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Tarot is a decentralized lending protocol in which users can participate as lenders or borrowers in isolated lending pools. Lenders can provide liquidity indirectly without the risk of impermanent loss. Lenders supply individual tokens to a lending pool, similar to single-sided staking, and earn a passive yield. Borrowers can use LP tokens as collateral in a lending pool to borrow and engage in leveraged yield farming with significantly increased LP rewards
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
