Overview

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Status Quo

Existing systems cannot achieve multi-venue trading without introducing significant latency or requiring collateral fragmentation. In many cases, traders also cannot use their full portfolio as margin. Consider a trader holding spot BTC who seeks to trade on a prediction market or purchase tokens via an AMM on a different chain. To execute the new trade, the trader must first free up margin by selling a portion of their BTC holdings. This approach incurs slippage and fees, triggers a taxable event, and reduces exposure when maintaining the position may be preferred. Subsequently, the trader must bridge the freed collateral to the target chain, which also incurs slippage and introduces latency.

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Protocol Overview

Notional implements a unified margin account that allows traders to access any supported asset, instrument, or exchange from a single collateral pool. Traders can deposit spot assets such as USDC, BTC, ETH, or HYPE. When additional USDC is required to open a position, the protocol automatically borrows it on behalf of traders and uses unrealized PnL and the spot assets as collateral. These spot assets are all risk-weighted through optimized max LTVs. With a single margin balance, traders can open positions across multiple exchanges, beginning with Hyperliquid and Polymarket and later expanding to any venue where assets are stored or traded. The unified margin backs all positions simultaneously, enabling immediate capital redeployment without manual transfers between venues. Liquidity providers supply the required USDC by depositing directly on Notional. In return, they receive interest, a share of trading fees and liquidation PnL. Their deposited assets can also serve as margin for their own trading activity, enabling traders to earn yield on their margin. Operationally, the Notional Protocol maintains accounts on the underlying exchanges and executes all trades through these accounts while keeping an internal ledger of balances and positions. The protocol tracks available margin, enforces risk constraints, and liquidates unhealthy accounts. In practice, this architecture streamlines the trading experience by allowing, for example, a user’s spot BTC position to directly serve as margin for trades on another venue or chain.

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Economic Model

Despite the protocol traders paying the same fees they would on the underlying venues, Notional generates revenue through multiple sources, distributing returns to liquidity providers and the treasury while maintaining an insurance fund for system stability. The protocol captures value through: Trading Fees: Lowering its Hyperliquid costs via fee-tier discounts and HYPE staking, capturing the spread between user fees and the protocol’s discounted venue fees. It may also use builder codes and referral programs to capture additional value. Liquidations: Executing liquidations on behalf of traders, capturing part of the proceeds for profitable liquidations.

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Fee Distribution

Trading fees are split:

• 30% to liquidity providers (distributed hourly pro-rata based on LP shares)
• 50-70% to protocol treasury (operations, development, ecosystem incentives)
• 0-20% to referrers

Liquidation PnL is entirely redistributed to liquidity providers and the insurance fund.

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Liquidity Pool

For each exchange, a shared liquidity pool is available to traders. The protocol enforces an 80% cap on utilization to ensure sufficient liquidity for system stability. New borrows and withdrawals are rejected if utilization would exceed that cap. High utilization (65-80%) triggers elevated interest rates, incentivizing deleveraging or new deposits.

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Existing Solutions

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Lending Markets

Key Limitations:

1. Can only liquidate collateral, not trading positions → forces lower LTVs to account for unobservable position risk
2. Dual-liquidation risk where traders can be liquidated separately on the lending platform and the perpetual exchange

Notional’s Solution: Liquidates collateral and positions together under a single unified risk engine, enabling materially higher effective leverage.

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Centralized Prime Brokerages

Limitations:

• Balance Sheet Constraints: Lending capacity constrained by balance sheet size, unlike decentralized protocols which can access global liquidity pools
• Custody Risk: Require trusting custodians (e.g., FalconX)
• Accessibility Barriers: $1M+ minimum balances, manual onboarding, opaque pricing

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Next Steps