Tapir FAQ

Frequently Asked Questions about Tapir

What is Tapir Protocol and what problem does it solve in DeFi?

Tapir Protocol is a decentralized depeg protection marketplace designed to improve risk management in DeFi. It addresses the inefficiencies of traditional protcols that require locking up capital in unproductive reserves. Tapir allows users to buy or sell protection against asset depegs while keeping their assets actively generating yield, optimizing strategies without sacrificing returns.

How does Tapir's depeg protection marketplace work?

Tapir uses a token splitting mechanism. Users split their assets into two components: DP (Depeg Protected Asset) and YB (Yield Boosted Asset). The DP token acts as protection, compensating holders if the asset's value falls below its peg. The YB token amplifies returns by assuming extra depeg risk and is sold to yield-seeking investors. These DP and YB tokens are then traded in an integrated AMM, allowing for real-time pricing of risk and yield.

What are the key benefits of using Tapir Protocol for protection buyers (DP holders)?

DP holders benefit from hedging depeg risk without sacrificing yield potential. They also gain flexible coverage, being able to buy & sell their DP tokens anytime and customize their exposure.

What are the key benefits for protection sellers (YB holders)?

YB holders can earn premiums by underwriting depeg risk by simply holding YB tokens. A significant benefit is the perfect capital efficiency, as YB tokens derive value from the underlying asset avoiding the need for idle collateral.

How does Tapir contribute to the DeFi ecosystem as a whole?

Tapir creates a liquid market for pricing and trading risk, addressing a significant gap in the DeFi landscape. It also avoids the inefficiency of traditional depeg protection protocols by ensuring that 100% of the capital remains productive instead of being locked in reserves. This allows DeFi to attract investors from traditional finance who now have the opportunity to derisk their DeFi exposure.

What makes Tapir stand out from other risk management solutions in DeFi?

Tapir's key differentiators are its decentralized risk pricing, capital efficiency, flexibility and transparent resolution mechanism. The AMM-driven market allows supply and demand to dynamically set the cost of depeg protection, reflecting real-time risk assesment of the market. Protection pools expire after fixed durations, enabling structured risk management. Automated depeg checks at pool expiry use on-chain price oracles to determine payouts, ensuring fairness and transparency.

What are DP and YB tokens?

DP (Depeg Protected) tokens protect their holders from depegs by compensating their losses in case of depeg. YB (Yield Boosted) amplify the returns of their holders by assuming additional depeg risk.

What is the role of the AMM in the Tapir Protocol?

The integrated AMM (Automated Market Maker) plays a vital role in enabling dynamic trading of DP and YB tokens. This allows for real-time pricing of risk based on supply and demand, ensuring a decentralized and efficient marketplace for depeg protection.