Notional Airdrop Review: Trust Code, not Custodians

About Notional Airdrop

Notional Airdrop is a protocol on Ethereum that facilitates fixed-rate, fixed-term crypto asset lending and borrowing through a novel financial instrument called fCash. Notional is designed to optimize capital efficiency and balance the needs of liquidity providers and the system’s end users.

Notional Airdrop is airdropping 0.75% of the total supply to various early users of the platform. A snapshot was taken on July 4th, 2021 at 00:00 GMT and users who have borrowed, lent or provided liquidity more than or equal to 50 DAI/USDC as of the snapshot date will receive between 600 NOTE and 1800 NOTE.

Step-By-Step Guide

1. Notional will airdrop 0.75% of the total supply to various early participants of the platform.
2. The snapshot was taken on July 4th, 2021 at 00:00 GMT.
3. All users who have borrowed, lent or provided liquidity more than or equal to 50 DAI/USDC as of the snapshot date will receive between 600 NOTE and 1800 NOTE.
4. A total of 741 addresses are eligible for this airdrop. Check here to see the eligible addresses.
5. The rewards will be distributed pre-V2 launch (tentatively) in September, pending audits.
6. For more information regarding the airdrop, see this post.

The Notional Protocol

Fcash

fCash is a tokenized representation of a fCash flow. It represents the amount of tokens (i.e. Dai) that an account is either entitled to receive (CASH_RECEIVER) or obligated to pay (CASH_PAYER) at its designated maturity. For example, if an account holds +100 fCash tokens for a maturity at timestamp 100, it is entitled to 100 Dai at any time greater than or equal to timestamp 100. Similarly, -100 fCash tokens for the same maturity means that the account is obligated to pay 100 Dai at timestamp 100. A detailed description of lending and borrowing mechanics will follow.

Notional Airdrop in one maturity (i.e. due to mature at timestamp 100) is fungible with other fCash tokens with the same maturity. However it is not directly fungible with fCash with different maturities. Also note that the entitlement to receive fCash (CASH_RECEIVER) is freely transferrable but the obligation to pay (CASH_PAYER) is not.

Current Cash

Notional uses an internal accounting concept called current cash to represent deposits and matured cash flows. Since cash flows may be positive (CASH_RECEIVER) or negative (CASH_PAYER), current cash is represented as a signed integer (i.e. positive or negative). When a fCash token matures, its positive or negative value is added to the account’s total current cash balance. This is discussed in the settlement section.

Maturities

Notional Airdrop introduces the notion of periodic, rolling maturities to simplify trading and pool liquidity. These maturities are defined by two governance parameters: G_NUM_MATURITIES and G_MATURITY_LENGTH. G_MATURITY_LENGTH defines how long each periodic maturity will last in seconds. G_NUM_MATURITIES defines how many of these maturities will be traded in the future. For example, if G_MATURITY_LENGTH = 1000 and G_NUM_MATURITIES = 4 and we are starting at time 0, there will be maturities at timestamps 1000, 2000, 3000, 4000. Each one of these maturities will have a pool of fCash tokens that can be bought and sold.

Lending (Cash for fCash)

The takefCash function allows users to deposit cash (i.e. Dai) to the market in exchange for the right to receive a cash flow at maturity. This is the equivalent of lending; the user is depositing cash for the right to receive a (hopefully larger) cash flow at maturity. From an economic standpoint, the user would simply not deposit cash unless they were entitled to a greater amount of fCash at maturity; no one would trade 100 Dai today for 95 Dai in the future. If the exchange rate were to fall to that level, arbitrageurs could easily obtain risk-free profits by moving it back into line with the market’s expectation for interest rates over the given period. The getExchangeRate function is described in detail in Appendix A.

Variables

• maturity: The timestamp where all the fCash tokens in this market will mature.
• totalfCash: The amount of fCash tokens available for purchase.
• totalCurrentCash: The amount of cash (i.e. Dai) available for purchase.
• totalLiquidity: The amount of liquidity tokens minted by liquidity providers in this market.
• rateAnchor: Offsets the interest rate curve from zero, can be thought of this as a bias term.
• rateScalar: A scalar that determines the slope of the interest rate curve.
• lastImpliedRate: The implied period rate of the most recent trade.