Tarot
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FAQ

What is Tarot?

Tarot is a decentralized lending protocol where users can participate as lenders or borrowers in isolated lending pools. The Tarot Protocol facilitates a new kind of leveraged yield farming experience for borrowers, with enhanced farming and vault rewards, while enabling lenders to earn significant yield on supplied tokens without the risk of impermanent loss.

What is a liquidity provider?

Liquidity providers supply tokens to decentralized exchanges (DEXs) and other DeFi protocols.

What are LP tokens?

When you provide liquidity to a DEX, you receive LP tokens as proof of contribution. For example, if you supply FTM and TAROT to a DEX, you will receive FTM-TAROT LP tokens in return. These LP tokens represent your proportional share of the total liquidity in the DEX for the token pair.
Whenever anyone swaps or trades on the DEX, a small trading fee is accrued to the liquidity pool as a reward for liquidity providers.

How do liquidity providers on DEXs earn yield?

Liquidity providers on automated market maker (AMM) DEXs such as SpookySwap and SpiritSwap earn yield from transaction fees and possibly staking rewards. Tarot enables borrowers and lenders to significantly dial up (or down) the risk (and rewards) of this yield, respectively.

What are farming / staking rewards?

DEXs sometimes offer farms or staking pools allowing liquidity providers to stake their LP tokens and earn additional reward tokens. These farms provide an additional incentive to liquidity providers and help to offset the risk of impermanent loss.

What is impermanent loss?

Impermanent loss is one of the principal risks associated with being a liquidity provider.
The value of an LP token is always backed 50-50 by the underlying tokens in the token pair. Due to the nature of AMMs / constant-product market makers 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 compared to simply holding the tokens, assuming the liquidity is removed at that moment. (Hence, the loss is “impermanent.”)

What is leveraged yield farming?

Leveraged yield farming is a mechanism in Tarot that allows liquidity providers to use their LP tokens to borrow and acquire more LP tokens, with the expectation that the rewards from having more LP tokens (adding more liquidity to the DEX and earning additional yield and farming rewards) will exceed the borrowing cost.
Tarot’s unique LP token collateralization model and liquidation mechanics enable significantly leveraged yield farming positions. The risk of impermanent loss is also amplified with leveraged yield farming.

What is indirect liquidity providing?

Lenders in Tarot indirectly provide liquidity by making their tokens available to borrowers for leveraged yield farming. Lenders do not risk impermanent loss with their supplied tokens, as the risk of impermanent loss is transferred to borrowers in the Tarot Protocol.

What is TVL?

Total value locked (TVL) is a useful metric for DeFi protocols. TVL measures the amount of tokens locked in a protocol at a given time. Tarot includes the following elements in TVL calculations:
  • Total collateral in lending pools (including initial collateral and leveraged positions)
  • Total excess supplied tokens (i.e. that are not borrowed, since borrowed tokens are already accounted for in total collateral or not locked in the protocol)

What is a price oracle?

A price oracle is any contract that provides on-chain access to price information for a token, usually denominated in terms of another token or an off-chain unit of account. Virtually every decentralized lending protocol requires timely and accurate on-chain prices in order to determine the value of collateralized loans, as well as to prevent borrowers from withdrawing more than the value of their collateral at any time.

User FAQ

How is my leveraged APR calculated?

There are various factors in the leveraged APR calculation, such as the current price of earned reward tokens (Tarot Vaults, plus Tarot Farming Rewards, if applicable), earned trading fees, and pool utilization. These are all factored into the estimated leveraged APRs displayed on the Markets page.
The estimated leveraged APR for leveraged yield farming is calculated based on your initial collateral (your deposited LP tokens) and not the total collateral of your position.

Why isn’t my leveraged APR calculated based on my total position size?

If the leveraged APR calculation was relative to the total collateral (your initial collateral, plus any borrowed), the displayed APR wouldn’t change much as leverage is increased.
Imagine you deposit 100 LP tokens that earn 90% APR.
Borrowing 200 additional LP tokens, with 10% borrowing costs, results in 300 LP tokens (total collateral) earning 90% APR. The 3x leveraged APR would be displayed as 250% (270% yield, minus 20% in borrowing costs) on the original 100 LP tokens.

Why am I occasionally unable to withdraw my supplied tokens?

Most likely, the tokens you supplied are fully utilized by the lending pool.
The interest rate model dynamically adjusts rates by increasing the Supply and Borrow APRs during periods of high utilization. Supplied tokens may be temporarily unavailable for withdrawal when utilization is high, since they’re all borrowed. In the meantime, you’ll continue to earn the Supply APR.

What happens to my LP tokens after I deleverage?

Deleveraging breaks down your collateral into its constituent tokens and uses them to repay the outstanding borrowed amounts. If you deleverage the maximum amount, then your collateral will be broken down into the underlying tokens to repay your borrow balance, and any remaining tokens are returned to your wallet as tokens in the token pair, rather than as LP tokens.
If you wish to deleverage and keep the remaining collateral as LP tokens, choose a smaller deleverage amount that still corresponds to the “0 - Infinity” range for liquidation prices (1x leverage).

Why am I occasionally unable to deleverage my position?

If the borrowed amounts for your position are lopsided or not equal, then it’s possible that deleveraging won’t be able to repay your entire borrowed balance for one of the borrowed tokens.
In this situation, you may need to repay some of the borrowed tokens individually, as deleveraging gets tokens via the breakdown of LP collateral (which is always backed 50-50 by the underlying tokens in the token pair).

What are the protocol fees?

There are two types of fees paid by borrowers to lenders in the Tarot Protocol. There is a fixed, one-time borrow fee of 0.1% whenever a borrower takes out a new loan. There is also the interest on borrowed tokens that accrues over time, according to the interest rate model.
There are no fees paid by lenders for supplying tokens, and no deposit or withdrawal fees.
The fee structure of the Tarot Protocol is described in further detail here:

How does a borrower get liquidated?

Every borrow or leveraged position in Tarot has a liquidation price range. If the time-weighted average price (TWAP) reported by the price oracle goes outside the liquidation price range, the position is insufficiently collateralized and in a liquidatable state.

Why are there two liquidation prices for a leveraged position?

A volatile price swing in either direction may cause a borrower’s position to become liquidatable. LP tokens are always backed 50-50 by the underlying token pair, so when the price for the token pair goes up or down, the protocol needs to ensure there is sufficient collateral (in the form of LP tokens) to cover the borrowed amounts of both tokens.
For example, if the price for the token pair decreases and the position becomes liquidatable, this means the collateral is at-risk of being worth less than required to repay the borrowed tokens.
Similarly, if the price for the token pair increases and the position becomes liquidatable, this means the value of the borrowed tokens is at-risk of being too high to be repaid with the collateral. In both situations, to protect lenders, the loan may be repaid by a liquidator and the liquidation incentive is deducted from the borrower’s initial collateral.
The liquidation range for a leveraged position can change over time according to the collateralization formula, described in further detail here:

What happens when a borrower gets liquidated?

When a borrower is liquidated, the collateral is used to repay supplied tokens to the pool. Some or all of the borrowed amount is repaid, plus a liquidator receives the liquidation incentive. The borrower keeps any remaining collateral after liquidation.

Who initiates liquidations?

By design, there is no frontend to perform liquidations as the process should be handled automatically via liquidator bots to ensure the stability of the protocol. Liquidation is permissionless and can be invoked by anyone willing to repay a liquidatable position and receive the liquidation incentive.

How does the reinvest bounty work?

The reinvestment process for Tarot Vaults is permissionless, so anyone can invoke it to compound an entire vault and receive the reward bounty (1% of the vault’s pending rewards). This process, along with the low transaction fees on Fantom, results in Tarot Vaults automatically compounding (up to) many times per hour.
Even without leverage, Tarot Vaults are one of the most competitive auto-compounding vaults on Fantom, with no deposit or withdrawal fees and much lower reinvest fees than similar auto-compounding farms.

What is bTAROT? What is cTAROT?

The bTAROT and cTAROT tokens are receipts for the borrowable (supplied) tokens and collateral (LP) tokens in a lend, respectively. They can be exchanged for their underlying tokens.

Why is my bTAROT/cTAROT balance different from the amount I deposited?

Balances for bTAROT and cTAROT can be different because there is an effective exchange rate between a supplied token and its corresponding bTAROT token, and an LP token and its corresponding cTAROT token.

I deposited tokens, but why can’t I see the deposited amount in the UI?

It’s possible for RPC issues due to network congestion to result in outdated information in the UI. You are encouraged to set your RPC endpoint configuration for Fantom to:
Outdated information may also be displayed in the UI due to slow syncing with the subgraph. If your transactions have gone through and the subgraph catches up, it will eventually display properly. The APRs displayed in the UI use information from the subgraph in their calculations, but the actual APRs and interest rate models are applied via smart contracts.

How do I see how much interest has accrued for my supplied tokens?

You can see your accrued interest reflected in an increasing supply balance over time as your lending position (bTAROT) accrues fees via the Supply APR.

What is the TAROT token used for?

In the future, TAROT token holders will be able to participate in protocol governance. The parameters of the protocol, including the use and distribution of protocol reserves, will be at the discretion of governance. Currently, the fees collected by the protocol reserves remain as borrowable tokens supplied to lending pools.
Last modified 4d ago