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Hey Teddy what's going on man? Hey Noah how you doing? Thanks for having me. Doing good. Glad to have you on today. Yeah, yeah, it's great to be here. I think I got you right on. So good. I was just gonna say I think like a lot of people on Twitter I think I yeah
I think it came down with a little cold after East Denver. Hey man, East Denver sounds like it was a great time, a lot of people, but it also sounds like a potential superstar. Yeah, yeah, basically. Did you go?
I did not go. I feel like everyone went except for me, but we'll try to be there next year. Nice, nice, nice, yeah, check that. Well, look, Teddy, before we get started, do you want to give our audience a quick background into who you are?
origin story, your career trajectory, and then how you ultimately ended up making that leap into Web 3. Yeah, sure, man. So my background is actually, I started my career as an interest rate swap trader. I worked
at Barclay's investment bank. So yeah, I did that for about three and a half years and you know, and like there were parts about that job that actually looking back on it, I actually
liked. So, you know, there's a lot like being a trader is really fun in a lot of ways. But like working at a bank is very, very not fun. So I did not like that part. And I really, you know, I wanted something sort
a new and exciting and then kind of 2017 happened and like crypto was just you know going through the roof and it really sort of caught my eye and it seemed to me like
You know, like it was like, I don't know, just seemed really exciting and really cool and like I thought that because it was sort of financial in nature, like I thought that my existing skillset like would apply. And so I got into crypto in 2018.
As a trader I worked for like a family office who was big into crypto at that time And I was there sort of I was their crypto guy and then Later in like 2019 I saw a defi really taken off
And it was sort of like that was before a DeFi summer, but there was still compound and maker-dough and Uniswap. And I thought that kind of the next sort of logical step for DeFi was going to be the ability to lend and borrow at fixed rates of interest.
like DeFi was going to be big and that fixed rate lending was going to be just a huge opportunity. And so basically, I started the company with my partner Jeff in January of 2020. And now we're here.
Beautiful men quite the story and we're glad you're here. I think we need more fixed lending protocols, but I'm not gonna steal your thunder. I want you to break it down for us. What is notional finance and then we can kind of jump in the nuts and bolt from there. Yeah, so notional
is a fixed rate borrowing and lending protocol on Ethereum. So, you know, it's like compound and Ave that you guys are familiar with, but the difference is that on Notional, you can lock in a rate of interest for borrowing and for lending. So,
Today we have about $50 million in TBL and today we've done about $700 million, I think over $700 million of loan originations. So we've gotten, like, I would say pretty good traction and really the reason people use
is just that they want sort of the stability and just like they want to be able to like lock in their return or lock in their borrowing cost as a borrower and they've sort of been you know people a lot of people are frustrated with with the rates in DeFi you know you
think you're getting 7% one day and then you come back and it's gone down to 1% and I think that's like a really common experience that a lot of people had in defy and so they like the ability to get a fixed rate of return. So that's what National Office
Right on. So fix rate of return. You get that by blocking in your east. What what are you borrowing? What do you guys love folks to borrow? Yeah, so you can so right now like we have four currencies on the platform.
There's ETH-REPT-PICCoin, USDC, and DIDE. And you can lend and borrow any of those. So our interest rates right now are actually really high for ETH. So we have rates over 6% right now.
So you can lock in a rate that's like 1, maybe 2% higher than the East Staking Rate on Notional today. And that's really good because you can get a guaranteed rate and you also
don't have to worry about the state-death peg risk. So if there's like a D-peg event, like you don't have any exposure to that. So we think that that's like a pretty good opportunity for people right now. But you can also lend them borrow stablecoins.
And our stablecoin rates are also pretty good. So right now, I think USDC and DI is about 4%, which is a lot higher than you're going to get on Compoundra Ave and it's a fixed rate.
And you guys also allow folks to leverage, is that right? Yep. Yep. So that's like a new product we actually recently launched. That's called leveraged vaults. So that's like a that's a really good product. And it's actually it's why our e-threats are so high. So
So this is more of a sophisticated or an advanced product. But basically, what it does is it allows you to borrow eth from notional at a fixed rate and then use that eth in a DeFi yield strategy.
So, let me just, like, the easiest way, so basically what's happening is that the DeFi yield strategy is itself collateral against your debt. Okay, so the easiest way to explain this is with an example. So, let's say,
You have 10 teeth, you can bring 10 teeth to the nose and borrow like 50 teeth. So you have 60 teeth in total and then you can take 60 teeth and put them in the vault and execute that yield strategy with 60 teeth. So like what does
strategy does today is it takes your eith, puts it in the rap state eith, LP pool on balancer, then takes those LP tokens and stakes them on aura, and then harvests all the incentives and reinvest them into the strategy. And right now, you know, that strategy yields around 7%.
Basically, you're earning 7% on the strategy, plus you're earning 7% on 60 East and you're paying notional borrowing costs on 50 East. Basically, the lower the borrowing cost is on notional.
Or the higher the strategy return like the more money you're making and so what's happened is that it's caused people to like borrow it really high rates unnotional because you can borrow a notional to directly go do the strategy That's earning you know 7% and notional does everything right so we
You know, you can get into this position in one click. So you just click once, decide that you want to do it, and then noional is going to go take your capital and execute that strategy, do all the reinvestments, do everything. So that's been a really big product. Yeah.
I appreciate the example, especially for someone like myself who's a visual learner, or either helps me learn by example. I see that it says data, beta.notional.finance. You guys are still technically in beta, and if so, what does the alpha version of "Notional" look like to you?
So the leverage vault product is still technically in beta. And that's really just like, we're working on updating the UI. So basically, we launched it before the UI was super crisp.
got a lot of feedback and we're making a lot of changes and we just haven't like yet been able to like push all those changes. So we expect to take the product out of beta later this month. Yeah, so so and then sort of for your other question, well when you say like the alpha version
of a notion, what do you mean by that? Well, I guess I probably made a mistake here because I have a bunch of your tabs open and I was looking at the URL that's beta dot notion all that finance and I assumed that the entire protocol was still technically in beta and so the question was what does
What does the alpha version of notion look like to you? But you kind of cleared that up by saying, hey, only part of it is embedded in this part of it's actually fully, fully live. Yes, yes, that's right. That's right. So it's only the leverage vaults product that is currently in beta. Everything else is fully live, yeah.
Got it. Okay. And so I'd read that there's a liquidation infrastructure that makes sure borrowers don't become insolvent. And if they do the protocol shields users from any losses with preserve funds. Yeah. Can you explain a bit how that
works and also if there's any sort of subscription feed to attain this. Yeah, so that's like, so okay, so basically like the way the way notion works, so everything is overcladderized whenever a borrower
borrows money, they are posting collateral to notional that is worth more than the money they're borrowing. So this is going to be very familiar to most people who've heard of Campan D'Ave. It's the same mechanism. So if you want to borrow USDC against ETH, you have to put up
$150 to borrow $100 of USDC. And basically if the value of your collateral drops below a minimum threshold, you can be liquidated. And it is that liquidation, which makes it safe for lenders,
and make sure that borrowers don't become insolvent. So, you know, basically, no-sional, so those liquidations are open to anyone. Anybody can do that, but no-sional, just like, you know, to be safe, we run, you know, liquidation infrastructure ourselves.
So we don't have the protocol doesn't give us any special treatment. We don't have any special access. But just like in order to be sure that somebody is doing it, we run automated bots that will go liquidate anybody.
So, there's also liquidation for leveraged vaults. And it's basically the exact same principle. So, like, in the example I gave previously where you're borrowing ETH to go LP into the rap state ETH, ETH, PUL on Balancer,
If the state's price deep pegs, then the value of those LP tokens will decline and they can be liquidated to pay off your debt. Now, a notional also runs liquidation infrastructure that's going to check and do that if that opportunity ever arises.
Yeah, because we, yeah, so we just like natively run liquidation infrastructure for everything that we list on notional. Although it's not, you know, it's a public function call, so anybody can do it, but we just, we just do it ourselves to make sure that somebody's doing it.
Okay, got it and You gave examples of of an compound pretty straightforward. I mean for the for the newbie investor or I guess leverage her you collateralize your you stake your Bitcoin your eith it's over
You do what you want with that as some people buy more yeast and loop it some people go and buy other assets and people just use that cash to live off of because they're bullish on the asset they're collateralizing but the picture that you painted for me earlier with the kind of bar walking in tenies and
borrowing 60 and you start to you start to paint out some more advanced yield farming, staking, borrowing, low-loaning strategies and this seems to not be super newbie friendly. So for folks that are interested in kind of won the example that you
linked in the UI and I can give you some links to that documentation as well if you want. But I think you're absolutely right. These leverage vaults are definitely more sophisticated tools that are
that are, you know, there's like a lot of moving parts. So it's not super simple to get your head around right at the beginning, but they're like very, very powerful. And so what we've seen is like, you know, the people that use these tend to be, you know, pretty
pretty sort of seasoned, grizzled kind of defy natives. So it's definitely like, you know, all the information that you need to figure out how to use them. Like it's all there, but it's yes, it is not as simple
as just like lending your ease. And that's the cool thing, I think, because basically the way it works is that if you want to dive in and figure it all out and go do it, you can, and a lot of people do, and then that pushes up the interest rates.
And then it means that if you're a lender and you don't want to go figure out how that all works and take the risk and do all this and that, you can just lend and earn the high interest that the leverage vault users are paying. So I think it's like a nice thing.
Yeah, I'd agree. I mean, going through this and learning more about the different services and features you guys offer excites me. I get particularly excited when I see a 6.54 fixed APY for not borrowing but lending East. So I would imagine
that other people that are long-term eithholders and see that return are going to get excited and maybe stake their eiths into the protocol would love to know what security measures you guys have because there's always that fear that hey the protocol might get hacked.
I could lose my eith or you already highlighted what would happen if there was like a seafee pegging. But yeah, I just want to know how you guys, what you securities like and then too, if there was an instance of a hack and funds being drained, if you guys have enough resources
to make those victims whole. Yeah, so yeah, okay, so there's like there's two basic risks when you use notional, like so if you want to like go earn that yield, you know, you're basically taking two risks. The first risk is like what we call
economic risk. And that's the risk that you were referring to. There's a state-to-see peg and borrowers become insolvent, then you as a lender could get hit. Right? Now, there's a lot in noisional and that makes that risk
pretty small. So, like I talked about earlier, we have our liquidation infrastructure up and running 24/7. Liquidations are open to anyone. So that means that you're not reliant on our liquidation infrastructure exclusively. And then, even if a liquidation does occur,
Like we've set our risk parameters very conservatively so that we can be sure that the protocol can remain solvent even if you know we see a move in in state D that's that's as bad as as any move in a 24-hour period
that state teeth is ever had. We set things very conservatively so that even in the worst case we're okay and lenders don't get hit. So that's like on the economic risk side. Then the other risk that you're taking is smart contract risk or hacking risk.
basically like we do everything we can to minimize that risk and mitigate it as much as possible. So that's like, you know, we have, we've done close to 10 audits at this point. We've done audits with open
In Zeppelin, Certora, ABDK, Consensus, Coderina, Sherlock, we've done multiple audits with Coderina and multiple audits with Sherlock. We've put a lot of time and effort into
to the security of the code. In addition to that, we have a 500K bug bounty live on a munify. If anyone has a critical bug, we'll pay them 500K to disclose it to us.
And then we can patch the vulnerability and our users don't get hurt. So we take that very, very seriously. And we use all the tools that are disposal to make sure that our code is as secure as possible. Yeah. Right. And then sorry, the last thing is like, OK, so.
If there is any loss, like whether it's from an economic risk event or a smart contract tech,
That's what we call a collateral shortfall. And we have a state note like liquidity pool that sits on chain and can be taken
from to replenish the reserves and the protocol in the event that there is any sort of collateral shortfall. So right now that liquidity poll holds about $3 million.
and up to 50% of that can be used to recapitalize the national in the event of like a hack or some economic risk event. So that's like the last line of defense. But yeah, we do have that as well.
Yeah, and just to clarify this is all for people that might just be tuning in this is all speculative Teddy if I'm not mistaken You guys have been around for relatively and relative in crypto terms a long time and Have you guys ever had an incident like this? There is it is that you guys been clean ever since your inception. Yeah, so we've
We've never had a hack. We have had vulnerability has been reported through a Mune 5. So we actually, like, we paid out, you know, we paid out like a million dollars. This happened in very shortly after, notional
We too went live. This happened, I believe, maybe a year ago, over a year ago now. But we got in a bug report through a munify and it was a critical bug and we paid the guy a million dollars. So actually we even tipped the guy. We gave him some note tokens too.
But yes, this you know, we've never had like any funds lost, but we have had like a vulnerability of that sort and we paid up, you know, so I think that that's like that's what you know, it's sort of like it's scary and it was scary
But it's also something where I just identify these things. If you look at the history of any protocol, almost all protocols, unless they're forks, have had some issue, whether that's a bug report like this or a live hack.
back. And I think it's actually like, you know, it's just something that you know, you try as a team, you do everything you possibly can to make sure it doesn't happen. But you know, then if it does, you just have to, you know, you just have to handle it as best you can and, and, and make sure to pay the guy that tells
you and you know like you know I think it's important and then you build yourself a reputation and then other people come in the future and if you have any other issues they know that you're a guy who does pay out so I think it's it's like a good you know it's important to do that yeah
Yeah, a million dollars quite the reward. I'm assuming it was it was a significant enough bug that warranted such a compensation Yeah, it was a critical bug. Yeah, that's awesome So the note token
Can you tell us a bit about that its utilities respect to the protocol and to tokenomics? Yeah, so basically like the node token is a governance token for the protocol and
It's kind of its current role in the notional ecosystem. So first of all, it's governance. And then it's also like there's like a speaking module where you can bring your note and
And if you do that, like, so that staking pool is like the insurance pool for the protocol that I was just talking about a little bit ago.
So you are taking the risk, you're taking your note, you're taking the risk that it can be seized to use to recapitalize the protocol. But in exchange for that, you're getting a return on your note because basically there's like periodic buybacks of note.
So, the way it works is that notional, because we're integrated with Compound, we earn Compincentives. So, the way it works today is that all the Compincentives that notional protocol earns are used to buy back notes
And then that note that is bought back is given to the note stakers. So I think the current APY for note holders or for note stakers is something like 17 20% Nice and it is this correlates to the rather this links to the
The provide liquidity tab where it says provide e. For example on a point two for a p y then it shows variable yield and it also shows a note incentive yield as well. Yeah, that's correct. So note is also used as liquidity incentives for liquidity providers unnotional.
There's a note-staking module whereby note holders can earn returns and the note is also used as liquidity incentives. Beautiful. So I think that that covers most of my questions. I try to keep things high level. I don't know if Petty
If there's anything you think I missed or you think it's important for us to highlight and discuss, go ahead and mention it now. No, I don't think so. I mean, I think this is pretty good. The only other thing I'd mention is that, you know, we're actually approaching the launch of Notional V3. So we just launched
locked in a time with our auditors for the end of this month. And we're hoping to have no social fee three live towards the end of the next quarter. So maybe roughly three months from now. And no social fee three is going to be a massive step forward.
The details aren't totally public yet, but what I can tell you is that it's going to provide even more opportunities to earn yields. You're going to be able to get higher yields with no.
And then also we're launching a stable coin leverage faults within the next few weeks. And that's going to be awesome. So you're going to be able to earn really high yields on stable coins using the leverage faults or, you know, just lending on notional. You're going to be able to earn high yields doing that too. So yeah, so we got a lot coming.
Awesome. I'm already thinking of some strategies. I like stablecoin yield farming strategies, especially in a bear market. It's a bit safer for my taste. Yeah, for sure. Teddy. Yeah, I think we covered everything. I don't know if any one of the audience wants to come up and ask any questions. We had some great questions earlier today.
on our other AMAs. But yeah, are you working on any other projects? Nope, just notional full time. Beautiful. Well look, I really appreciate your time Teddy. I know you're not feeling all that great. So I'm not going to keep you longer than I have to.
Yeah, I appreciate that. Yeah, yeah, I hope you recover well and don't be surprised by meeting your DMs asking about different potential looking strategies that I could deploy with NOS and all because really the way you broke things down and the way that I, after looking through your website and looking at other protocols, you can
All the different things that you offer I am very intrigued by especially those fixed APIs on assets like Ethereum Yeah, yeah cool, man All right, well yet so you know if you do have questions, you know, let me know happy to answer and then you know again
Thanks, thanks for having me on and yeah, I'll rest up and try and get better. All right, Teddy. Well, I really appreciate your time. We'll call and talk to me. Thank you for joining today. That was the third AMA of the afternoon. We have one more coming up.
I believe it's 11pm UTC. So stay tuned for that. And remember everything you're here on these broadcasts meant for educational purposes only. Nothing is financial advice. So be safe out there everyone and see you on the next one. Take care.