DeFi Lending Protocol Set For Leveraged Product


The DeFi Lending Protocol plans to release three “leveraged vaults” next month, which will let users trade up to 10 or 20 times their initial capital.
DeFi Lending Protocol Set For Leveraged Product
DeFi Lending Protocol Set For Leveraged Product

According to a blog post on the company’s website on Wednesday, “leveraged vaults,” a new type of DeFi Lending Protocol, will soon be available to Notional Finance’s users.

Notional will have three leveraged vaults that will be available in October. The leveraged vaults will allow Notional’s protocol to make more money from transaction fees and be less reliant on liquidity incentives, Notional co-founder Teddy Woodward told CoinDesk. As borrowing demand goes up, users will have access to higher interest rates.

“Loaned vaults are a big step toward making DeFi users and the DeFi space as a whole more efficient with their capital,” Woodward said.

Leveraged vaults are a form of DeFi Lending Protocol through on-chain liquidity pools that let users borrow crypto at a fixed rate. The cryptocurrency is then put into a smart contract that has been whitelisted and is set up to carry out a specific yield strategy.

The amount of money a user puts up determines how much money they can borrow from the protocol. Notional’s three leveraged vault options let users trade up to 10 or 20 times their initial capital. The minimum amount of capital a user can put up hasn’t been set yet, but it will “vary depending on the vault,” Woodward said.

The blog says that a user who puts up 100,000 USDC through lending vaults could earn 36% annual percentage yield (APY) on his initial investment over a three-month period.

But a bigger chance of getting a reward also means a bigger chance of something going wrong.

“The user’s potential upside and downside are both bigger the more leverage they use,” the blog said.

The launch of the leveraged vault by Notional comes as the lender continues to grow its presence in DeFi. After a $10 million Series A funding round, which was led by Pantera Capital, the V2 version of the lending protocol was released last fall. After 10 months in stealth mode, Notional went into beta on the Ethereum blockchain in October 2020.