Tarot: Great Power and Greater Responsibility

Tarot came to surface on Fantom in May 2021 and has since then, cemented itself as a non-custodial, permissionless blue-chip project on the network. Founded by pseudonymous developer Tigris of Gaul, who introduced users of the chain to the new DeFi primitive of Leveraged Yield farming and isolated lending pools. Users can receive yield on their assets in a number of ways: Lending, Borrowing, Leveraging their LP tokens and staking the governance token for xTarot. Tarot’s Vault system is also unique on Fantom, in that bounties are given out to compound the rewards for each vault. Tarot’s governance is managed by the Tarot DAO, where users of the protocol (and holders of xTarot) will direct Tarot’s trajectory from here, into the future.

Leveraged Yield Farming

Leveraged yield farming allows users who seek leverage on their assets to also benefit from the reward structure of transaction fees paid out to liquidity pools. User’s deposit LP tokens from SpookySwap or SpiritSwap as collateral and can lever them up to 10x for some pools and at least 5x for every pool This leverage allows tailored exposures to an individual users’ needs and is facilitated by lending pools. When levering up or down, liquidation prices are not fixed and may change as your borrowing costs increase. Prices are calculated using the time-weighted average price (TWAP) for the token pair from the Tarot Price Oracle. Liquidations occur when the TWAP price for the pair crosses the boundary of liquidations (pictured below). The higher the leverage, the smaller the liquidation zone.

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Price Oracle

Tarot uses their very own Price Oracle, developed by mighty Tigris. The Price Oracle allows for an accurate and automated reflection of the TWAP of pooled assets and facilitates liquidations.

Isolated Lending Pools

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Lenders deposit their tokens and receive bTarot single-sided yield in the form of .

Borrowers deposit LP tokens and receive cTarot. They can either take out a loan against their collateral in the underlying token or leverage their LP token positions with greater yield. An important thing to understand is the increased yield is applicable to the whole leveraged position, however, the shown Leveraged LP APR is the result of multiplying your leverage multiplier to the original APR with no leverage.

Ex: You deposit 100$ of LP tokens into the FTM/TAROT Vault. The unlevered position has 2.21% APR

You lever that up 5x → your position is now 500$ and the 5x APR is 176% now.

The 176% APR is applicable to your initial 100$.

Bounties and Rewards

The ongoing fees generated by borrowing activity and Supply Vaults accrue to the protocol’s reserves and pay out the xTAROT rewards. The processing of fees and distribution of TAROT to xTAROT holders is permissionless and can be invoked by anyone on a per-token basis. In return for invocation, the caller receives a reward bounty in TAROT (currently 0.1% of the processed amount).

The Tarot Vault contracts are based on Impermax\’s StakedLPToken functionality, which was originally designed to work with QuickSwap on Polygon and appears to have been inspired by Alpha Homora\’s vault functionality. QuickSwap uses a different farming framework that\’s not based on MasterChef. So, to support Spooky and Spirit farms, these contracts were adapted (once again taking inspiration from AH, which supports quite a few farming frameworks).

Supply Vaults

Supply Vaults enable users in automatically earning yield through multiple lending pools, with just one deposit. The strategies behind the Vaults provides blended interest rates to from multiple supply pools.

Tarot Supply Vault tokens (tTokens) represent a share of the total underlying value of a Tarot Supply Vault and they continuously earn yield over time.

Each Supply Vault has its own tToken that corresponds to an underlying token. For example, if you stake FTM in the Tarot FTM Supply Vault, you receive tFTM. tTokens are much like receipts and may be transferred, used as collateral, or even composed into other protocols.

Fee Structure

Compared to other vaults, Tarot Supply Vaults offer a highly competitive fee structure:

  • 10% performance fee on earned yield
  • No management fee
  • No deposit fee
  • No withdrawal fee
  • No lockups

Future Possibilities for tTokens

In the future, you may be able to provide tTokens as collateral to stablecoin lending protocols that accept interest-bearing tokens. For example, users can continue to earn yield in the Tarot Protocol while borrowing against the increasing collateral value.

xTarot

Staked TAROT (xTAROT) is the gateway for on-chain governance of the Tarot Protocol.

Benefits of staking TAROT for xTAROT:

  • Earn TAROT rewards from protocol revenue
  • Enhanced yield by supplying staked TAROT in lending pools
  • Increased liquidity across multiple lending pools
  • Collateralization via the composable xTAROT token
  • Participation in Tarot DAO governance
  • Stake xTAROT in partner-incentivized pools for additional rewards
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Staking TAROT, receiving xTAROT that earns TAROT rewards

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Staking xTAROT and earning tFTM. (note: APR is the sum of APR from staking TAROT to xTAROT + APR for staking xTAROT to earn tFTM)

You can learn more about xTarot and Tarot Supply Vaults here: Tarot Supply Vaults

Fee Distribution

With the launch of xTAROT, ongoing fees accrued to the Tarot Protocol will be used to buy back and distribute TAROT rewards to xTAROT holders as follows:

  • 50% → Remain in protocol reserves (as bTAROT and tTokens)
  • 50% → Buy back and distribute TAROT to xTAROT holders

The fees accrued to the Tarot Protocol prior to the launch of xTAROT will remain in protocol reserves (as bTAROT) for future opportunities. The strategy for reserve management, as well as future adjustments to the distribution of ongoing fees, will be at the discretion of protocol governance.

Governance

xTAROT exists to enact protocol governance through Tarot DAO.

The core tenets of Tarot DAO are as follows: self sustaining, community governed, governance minimized, modular and flexible

Tarot DAO empowers the Tarot community to propose ideas, provide input, and signal sentiment for various proposals, as well as unlock unprecedented capital efficiency with novel protocol treasury and reserve management strategies.

Recent proposals include TIP-006, which enables xTAROT holders to vote on the allocation of farming incentives to pools in the Tarot Farming Rewards program in a more direct manner; the other recent proposal, TIP-005, looks to adjust farm weights for the Tarot Farming Rewards program.

Proposals that have passed before that:

TIP-001: Adjusted protocol parameters to enable higher maximum leverage and increase token utilization across all lending pools.

TIP-002: Migrated liquidity to the Spirit Boosted lending pools.

TIP-003: Adjust farm weights in the Tarot Farming Rewards Program, to direct TAROT incentivization to pools where increased borrowing activity is desired.

TIP-004: A test drive of Olympus Pro’s bonding program, to acquire protocol-owned FTM-TAROT liquidity; the other proposal.

All 6 of Tarot’s proposals made have been passed with resounding strength

Interest Rate Model

Tarot uses an adaptive interest rate model. This model determines Borrow and Supply APRs for each lending pool, which are isolated. Each borrowing pool uses its own interest rate, independent of others.

Utilization rate is the % of tokens supplied by lenders to a lending pool that are currently utilized by borrowers in outstanding loans.

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The utilization rate

Token Distribution

$TAROT is a fixed-supply token for the Tarot Protocol. The tokenomics, which include a 4-year farming rewards program, will promote the growth of the protocol for years to come.

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Tarot Tokenomics

The total supply of $TAROT is 100,000,000. These tokens, and their vesting periods, are allocated as follows:

  • Farming Rewards: 59,000,000 over 4 years
  • Protocol Growth: 19,000,000 over 4 years
  • Core Team: 13,300,000 over 4 years
  • LGE Participants: 3,200,000 over 1 year
  • Early Tarot Users: 3,000,000 over 1 year
  • Initial Liquidity: 2,500,000

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Tarot Emission Schedule

Farming Rewards Program

The Tarot Farming Rewards program is an ambitious, multi-year liquidity mining program that will distribute 59% of the total supply of TAROT to borrowers and leveraged yield farmers in the Tarot Protocol.

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Tarot Farming Rewards will decrease by 2.4% every two weeks.

Approximately half of all farming rewards will be distributed to farmers in the first year of the Tarot Farming Rewards program, with 3% of the total supply of TAROT distributed in the first month.

Risks

Leverage is a powerful tool but like Uncle Ben would say, Great Power comes with great responsibility. In DeFi and non-custodial dApps, your ability to unlock the power of Tarot belies on you and becomes your responsibility.

When you deposit your LP tokens as collateral to take out a loan or enter into a leverage yield farming position, your collateral is always at-risk and may even be liquidated when certain conditions are met.

The risk of impermanent loss is amplified with leveraged yield farming. Impermanent loss may result in liquidation for a leveraged position. Liquidation is always possible with borrowing or leveraged positions in Tarot.

Tarot demonstrates an estimate of the liquidation price range when taking a loan: higher leverage implies a smaller range, and a leveraged position becomes liquidatable when the relative price for the token pair moves outside of this range. When this happens, your collateral may be liquidated in order to repay the loan, plus a liquidation incentive on the borrowed amount.

Liquidation prices are not fixed and may change as your borrowing costs increase. Prices are calculated using the time-weighted average price (TWAP) for the token pair from the Tarot Price Oracle.

Looking Ahead…

As Tarot and the whole Fantom grow in unison, the protocol looks to grow its DAO and treasury, all while continuing to help provide better, more efficient liquidity to protocols and the leverage that users look for.

The emissions and the initial Tarot Farming Rewards program will end in 2025, but that doesn\’t necessarily mean the end of incentivization by the protocol. Ultimately, the long term direction of the protocol is determined by its stakeholders through Tarot DAO governance.

The future is bright for Tarot.

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