An introduction to the liquidity pool Notional | which gives time value to tokens

As we all know, money has a time value, in other words, 100 yuan today is worth more than 100 yuan in 10 days, which includes the time value of the money.

From the perspective of quantitative stipulation, the time value of money is the average profit rate of funds in the society without risk and inflation. Because of the time value, the purchasing power of the same amount of money will decline in the long run.

The cryptocurrency market already has a number of third-party platforms lending to cryptocurrency assets with time-value properties. But few decentralised lending platforms offer fixed rates and maturities.

Notional is a DeFi programme offering fixed rates and fixed term loans and the emergence of Notional fills in the gaps in this type of facility for financial system users who do not wish to be exposed to the risk of interest rate fluctuations. It was inspired by the Ethereum protocol of Uniswap, Compound, and MakerDAO.

Notional

The Notional consists mainly of fCash tokens and liquidity pools where participants are divided into lenders, borrowers and liquidity providers

fCash

FCash tokens are an essential part of the Notional system. FCash is a negotiable token and represents the requirements for positive and negative cash flows at a specified point in the future.

Liquidity pools

Notional allows fCash to trade in its local liquidity pool that supports AMM. A nominal liquidity pool holds fCash as well as its currency types (such as Dai and fDai).

The Notional liquidity pool is defined as an expiry date and the Liquidity pool as at 1 December 2020 holds fCash as at 1 December 2020.

Maturity date

The liquidity pool rolls at a set pace according to the governance parameters.

Quarterly DAI liquidity pool

The user types

There are three different types of users in the Notional liquidity pool: lenders, borrowers and liquidity providers.

Lend (Lend)

Users who want to lend money at a fixed rate can buy fCash. Lenders trade their currency for a larger fixed amount of that currency at a certain point in the future. The exchange rate that users receive means a fixed interest rate on their loans between the time they trade and the time their fCash matures.

At maturity, the lender can convert its fCash into currency.

To Borrow

Users who want to borrow at a fixed rate can mint fCash and sell it for money. By selling fCash in exchange for currency, the borrower obtains currency in advance in exchange for an obligation to repay a fixed amount of currency at a specified time in the future.

First, the borrower deposits the collateral in a Notional portfolio.

The borrower then selects the "maturity date" and COINS the fCash token.

Borrowers can sell positive fCash tokens into the liquidity pool in exchange for currency.

The borrower now has the money to withdraw and in the future is obligated to repay a fixed amount of money pledged by his OR her ETH.

At maturity, borrowers can pay back the money they owe, or their collateral can be used to cover their obligations to the agreement.

Provide liquidity

Liquidity providers fund the Notional pool of liquidity. They provide currency and fCash to the liquidity pool and act as counterparties to lenders and borrowers arriving at the agreement, providing exchange services for loans. Liquidity providers earn fees every time a lender or borrower makes a transaction between currency and fCash.

Liquid token

When the user contributes liquidity to the liquidity pool, the user receives the liquidity token. Liquid tokens represent their ratio requirements for the currency and fCash tokens in the pool.

Liquid tokens can be exchanged for these underlying assets (currency and fCash) at any time.

Using the process

Liquidity providers are nominally allowed to borrow from the agreement to provide liquidity. This is necessary to instantiate the liquidity pool, which allows LP to leverage its capital.

First, LPS specify a liquidity pool and the amount of money they wish to provide as liquidity. The liquidity provider will then cast a pair of fCash tokens.

The liquidity provider then deposits currency and positive fCash into the liquidity pool and receives liquidity tokens in return.

LP now has an obligation, along with its liquid tokens, offset by the positive fCash it enjoys in its liquid tokens.

Using the tutorial

1. Open the official website:https://notional.finance/

2. Connect your wallet

3. Choose "Lend", "Borrow" or "Provide Liquidity" on the home page.

Lend it to sb.

Select the maturity date and fixed interest rate on the right side, and submit the amount of token you want to lend. The left side will show the amount of token you can get back at maturity and the amount of interest received.

I can Borrow money from you.

Similar to the Lend step, the right side selects the due date and the amount of the loan, and the left side will show the amount due and the total interest paid. Unlike Lend, loans have more options for adjusting the collateral risk, increasing the collateral risk of loans, requiring less collateral, increasing the liquidation risk, and vice versa.

Provide Liquidity

The steps to provide liquidity are the same as those for Lend, but the returns to liquid providers are "market rates" rather than "fixed rates".

risk

By making the data available so far, the known team member is code contributor Jeffy Wu, and while the project is still being tested, users who participate in the trial should be aware of the risks.

As of press time, the Notional project code has been audited (not completed) by Open Zeppelin and is expected to be completed by December 11.

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