Notional V3 Leveraged Strategies

Teddy Woodward -

Notional V3 is the fixed rate lending protocol for power users. To better serve these users we are doubling down on leveraged yield strategies. We aim to be the best place for power users to maximize their yields with leverage by focusing on three things:

  • High leverage and high returns. Every leverage strategy is individually tailored to maximize returns. This means that our strategies will minimize fees by removing intermediaries wherever possible and maximize available leverage while keeping lenders safe.
  • Clear, detailed risk visibility and risk management. The Notional V3 UI gives a detailed explanation of how the strategy works with full visibility into the risk factors of the strategy and the profit or loss implications of relevant market movements.
  • Automated execution. All of our leveraged strategies are fully automated. That means no more leverage looping over multiple transactions. It means no more claiming and reinvesting your token incentives. You select your leverage up front and enter in one transaction. And if there are incentives to be claimed as part of the strategy, Notional bots will claim and reinvest them on your behalf.

Notional V3 will enable three kinds of leveraged strategies: leveraged vaults, leveraged lending, and leveraged liquidity. Leveraged vaults are strategies that use external protocols like Curve and Convex to source yield. Leveraged lending allows you to arbitrage Notional's interest rates. And leveraged liquidity allows you to provide liquidity on Notional with leverage.

All of these leveraged strategies are built to optimize users' returns, give full visibility into risk, and enable automated execution.

Leveraged Vaults

Leveraged vaults were first introduced in Notional V2, but V3 doubles down on the product and introduces important UX improvements.

In Notional V2, users only had the option to borrow at a fixed rate. Additionally, once their debt matured their vault position would be forcibly settled out. This was not ideal as most users prefer to leave their position open until they want to close it, not until some arbitrary maturity date.

Notional V3 adds the option to borrow at a variable rate for a leveraged vault and eliminates Notional V2’s settlement process. If you have borrowed at a fixed rate to fund a V3 leveraged vault, at maturity your debt will auto-convert to a variable rate and your position will stay open. No action needed from you and you are able to withdraw or re-fix your rate at any time.

Leveraged vaults are a critical piece of Notional’s growth strategy going forward, so expect a lot of new vaults and new protocol integrations coming soon after the launch of Notional V3.

Leveraged Lending

Leveraged lending allows users to arbitrage Notional’s different interest rates within the same currency.

For example, USDC will have a variable lend and borrow rate + three different fixed lend and borrow rates. As markets move and users lend and borrow, these interest rates can change and get out of line. Leveraged lending allows you to arbitrage differences in these rates by borrowing at a low rate and lending at a high rate using your loan as collateral for your debt.

With Notional V3, users will be able to put on leveraged lending positions with up to 50X leverage in just one click on the new UI.

For example, let’s say that the variable USDC borrow rate is 3% and the 3M fixed USDC lend rate is 4%. With a 1000 USDC deposit at 25X leverage, you will be lending 26,000 USDC at 4% fixed and borrowing 25,000 USDC at 3% variable. That’s a total return of 29% APY!

Leveraged Liquidity

Leveraged liquidity allows you to multiply your yield by providing liquidity with leverage. When a user provides leveraged liquidity, they deposit their assets into Notional as liquidity, borrow against them and provide more liquidity.

Many of Notional’s V2 users already do this so we decided to make it easy on the Notional V3 UI. With Notional V3, you will be able to specify your desired leverage up front and enter into the position in a single transaction. This means no more “leverage looping” over multiple transactions.

Leveraged liquidity can be a great way to earn high returns, especially if you want to earn NOTE incentives. At 4X leverage you can earn NOTE incentive APYs as high as 20% or more!

Conclusion

Notional V3 is an incredibly powerful lending protocol and it will offer lots of opportunities for advanced users to maximize their returns with leverage. If this sounds like something you're interested in, follow us on twitter or jump in our discord to follow along with our progress.

The Notional Team