Prime Cash Supply Caps

Notional's governance can set Prime Cash supply caps that effectively limit the maximum amount of Prime Cash that can be minted in a given currency. Governance can set the maxUnderlyingSupply for all listed currencies. The maxUnderlyingSupply sets the maximum amount of Prime Cash that can be minted based on a value in underlying terms.

Supply caps are important because they can put a practical limit on the total value of a given currency that can be used as Prime Cash collateral. This allows Notional's governance to be able to list less liquid assets in a capital-efficient manner by limiting the protocol's exposure.

Parameter selection considerations

When setting Prime Cash supply caps, Notional's governance should consider the asset's on-chain liquidity profile and the demand from Notional users for that asset.