Notional Finance closes a $10 million Series A round from Pantera, ParaFi Capital, 1Confirmation, Spartan Group, Nascent, and other big names following a seed round from Coinbase Ventures.
Notional’s protocol brings fixed lending rates on stable coins to the Ethereum blockchain, a first of its kind, along with Yield Protocol.
Fixed lending/borrow rates are a crucial element of the traditional financial system, allowing businesses and individuals to better plan their future finances. In the crypto space, however, variable rates are the norm; these fluctuating rates make it difficult to compare protocols and use DeFi (Decentralized Finance) for real-world applications.
“In order to plan for the long-term, to borrow money for a house or car, people need to know what their costs will be – they need fixed rates” says Kyle Long, the Head of Marketing at Notional.
The protocol has already seen success, with just under $20M locked up (as reported on DeFiPulse), and has executed around $10M in loans.
Users can use Notional to borrow, lend, or provide liquidity directly on the platform via connecting their Ethereum wallet. Rates depend on size and stablecoin, but generally hover around 6-7% APR.
Fixed rate lending protocols add another important building block to the composable basket of DeFi tools. As more and more financial applications become codified on decentralized blockchains, they become immediately accessible to new populations and enable novel use-cases when combined.
Existing lending projects built on Ethereum such as Aave (formerly LEND), an open source liquidity protocol which has a fully-diluted market size of over $7B, and Liquity USD (LUSD), which lets users draw 0% interest loans against their Ether, have seen tremendous success within the ecosystem. For the crypto space to expand into more real-world use, however, these loans need to be used in the broader economy.
DeFi Money Market (DMM) was an early project working to enable crypto borrowing for real world purchases, like car loans, in the past. They recently ceased operations due to regulatory inquiries, but growing demand beforehand. Newer projects like Alchemix (ALCX) have also started seeing use for making real-world purchases.
Teddy Woodward, Co-Founder & CEO at Notional, says there is a lot more work to do in order to bring DeFi to a more mainstream audience: “We are hard at work on delivering upgrades to our protocol which will enable users to lend and borrow for multi-year periods of time, against a broader set of crypto assets, and with even lower transaction costs.”
These improvements, he and his team believe, will yield “a product that gives the stability needed to plan for long-term financial success.”
While Bitcoin, NFTs, and DeFi are all now being discussed in mass media, it is still early days in terms of development. Like many technological revolutions of the past, DeFi too will be adopted by solving real world problems; fixed lending rates are yet another core building block in that path forward. With Notional being an open-source project, they open the door to further innovation and integration of fixed rate lending.
May 5th 11:30ET: Updated to include a mention of Yield Protocol, another fixed rate lending protocol.
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