Notional Finance Announces Notional Exponent - First Leveraged Yield Protocol

**Notional V3 has permanently shut down** following a November 3rd Balancer V2 hack that devastated the protocol. **The damage was severe:** - Leveraged vault users lost 100% of their positions - ETH lenders faced massive haircuts: 56% on Mainnet, 19% on Arbitrum - Total bad debt reached 713 ETH across both networks **What happened:** The hack targeted five vaults containing ETH pairs, zeroing out all collateral values. Notional's team immediately paused the protocol but determined the damage was too extensive to continue operations. **User impact breakdown:** - **Vault holders:** Complete loss of positions - **ETH lenders:** Significant haircuts on asset values - **Other users:** No haircuts applied **Recovery efforts:** Notional used all reserves (~$485,000 total) to minimize ETH lender losses. The team converted non-ETH reserves to ETH for proportional distribution to affected users. **What's next:** Balancer is working with authorities on potential fund recovery. Any recovered assets will be distributed proportionally to Notional users. The team is evaluating future plans.

**Notional V3 is winding down** on Mainnet and Arbitrum following the Balancer V2 exploit that created 641.4 ETH bad debt on Mainnet and 80.2 ETH on Arbitrum. **Impact on users:** - Users in Balancer/Aura leveraged vaults face **100% loss** of position value - ETH lenders and liquidity providers will see **significant haircuts** to account values - Cross-currency borrowers will be **auto-migrated to Aave** **Wind-down process begins November 11-12** with borrower migrations. Each migrated borrower receives a Gnosis safe with dual ownership (borrower + Notional) to manage their Aave position. Notional cannot function properly with this level of bad debt and will publish detailed withdrawal plans for remaining users.

**Notional Exponent Beta** is launching with a **6-week program** featuring innovative leveraged yield strategies. **Key Features:** - 4 new leveraged yield strategies - 100,000 $NOTE token incentives for participants - Beta testing phase for the world's first leveraged yield protocol This represents the **next evolution** of Notional's fixed-rate lending protocol, expanding beyond traditional borrowing and lending into leveraged yield generation. The beta program offers early access to test these new strategies while earning substantial NOTE rewards for participation.

Notional Exponent addresses a critical DeFi challenge: managing illiquid collateral that requires days to redeem. The protocol introduces **Smart Liquidation**, a solution designed to handle slow-moving collateral in DeFi lending markets. Key features: - Automated handling of illiquid assets - Reduced risk for lenders - Streamlined liquidation process This development builds on Notional's existing fixed-rate lending infrastructure, which currently manages approximately $500M in TVL. The solution aims to expand DeFi lending markets beyond instantly liquid assets, potentially opening new opportunities for real-world assets on-chain.