Notional Finance is a DeFi protocol offering high yields through the use of Leveraged Liquidity, and it comes with fixed rate options so you can lock in your borrowing rates. Notional also recently introduced a Leveraged Pendle product, enabling users to implement a leveraged strategy that is automated to purchase and earn yield on Pendle PT tokens.
If you’re searching for a high yield strategy then one place to look right now is Notional Finance, a protocol that offers fixed rate crypto lending and borrowing, and where you can get solid returns on a variety of assets.
There are several ways to earn from your assets on Notional, including through Lending and Fixed Rate Lending, which are both worth exploring, but today we’re going to focus on getting the highest possible yield through Notion’s various leveraged liquidity products.
What Is Notional Finance Leveraged Liquidity?
When you act as a Liquidity Provider, you’re depositing assets into Notional lending markets in order to earn yield from interest and fees, as well as picking up additional incentives in the form of NOTE tokens. NOTE is an ERC-20 governance token issued by Notional, and as well as providing holders with voting rights, it can be staked on the platform for further rewards.
But besides this mechanism, Notional also offers a Leveraged Liquidity yield strategy, which offers all of the above incentives, but–as the name suggests–amplified with leverage. This means that you will in the process be borrowing from Notional’s lending markets in order to increase the size of your position (for comparison with another strategy based around increasing your position size, take a look at this earlier guide on looping with Kamino Multiply).
When doing this in connection with Pendle (which we’ll look at below), it means using borrowed funds to purchase that protocol’s PTs (Principal Tokens), which are then held on Notional, although as we’ll see in a moment, this process is mainly automated and can be implemented with just a few clicks.
You should note though, that this strategy comes with the risk of liquidation (since it involves leverage), impermanent loss (IL), negative APY in rare circumstances, and liquidity problems, and it’s recommended to read about these risks in detail in Notional’s documents.
Additionally, any time you interact with a DeFi protocol, you are exposed to risks including smart contract exploits, frontend attacks, systemic risks across DeFi and crypto, and market volatility.
How to Use Leveraged Liquidity on Notional Finance
First, you need to go to the Leveraged Liquidity page on the Notional app, and connect up your wallet. You can see here that there’s a summary of how the process works, and also of the specific risks involved. As it states, you create a position–with leverage and a borrow rate–in one transaction, and when it comes to risk, liquidity and IL risks are both marked as medium.
If you then scroll down, you can see the options for which assets you can initially deposit, along with their respective APYs and amounts of liquidity. Right now, USDC offers a maximum APY–that’s with the most possible leverage–of 35.9%, and has $3 million of liquidity, and the NOTE token APY on that one (displayed as incentive APY) is 24.18%.
If you select that option, as an…
