Incentives

Incentive emission rates

Incentive emission rates govern the amount of NOTE incentives distributed annually to nToken holders of a specific currency.

Incentive emission rates are controlled by Notional's governance and are used to ensure markets are sufficiently liquid for fCash borrowers to interact with the protocol in a capital-efficient manner.

Parameter selection considerations

In practice, the optimal amount of NOTE incentives allocated to a given currency can be estimated based on how much slippage Notional's governance wants borrowers and lenders to experience for a given trade size. For example, if governance wants users to be able to trade $1M of 3M fUSDC with 0.2% slippage, then based on fUSDC's 3M interest rate model, it can compute how much liquidity that fCash market needs to have. Based on that amount of liquidity, it can estimate the returns nTokens holders (LPs) will require to attract the appropriate amount of liquidity.