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Find New | Notional Finance: Fixed Rate Loan



"Find New" is a blockchain project observation project launched by Jinse Finance. It covers the development of projects in various fields of the industry, and the specific design includes project overview, technological progress, fundraising situation, etc., and strives to present you a collection of popular and trendy projects. . This translation has been authorized by VeradiVerdict. Yesterday, my friend asked me which platform is better to deposit BTC and Ethereum? Where can I borrow stablecoins with a fixed rate and term? This article will explain how to borrow and borrow cryptocurrencies at a fixed rate. Recently Pantera led the Series A financing of Notional Finance, the agreement is solving this problem, through Notional Finance, especially during the bear market, people don't have to sell their cryptocurrencies, and don't need to give up risk exposure, while being able to borrow funds for daily expenses. 1. The interest rate of most existing DeFi loan agreement loans will fluctuate up and down, which means that during the borrowing period, the interest rate will change. In December 2020, the USDC interest rate offered by the mainstream DeFi lending protocol Aave fluctuated between 2-65%. Interest rates are high and volatile, and users lack confidence in interest rates, thinking that floating rate loans usually bring risks. 2. In contrast, a large part of the global debt market is based on fixed interest rates, where the interest rate remains unchanged for the duration of the loan. Fixed rates are attractive for many long-term, low-risk use cases because the rates are fixed up front and are considered less risky. U.S. stocks closed, and the three major stock indexes collectively fell: the Dow Jones Index closed down 220.99 points, or 0.67%, at 32991.97 points on May 31 (Tuesday); the S&P 500 index closed down 21.84 points, or 0.53% on May 31 (Tuesday) , to 4136.40 points; the Nasdaq Composite Index closed down 49.74 points, or 0.41%, to 12081.39 points on May 31 (Tuesday). [2022/6/1 3:54:19] 3. Notional Finance is a decentralized cryptocurrency lending protocol in Ethereum, which provides fixed-rate, term loans. Users can borrow, lend and provide liquidity to the agreement in the form of DAI and USDC. For a 6-month loan, the agreement typically offers around 6-7% APR, which is very competitive in the market. 4. The core of the Notional Finance protocol is the fCash token, which represents the loaned cryptocurrency and has a maturity date. Essentially, between fCash and the backing assets, Notional Finance will use several liquidity pools and a custom AMM to enable fixed rate lending. 5. After the borrower withdraws assets from Notional Finance, he will receive fCash tokens with a negative balance and a fixed interest rate. On the due date, the borrower shall return an equivalent amount of cryptocurrency to the agreement based on the fCash balance. 6. Lenders can deposit assets into Notional Finance and receive fCash tokens representing relevant cryptocurrencies, with a fixed deposit rate. On the maturity date, the lender can redeem the relevant cryptocurrency through fCash tokens. Coinbase Cloud launched a forum for Web3 developers: According to the official Coinbase blog, Coinbase Cloud launched a forum for Web3 developers, encouraging the Web3 developer community to use this forum to share information and learn from each other. Developers can connect with the Coinbase Cloud community, including engineers and moderators who can answer questions and participate in technical discussions. [2022/1/15 8:50:24] 7. In the field of DeFi, Notional Finance has opened a new usage scenario of fixed interest rate, which is especially aimed at risk-averse, long-term borrowing users. Notional Finance is exploring fixed-rate loan applications, which include funding low-risk, low-return trading strategies, continuing to provide early liquidity for new DeFi projects, and even using encrypted currency assets for personal purposes, such as repaying home mortgages. 8. Ultimately, in the global financial ecosystem, in order to allow the DeFi field to occupy more shares, platforms that provide fixed-rate encrypted loans will play a vital role. Notional Finance provides a very promising model of how a fixed-rate lending market should work on Ethereum, allowing users to borrow and lend cryptocurrencies with lower risk than ever, which has also greatly expanded the use of DeFi scope. What is Notional Finance? Notional Finance is a decentralized cryptocurrency lending protocol in Ethereum, which provides fixed-rate, term loans. Since going live last fall, the protocol has accumulated more than $19.5 million in locked value and processed loans worth $9.5 million. By building a fixed-rate debt market platform on Ethereum, Notional Finance aims to introduce new financial use cases to the DeFi world, such as retail loans for the masses.  Tencent Magic Core and "Inhuman" release winter limited digital collection: On January 14, Tencent's digital collection platform Magic Core and the popular comic "Inhuman" released a winter limited digital collection. This series of digital collections includes 6 comics For digital mapping of characters, collectors can choose to directly purchase digital mapping of designated styles, or purchase digital blind boxes to randomly obtain digital collections. In addition, "Inhumanity" and Magic Core co-hosted the first Inhumanity Ice and Snow Games, and participants can draw free digital blind boxes and signed peripheral benefits. In this event, a total of 60 "Inhuman" digital blind boxes, 3 physical books signed by the author of "Inhuman" and 1 point of the author's autographed drawing will be drawn out. The rewards cannot be obtained repeatedly. [2022/1/14 8:49:21] Currently, Notional Finance supports stablecoins such as DAI and USDC in lending and providing liquidity. The interest rate is fixed for the duration of the loan, but varies depending on the amount, underlying stablecoin, and term. For a 6-month loan, the agreement typically offers a fixed annual interest rate of around 6-7%. Fixed-rate lending scenarios in DeFi As of this writing, the total outstanding debt in DeFi lending protocols is approximately $19 billion. In comparison, the total size of the U.S. debt market is estimated at $46 trillion, and the global market is estimated at $128 trillion. With the exception of DeFi, most debt markets are based on fixed-rate loans. Usually fixed-rate loans are less risky, allowing both lenders and borrowers to have more confidence in the loan contract, thereby enabling long-term investment strategies and leveraged trading positions. This is why fixed-rate loans dominate in countless classic financial applications, such as home mortgages, corporate loans, and public bonds. Deutsche Bank: "Ten major themes" of the capital market in 2022: According to news on December 26, Deutsche Bank listed the 10 major themes of the capital market in 2022. Among them: 1. Overheated economy, 2. New crown epidemic, 3. Labor market and inflation, 4. Enterprise asset efficiency, 5. Excess inventory, 6. Anti-monopoly, 7. Will the myth of the stock market be terminated, 8 .Space race, 9. Central bank digital currency, 10. ESG bonds become mainstream. Among them, when talking about central bank digital currency, Deutsche Bank said that in the next two years, major central banks may issue a common digital currency. We believe that the vast majority of countries will have a central bank digital currency (CBDC) within the next five to six years. Compared with developed economies, emerging economies may develop faster and have higher penetration rates in this regard. [2021/12/26 8:04:31] In contrast, the lending interest rate of most lending agreements in DeFi will change, and the interest rate will change during the loan period. Since the assets traded and held by these loan agreements are almost all encrypted currencies, the overall encrypted market itself has high volatility, so interest rates will also have high volatility. For the realization of long-term financial goals, high volatility interest rates are extremely risky and Unreliable. Aave is one of the largest DeFi lending protocols, and in December alone, its USDC loan annual interest rate fluctuated between 2% and 70%. Highly volatile interest rates are generally frowned upon by investors seeking low risk and reliable capital. The graph above shows Aave’s USDC loan annual interest rate in December 2020. NEAR Co-Founder: Develop NEAR Ecosystem in a Decentralized Way: On November 18th, NEAR Co-Founder Illia Polosukhin said that he has begun to split some projects from the NEAR core team to make it an independent company. Completed and ongoing spin-offs include: Aurora, Proximity Labs, Satori, and Human Guild. [2021/11/18 22:02:02] Therefore, in order for cryptocurrencies to fully capture the debt market, crypto lending protocols must offer fixed-rate loans, increasing their appeal to more traditional usage scenarios, which are mostly non-crypto-native . Some projects provide fixed-rate encrypted loans through CeFi. The lending institution is actually like a central bank, except that the assets held and traded are encrypted currencies instead of fiat currencies. One such lending protocol is BlockFi, which currently manages more than $15 billion in assets, showing a huge demand for cryptocurrency lending. However, just like most traditional banks, these CeFi encrypted lending agreements have several obvious disadvantages, including low usage, low transparency and significant counterparty risk, leading to possible defaults in financial transactions. In 2020, cryptocurrency lender Cred went bankrupt after a series of false bets and fraudulent transactions wiped out more than $100 million worth of cryptocurrency from liquidity providers. In contrast, DeFi can significantly reduce risk because the entire protocol is transparent, automated, and decentralized, able to absorb liquidity from thousands of users. Lenders and borrowers can fully foresee how funds will be used, and loan rates and parameters are usually managed by the user community rather than a centralized institution. Through the fixed-rate lending market on Ethereum, Notional Finance can provide fixed-rate loans, making borrowing more convenient and reducing risks, while enjoying the convenience, efficiency and security of DeFi. How does Notional Finance work? The key to the Notional Finance protocol is the fCash token. Each token represents a different lending cryptocurrency and has a maturity date. fCash token holders can exchange it for the same amount of the relevant currency on or after the maturity date. After depositing assets into Notional Finance, the lender receives fCash tokens representing the relevant cryptocurrency, with a specific maturity date and a fixed deposit rate. The amount of fCash tokens initially received by the lender is proportional to the value of the lender's deposit at maturity. Therefore, after the maturity date, through the fCash token, the lender can redeem the original cryptocurrency at a ratio of 1:1 and obtain a fixed interest. Borrowers who withdraw loans from Notional Finance will receive fCash tokens with a negative balance and a fixed interest rate. For the borrower, the fCash negative balance amount will be based on a fixed interest rate, proportional to the amount that must be paid when due. After maturity, the borrower has to repay the cryptocurrency equivalent to the fCash token balance. In addition, fCash minting is always in pairs, because tokens are issued to both borrowers and lenders separately, so that the difference between deposits and loans in the entire ecosystem is zero.  The diagram above shows assets and loans expressed in fCash. In order to facilitate the faster flow of fCash tokens, Notional Finance uses multiple liquidity pools. Each liquidity pool holds fCash and its associated cryptocurrency, which means that each liquidity pool will correspond to a specific cryptocurrency and a specific maturity date. The share of fCash and cryptocurrencies in the liquidity pool changes as the maturity date approaches to match the ratio corresponding to the fixed rate. In order to manage the liquidity pool, Notional Finance has its own AMM with dynamic curve sensitivity, which helps stabilize interest rates and reduce slippage, because deposits or withdrawals will have an impact on real interest rates. Potential-rich usage scenarios From a macro perspective, in the DeFi field, Notional Finance has unlocked a lot of new lending usage scenarios, especially for risk-averse, long-term lending users. Notional Finance has developed the following typical fixed interest rate usage scenarios in DeFi: 1. Trading companies often prefer to borrow with fixed interest rates rather than floating interest rates to provide funds for low-return reliable trading strategies. Considering the expected return is low, highly volatile interest rates may be Risks to these companies' profit margins. 2. Traditional lenders usually tend to borrow at a fixed rate because they pay customers a fixed rate. Variable rate loans can threaten profit margins and pose significant risks to business models. 3. Cryptocurrency holders may prefer to borrow at a fixed rate. These currency holders need liquid assets, but do not want to sell tokens and lose their positions. Based on fixed-rate borrowing, token holders can leverage more cryptocurrencies to fund larger financial decisions because the risk is significantly reduced. One user even took out a fixed-rate loan through Notional Finance to pay off their home loan. 4. Some DeFi projects urgently need liquidity. These projects want to seek fixed-rate loans instead of liquid mining. If liquidity mining is adopted, projects often have to provide huge returns to liquidity providers in the short term, which may make the project unsustainable or unprofitable if it fails. Fixed rate loans can provide security for long-term borrowing of projects. What is the future goal of Notional Finance? Notional Finance V1 does not just introduce fixed rate loans. The team is working hard to build V2, and V2 will have many improvements, such as longer loan periods, more mortgage types, more generous returns for liquidity providers, and more. Many upgrades will be made public and implemented into the protocol over the next few weeks. Summary In the past few months, more and more ordinary people have become interested in the DeFi field, exploring new ways of using it, and replacing traditional financial products with low usage and inefficiency through user-oriented decentralized protocols..


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