Notional Finance

Notional Finance is a decentralized protocol built on Ethereum that facilitates fixed-rate, fixed-term lending and borrowing of crypto assets. Founded in 2020 by Teddy Woodward and Jeff Wu, the platform officially launched in January 2021. Woodward, the CEO, has a background in traditional finance as an interest rate swap trader at Barclays Investment Bank and a crypto trader. Wu, the CTO, previously worked as a data engineering lead at Atlassian and a blockchain product manager at Splunk. The founders' combined expertise in finance and technology was a key motivator for starting Notional, aiming to bring the stability of fixed rates, a staple in traditional finance, to the DeFi market.

The protocol addresses the uncertainty of variable interest rates common in DeFi by offering predictable borrowing costs and lending yields. It operates using a financial primitive called fCash, which represents a claim on a currency at a specific future date, akin to a zero-coupon bond. This mechanism allows users to trade between an asset today and the same asset in the future, with the exchange rate implying a fixed interest rate for the term. Users can lend or borrow assets like USDC, DAI, ETH, and WBTC for terms up to one year. To borrow, users must provide over-collateralized assets such as ETH or wBTC.

Notional generates revenue for liquidity providers through trading fees. These providers capitalize the protocol's liquidity pools and act as counterparties to lenders and borrowers. The platform launched its V2 upgrade, which introduced nTokens to automate the process of rolling liquidity to new maturities, simplifying the experience for providers. The protocol is community-governed through its native token, NOTE, which grants holders voting power on protocol matters. In May 2021, Notional raised $10 million in a Series A funding round led by Pantera Capital, with participation from firms like ParaFi Capital, 1Confirmation, and Coinbase Ventures.

Keywords: fixed-rate lending, decentralized finance, DeFi, crypto borrowing, Ethereum protocol, fCash, zero-coupon bond, NOTE token, stablecoin loans, crypto loans, liquidity pools, Teddy Woodward, Jeff Wu, Pantera Capital, crypto asset management, decentralized lending, on-chain finance, fixed income DeFi, yield protocol, ERC-1155