Prime Cash

Sneak Peek 1 - Notional V3

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A 🧵 on how primeCash offers variable lending and borrowing opportunities

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In V2, Notional used cTokens as underlying currency. This offered better APY for lenders but limited the activity to compound v2.

Moreover, there was no way to arbitrage variable rates and fixed rates in Notional.

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With V3

Notional will be in a position to offer variable rate services with diversified dependency risks

There is much more that Notional V3 will bring to the table, check the following thread for insights:

https://twitter.com/NotionalFinance/status/1640704057865109506?t=D1A1Z6WmlXFJYMb1Evzy2Q&s=19

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In V3, cTokens will be replaced with primeCash.

primeCash is a portfolio token representing lending positions in external money markets. It is similar to cToken but it includes more than one money market.

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Just like other lending and borrowing platforms offer services for a token, Notional offers lending and borrowing service on primeCash.

This would get executed with variable rates and the rates will be decided by utilization.

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The Lender lending variable on Notional would get:

- The supply rates from other money markets.

- The interest paid by the borrowers who borrowed with a variable rate.

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The borrower needs to pay the interest equivalent to the supply rates of other money markets plus the interest charged by Notional.

But

The borrower is asked if they want to lend (variable or fixed) their collateral or supply liquidity with their collateral.

In both the cases the collateral supplied by the borrowers earns better returns than other money markets.

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Notional would use 2 interest rate vs utilization invariants (variable & fixed) to compute the interest rates.

This expands the possibilities to arbitrage the rates:

- Borrow fix and lend variable

- Borrow variable and lend fix

These are possible when the utilization is different b/w fCash markets and primeCash markets.

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More V3 sneak peaks & strategies would be published in the form of tweet threads

Stay tuned.