https://gov.optimism.io/t/review-gf-phase-1-voting-cycle-7-tarot/3567
We are in support of the proposal and respect the creative attention to feedback. We’re beginning to take the view that liquidity mining and usage rewards are generally a -EV activity unless they amplify activity that is already sticky or promise to improve the function or use of protocols through composability or network effects. This proposal offers both.
It’s not clear to us that the changes made here are more cost-efficient than the original proposal made (as they’re direct incentives), but the emphasis on central tokens — wholly constructed by Tigris with little direction — speaks to the creativity and capability of this team.
Adapted from previous review Tarot is a leveraged yield compounder. It’s a tightly scoped, essential defi lego that focuses on a few valuable features and has earned a genuine following.
On Tarot, borrowers depositing LP tokens can leverage their positions to amplify yield on their invested capital, though doing so amplifies impermanent loss and introduces liquidation risk. Liquidity providers can also deposit LP tokens without borrowing to enjoy autocompounding, similar to what Beefy offers.
On the other side, lenders can stake single tokens for variable yield, in some cases generating rates well above market with the risk of having their funds temporarily unavailable or incurring bad debt loss.
Protocols benefit from this key defi piece; Tarot encourages liquidity provision on dexes by offering LP autocompounding and juiced rewards, and we see some additional composability possible from the various borrow, lend, and collateral tokens it issues.
Optimism’s seen noteworthy organic adoption of Tarot, despite the lack of incentives to date and the limited LP coverage (only Velodrome and Zipswap). Tarot plans to expand to Beethoven X, and our expectation (and hope) is that Tarot will soon be able to cover other dexes as well.
540,000 OP over 24 weeks, or ~90,000 OP/month, for borrow and supply incentives on various Dex pairs
30% to OP-borrow incentives This dramatically increases demand for OP and will help act as a stopgap solution until we find a more Defi-native means of deploying OP in a way that allows it to be a sustainable funding source.
30% to other Optimism pairs
All of these pairs have OP, ETH, or USDC to match the supply-side incentives.
40% to single-sided supply incentives
4500 OP/week to OP 2250 OP/week to ETH 2250 OP/week to USDC
Single-sided supply incentives