2024: A Year of Progress for Notional

Teddy Woodward -

Notional made a lot of progress in 2024. We expanded Notional V3 on Arbitrum, launched Notional V3 on Mainnet, listed new tokens and vaults, introduced innovative new vault types, launched the NOTE buy & burn, reduced NOTE inflation, and more! 

Here are the key takeaways from the last year:

  • Leveraged yield strategies are thriving.
  • We’ve achieved product-market fit for fixed rate borrowing.
  • NOTE token value accrual has improved significantly.

Leveraged yield strategies

We had lots of ups and downs in 2024 fueled in part by two big ARB grant distributions. But through all the volatility in usage metrics, one trend in particular was clearly up and to the right: leveraged vault debt.

We started working on leveraged vaults as a way to generate borrowing demand in 2022. That bet paid off last year. We continue to believe that Notional’s competitive advantage lies in these products. 

That hypothesis was borne out in the data. Over the course of the year, leveraged vault debt as a percentage of total debt went from 0% all the way up to 70% on a clear upward trajectory.

The message is clear - users want leveraged yield strategies!

Product-market fit for fixed rate borrowing

Notional first launched on Ethereum Mainnet in late 2020 as the original fixed rate DeFi protocol. Ever since then, we’ve been on a journey to find product-market fit for fixed rates.

We established in 2022 that the value prop of borrowing stables against crypto at a fixed rate wasn’t enough for most users. Some people wanted it, but the vast majority didn’t care enough about fixed rates to use a new protocol.

Our hypothesis was that people would care more about fixed rate borrowing in the context of a leveraged yield strategy. We thought that mitigating borrow rate volatility would matter more to users who are borrowing to earn yield than to users who are getting levered long crypto. 

We were right. Notional users tell us every day how important fixed rates are for leveraged yield strategies.

This value prop was further validated with the launch of leveraged PT strategies in Q4 2024. The ability to borrow fixed AND lend fixed in a leveraged yield strategy is a game-changer and we think that we will see significant growth in this kind of strategy in 2025.

NOTE value-accrual 

2024 marked a big step forward in NOTE tokenomics - the buy and burn. NIP-41 introduced a new mechanism to use protocol revenues to accrue value to NOTE. Starting from the implementation of that NIP, 5% of protocol revenues are now used to reward NOTE stakers and 15% of protocol revenues are used to buy NOTE and burn it.

This has led to great results so far. In 2024, the protocol earned 460k USD in fees and burned 1.61M NOTE or 1.61% of the max supply.

Meanwhile, NOTE inflation decreased dramatically over the course of the year. The amount of NOTE emitted as liquidity incentives dropped 36% from 7.5M NOTE per year to 4.8M NOTE per year. It’s planned to drop another 35% to 3M NOTE per year by the end of 2025.

These changes put NOTE on a stronger footing and position it to benefit alongside growth in the protocol. If Notional grows like we hope it will, we look forward to the possibility of a deflationary NOTE token one day!

Looking to 2025

For all that we accomplished in 2024, we still have big challenges that we will need to overcome in 2025. We need more liquidity for the protocol to grow. Specifically, we need more fixed rate liquidity that leveraged yield users can borrow. 

Our focus in 2025 will be to solve this problem and unlock the next stage of growth for Notional. We have plans in place for how to do this and we are excited to share them soon. Stay tuned!

Thanks for being part of the Notional community. Here’s to the golden bull market of 2025!

The Notional Team