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Overview

Notional supports multiple collateral assets with different loan-to-value (LTV) ratios and risk parameters.

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Supported Collateral

Risk parameters vary by asset based on historical volatility and market liquidity:
AssetMax LTV
BTC85%
ETH85%
HYPE75%
SOL75%
USDC100%*
*USDC has 100% LTV because it’s the borrowing asset - borrowed USDC doesn’t require haircut

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Collateral Structure

Each asset balance is tracked separately with four key fields: the asset identifier, total balance, hold amount (reserved for pending withdrawals), segregated balance (not available for borrowing), and last updated timestamp.

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Balance Categories

Total Balance
  • All funds owned by the account
  • Includes available, hold, and segregated
Available Balance
  • Calculated as total minus hold minus segregated
  • Funds available for trading and margin
Hold
  • Funds locked for pending withdrawals
  • Released when withdrawal completes or fails
Segregated
  • User-designated funds not used for margin
  • Cannot be used for borrowing or margin
  • Protected from liquidation

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Core Accounting Formulas

All user actions are governed by three fundamental formulas from the Notional whitepaper:

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Account Balance

Account Balance represents the total value of all deposited assets at current market prices: 
Balance = Σ (Asset_i × Price_i)
Example: 1 BTC at 40,000+10,000USDC=∗∗40,000 + 10,000 USDC = **50,000 balance**
Assets are valued at current spot prices without any haircuts or max LTV adjustments.

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Account Value

Account Value represents net equity after accounting for unrealized gains/losses: 
Account Value = Balance + unrealizedPnL
Example: 50,000balance+50,000 balance + 2,000 unrealized profit = $52,000 account value
Account Value is used for bad debt calculations and determining if an account has positive equity. Borrowed USDC is tracked separately and calculated as: max(0, margin requirements - available USDC).

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Total Margin Value

Total Margin Value represents the effective collateral available for margin purposes: 
Total Margin Value = Total Collateral + unrealizedPnL

where:
Total Collateral = Σ (Asset_i × Price_i × MaxLTV_i)
Example:
  • Collateral: 1 BTC at $40,000 (85% max LTV) + 10,000 USDC (100% max LTV)
  • Total Collateral: (1 × 40,000×0.85)+(10,000×40,000 × 0.85) + (10,000 × 1 × 1.0) = $44,000
  • With +2,000unrealizedPnL:∗∗TotalMarginValue=2,000 unrealized PnL: **Total Margin Value = 46,000**
Total Margin Value is the denominator in the Cross Margin Ratio calculation.

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Maintenance Margin Requirement (MMR)

Cross positions are liquidated when total collateral falls below the maintenance margin requirement: 
MMR = Σ (|Size_i| × Price_i / (2 × MaxLeverage_i))
Example: 10 BTC-PERP long at $40,000 with 20x max leverage
  • MMR = |10| × 40,000/(2×20)=40,000 / (2 × 20) = 10,000

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Initial Margin Requirement (IMR)

IMR is the minimum equity required to open a new position, stricter than MMR: 
IMR = Σ (|Size_i| × Price_i / Leverage_i)
Example: A 10 BTC-PERP position at 20x leverage requires **20,000IMR∗∗.TheMMRwouldbe20,000 IMR**. The MMR would be 10,000 - exactly half of IMR at max leverage.

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Cross Margin Ratio

Account health is measured by the Cross Margin Ratio: 
Cross Margin Ratio = MMR / Total Margin Value
Example: With Total Margin Value of 46,000andMMRof46,000 and MMR of 10,000:
  • Cross Margin Ratio = 0.217 (21.7%)
Interpretation: The ratio represents the percentage of effective collateral used for maintenance margin. Lower ratios are healthier (less margin used).
Liquidation Thresholds:
  • Partial Liquidation: Margin Ratio ≥ 1.0 (equity below maintenance margin)
  • Full Liquidation: Margin Ratio ≥ 1.5 (equity < 2/3 maintenance margin)

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Deposit Flow

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1. Transfer to Protocol

Transfer USDC to the protocol address using the ERC-20 transfer function. For example, 1000 USDC (6 decimals) = 1000000000.

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2. Report Deposit

Submit a POST request to /exchange with action type “reportDeposit”, specifying the asset, amount, transaction hash, and exchange ID.

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3. Event Emitted

A DepositDetected event is emitted containing the user address, asset ID, amount, transaction hash, and exchange ID.

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4. Balance Updated

The total balance is incremented by the deposit amount while hold and segregated remain unchanged. For example, a 1000 USDC deposit increases total from 5000 to 6000.

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Withdrawal Flow

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1. Initiate Withdrawal

Submit a POST request to /exchange with action type “withdraw”, specifying the asset, amount, destination address, and source (balance or segregated).

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2. Funds Placed on Hold

A WithdrawalInitiated event is emitted containing the withdrawal details. The balance is updated to move the withdrawal amount from available to hold. For example, a 500 USDC withdrawal increases hold from 0 to 500 while total remains at 6000.

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3. Withdrawal Executed

A WithdrawalCompleted event is emitted with the transaction hash. The balance is updated to reduce total by the withdrawal amount and release the hold. For example, total decreases from 6000 to 5500 and hold returns to 0.

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Borrowing Power

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Available to Borrow

Available to borrow is calculated as account value minus maintenance margin minus current borrowed amount. Example: With account value of 16,900,maintenancemarginof16,900, maintenance margin of 475, and current borrowed of 5,000,theavailabletoborrowis5,000, the available to borrow is 11,425.

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Maximum Position Size

Maximum position size is calculated as available to borrow times leverage divided by mark price. Example: With 11,425availableat5xleverageandBTCat11,425 available at 5x leverage and BTC at 95,000, the maximum position size is 0.6 BTC.

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Multi-Collateral Examples

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BTC Collateral Only

With 1 BTC collateral at 40,000anda10BTC−PERPlongpositionat40,000 and a 10 BTC-PERP long position at 40,000 (20x max leverage):
  • Balance: $40,000
  • Total Collateral: $34,000 (applying 85% LTV)
  • Total Margin Value: $34,000 (no unrealized PnL)
  • MMR: $10,000
  • Cross Margin Ratio: 0.294 (29.4%) ✅ Healthy

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BTC + USDC Collateral

With 1 BTC at $40,000 and 10,000 USDC collateral, same 10 BTC-PERP position:
  • Balance: $50,000
  • Total Collateral: 44,000(44,000 (34,000 from BTC + $10,000 from USDC)
  • Total Margin Value: $44,000
  • MMR: $10,000
  • Cross Margin Ratio: 0.227 (22.7%) ✅ Healthier

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With Unrealized Loss

With 1 BTC collateral and 10 BTC-PERP position entered at 40,000,nowmarkedat40,000, now marked at 38,000:
  • Unrealized PnL: -$20,000
  • Balance: $38,000 (BTC price also dropped)
  • Total Collateral: $32,300 (applying 85% LTV to current price)
  • Total Margin Value: $12,300 (including unrealized loss)
  • MMR: $9,500
  • Cross Margin Ratio: 0.772 (77.2%)
Still healthy but approaching danger zone (1.0 = liquidation)

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Next Steps

Interest Model

Borrowing rates and funding

Liquidations

Automated liquidation process