Tarot
  • Introduction
  • User Guide
  • Deployed Contracts
  • Addresses
  • FAQ
  • Security Audits
  • Risks
  • Token Migration
    • Bridging TAROT v2
    • TAROT v1 Migration
  • Tarot Protocol
    • Protocol Overview
    • Lending Pools
    • Collateralization Model
    • Liquidation
    • Tarot Vaults
    • Price Oracle
    • Fees
    • Interest Rate Model
  • Supply Vaults
    • Supply Vaults
    • tTokens
  • Spirit Boosted
    • tinSPIRIT
  • BoostMaxx
    • BoostMaxx
  • Tokenomics
    • The TAROT Token
    • xTAROT
    • Governance
    • Tokenomics
    • Emissions
    • Farming
  • Resources
    • Media Assets
  • Links
    • Website
    • Discord
    • GitHub
    • Medium
    • Snapshot
    • Twitter
  • Deprecated
    • Bridging TAROT (Multichain)
Powered by GitBook
On this page
  1. Tarot Protocol

Collateralization Model

PreviousLending PoolsNextLiquidation

Last updated 3 years ago

The value of an LP token is always backed 50-50 by the underlying tokens in the token pair. In order to determine how much collateral is necessary for borrowing and ensure borrowers can’t borrow more than the value of their collateral, the Tarot Protocol needs to reliably calculate the value of LP tokens.

The collateralization model in Tarot determines the collateral needed for a loan, given the safety margin and liquidation incentive parameters for the lending pool.

These safety margin and liquidation incentive parameters work to ensure that even after a volatile price swing in the underlying tokens, there will always be enough collateral to both repay the loan and pay a liquidator in the event of liquidation.

More information on the collateralization model can be found on Medium:

Tarot Deep Dive: Part One
Tarot Deep Dive: Part Two