk of debt assets rising in value.

  • Supply caps to mitigate the protocol's exposure to more risky assets while allowing the selection of capital-efficient risk parameters.

  • Oracle price deviation limits to validate the market value of leveraged vault strategy tokens align with oracle prices.

  • Oracle rate TWAPs to value fCash for collateral purposes.

Protocol Governance

NOTE and staked NOTE (sNOTE) token holders can participate in Notional’s governance by proposing or voting on parameter change proposals. Anyone can propose or vote on Notional Request for Comments (NRCs) or Notional Improvement Proposals (NIPs) through the Notional Governance Forum. Official votes are currently held through Notional's Snapshot but will become fully on-chain in the coming future.

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