Would like to clarify a few items which appear to have been missed during review of Tarot’s proposal by Committee A:
Distribution Period:
The distribution period was extended in response to community feedback, as outlined in our Summary of Incorporated Feedback.
Use of OP Tokens:
Regarding the 10% portion of OP, the use of these tokens is quite clear. From our proposal, the complete breakdown is:
The OP will be paired with team-held TAROT and provided as initial liquidity on Optimism for a period of at least 12 months.
Focus on Optimism Pairs:
For the rest of the OP incentives (90%), the idea is to use them towards TAROT liquidity, and incentivize general borrowing/lending activity (for all Optimism pairs) within Tarot via TAROT incentives. The co-incentives allocation following the adoption of TIP-018 (which includes 3M TAROT) is flexible, and can be used to incentivize Tarot activity for any pair, not just those that are TAROT-based. One such use of this allocation is via Tarot’s own single-token TAROT farming rewards mechanism, which tracks and rewards borrowing activity in the protocol.
Currently, we’ve found bribing to be the most capital-efficient liquidity incentivization mechanism, but using OP incentives to drive liquidity for non-TAROT pairs (e.g. BTC-ETH or OP-ETH), while benefiting Tarot’s growth to some degree, would not be as effective as incentivizing Tarot activity directly.
This is because Tarot is different from other lending protocols, in that DEX rewards are directly correlated with and intimately tied to the activity in our isolated lending pools. This is evidenced by our DEX liquidtiy incentivization to date, which has resulted in ~$135K borrow activity in a single pool on Optimism.
From our proposal:
By significantly increasing the available liquidity for TAROT on Optimism, Tarot will have the flexibility to offer a number of direct or targeted incentivization models on Optimism for lending pools. In practice, the increase of borrowing activity in Tarot’s lending pools creates a flywheel effect and, in response to higher pool APRs, lenders are incentivized to supply additional tokens, thus increasing TVL and liquidity across the ecosystem.
Liquidity incentivization for the TAROT-based pairs will encourage Tarot stakeholders to provide deep liquidity in the OP ecosystem. This distribution helps Tarot to continue to offer competitive yields, generated by supply and demand for loans in isolated lending pools, to users on Optimism, and will facilitate the creation and expansion of additional lending pools (e.g. USDC/TAROT) with attractive leveraged APRs.
Addendum:
Relative to other proposals, an immense amount of discussion has taken place in Tarot’s proposal thread since its introduction in July. None of the members of Committee A provided any feedback, nor asked any questions, prior to delivery of their recommendation, despite having the opportunity to do so in the preceding weeks and months that Tarot’s proposal has been available for review/discussion. I would have been, and continue to be, happy to address any items that the members of Committee A feel need clarification.