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Last updated: Aug 20, 2023
Tarot is a decentralized lending platform that allows its users to lend and borrow crypto in isolated lending pools. Lenders can supply tokens to whichever lending pool they choose in the Tarot Protocol and earn passive yield with no impermanent loss. Borrowers deposit Liquidity Provider (LP) tokens in lending pools and borrow additional tokens in the token pair. This process enables leveraging LP tokens for more LP tokens, thus allowing leveraged yield farming and enhanced LP rewards.
Impermanent loss is considered one of the principal risks associated with being a liquidity provider. An LP token’s value is always backed 50-50 by the underlying tokens in the token pair. However, due to the nature of AMMs to uphold this ratio, a significant swing in the price of the underlying tokens relative to each other can result in a greater loss to liquidity providers than simply holding the tokens, assuming the liquidity is removed at that moment.
The platform combats this risk thanks to its leveraged yield farming mechanism, which allows liquidity providers to use their LP tokens to borrow and acquire more LP tokens. The expectation is that the rewards from holding more LP tokens, thus adding more liquidity to the DEX and earning additional yield and farming rewards, will exceed the borrowing cost. Lenders do not risk impermanent loss with their supplied tokens, since the risk of impermanent loss is transferred to borrowers in the Tarot Protocol.
In order to borrow money on the Tarot app, a user first has to deposit LP tokens to a lending pool corresponding to the LP tokens to be deposited. Each pool has an overview of information for each borrowable token in it, such as Total Supply, Total Borrowed, Utilization, Supply APR, and Borrow APR. New users are required to approve their first transaction on the platform and confirm it by their wallet.
To leverage LP tokens once they have been deposited, the customer chooses the lending pool corresponding to the LP tokens to be leveraged, and after picking the amount desired is presented with information including New Leverage, New Liquidation Prices, Borrow Fees, Trading, Reward, and Borrow APR, as well as the Estimated APR for the leveraged position.
Once a person wants to deleverage their LP tokens, they only need to navigate to the lending pool corresponding to the LP tokens, enter the amount they wish to deleverage, and confirm the information presented for the position – New Leverage, New Liquidation Prices, Repay and Receive amounts, and the Estimated APR.
Borrowing, repaying loans, and lending assets follow the same steps through the user-friendly interface of the platform.
The project also has a Farming Rewards program, intended to last four years and distribute 59% of the total supply of TAROT to borrowers, leveraged yield farmers, and stakeholders in the protocol. In order to participate in it, users need to choose a farming-enabled lending pool corresponding to the TAROT farming rewards they want to claim. The dApp has a Farm tab which shows the amount of TAROT claimable for the lending pool, once a customer has leveraged or borrowed assets from it.
Another functionality provided by the company is Supply Vault, intended to be used as a lending aggregator. In it, users can earn yield across multiple lending pools, taking advantage of its automated strategies.
At the time of writing this article, the only wallet Tarot supports is MetaMask, however, the dApp also works with all wallets integrating the WalletConnect protocol.
Currently, TAROT can be stored in hardware wallets such as Ledger Nano S, and Ledger Nano X, besides the exchanges where the token is tradeable and the Tarot platform itself.
The platform also provides staking of TAROT in xTAROT – which is “the gateway for on-chain governance and fee distribution of the Tarot Protocol”. Stakeholders can govern key parameters of the protocol such as fees and rates, as well as determine the distribution of fees accrued to the protocol’s own reserves.
The total supply of TAROT is 100,000,000 allocated and vested as follows: 59% go for Farming Rewards over a four-year period, 19% are allocated towards the growth of the protocol over four years, 13% are for the core team behind the project and will be vested for four years as well. 3.2% are distributed among liquidity providers during the first year of the project, and 3% are given to the early Tarot Protocol users over the first year. The remaining ~2.5% provided the initial liquidity of the platform.
The platform utilizes tTokens – Tarot Supply Vault tokens, which represent a share of the total underlying tokens in a Supply Vault and constantly earn yield over time. Each vault has its own tToken corresponding to an underlying token, meaning if the user stakes for example USDC in the Supply Vault, they receive tUSDC.
tTokens can be used to unstake and receive share of the underlying tokens in the Supply Vault and are transferable, can be used as collateral, or composed into other protocols. They earn yield through their exchange rate, and each share of a tToken represents the increasing balance of its underlying token as yield is being earned.
The main token – TAROT has no implied value beyond its utility as a governance token. In order to participate in protocol governance, users are required to stake TAROT for xTAROT.
Supplying staked TAROT in lending pools provides enhanced yield, besides participation in the DAO governance, increases the liquidity across multiple pools, and provides additional rewards in partner-incentivized pools. Half of the ongoing fees accrued to the Tarot protocol are used to distribute TAROT rewards among xTAROT holders by buying back and distributing TAROT, whereas the other half remains in the protocol reserves as bTAROT and tTokens.
The Tarot team consists of experienced developers in the DeFi space with a background in game theory and protocol mechanics. They are led by Tigris of Gaul, who keeps his anonymity like the rest of the team choosing “to be judged by deployed contracts”. Although the bar is higher for projects whose developers decide to stay anonymous, the Tarot Protocol team believes that “consistently acting with integrity and helping others” are the key aspect to earning the community’s trust.
Besides getting support from the Fantom Network in a spotlight article on the Fantom Foundation blog which mentions TAROT as “one of the first native Fantom DeFi protocols on the network”, the platform doesn’t have any partnerships announced officially as per the time of writing.
At the moment the team is working on delivering a better user experience in the xTAROT staking program and further decentralizing the governance of the platform. They are also on the lookout for partnerships with major protocols and are developing Advanced Lending Pools, however, no information regarding them is being shared publicly yet.
Recently the project announced they are participating in the Fantom ecosystem program committed to making 370,000,000 FTM available for grabs among protocols on its ecosystem. Tarot provides an inaugural xStaking tFTM rewards pool, exclusively available to xTAROT holders. This means the Supply Vault users earn TAROT and FTM yield by staking xTAROT in the tFTM pool.
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