What is Bucket Protocol (BUT)

Exploring Bucket Protocol: A New Era in Decentralized Finance

Introduction

In the ever-evolving landscape of decentralized finance (DeFi), the Bucket Protocol stands out with its innovative approach to stablecoin management. Operating on the Sui Network, this protocol aims to enhance financial efficiency and user experience through its flagship stablecoin, $BUCK, and its governance token, $BUT. This article delves into the features, operations, timelines, as well as the creator and ecosystem contributors behind this ambitious project.

What is Bucket Protocol?

Bucket Protocol is a decentralized stablecoin protocol allowing users to borrow $BUCK, a stablecoin pegged to the US dollar. Users can lock their crypto assets in over-collateralized debt positions (CDPs) to mint $BUCK. The unique mechanics of Bucket Protocol enable zero-interest loans while retaining exposure to the underlying assets[1][6][12].

Core Features

1. Over-Collateralized CDPs: Users must maintain a minimum collateral ratio of 110% to mint $BUCK, providing a safety net for the protocol[1][14].

2. Peg Stability Mechanisms: The protocol incorporates a Peg Stability Module (PSM) that facilitates one-to-one swaps with established stablecoins like USDC/USDT. This mechanism, along with a redemption system, ensures that the $BUCK maintains its $1 peg even during market fluctuations[1][12][15].

3. Governance-Free Design: Unlike other DeFi protocols, Bucket Protocol operates without centralized governance. Its parameters are managed algorithmically, reducing the risk of manipulation and enhancing decentralization[1][6].

4. Real-Time Liquidation: The protocol has an active system for real-time liquidation of under-collateralized positions, aimed at safeguarding the stability of the ecosystem[1][16].

Who is the Creator of Bucket Protocol?

The project was co-founded by Pierce (ilmondo), who has a strong background in the Web3 sector. The team comprises contributors from various technical and financial backgrounds who participated in numerous Web3 hackathons[9][10]. However, details about the complete team behind Bucket Protocol remain limited, with most of the focus on the innovation and functionality of the project itself.

Who are the Investors of Bucket Protocol?

While specific investors in Bucket Protocol are not publicly disclosed, the project has garnered significant attention within the Sui ecosystem. It has formed partnerships with notable projects such as Scallop, Aftermath Finance, and Navi Protocol. These partnerships have played a critical role in establishing the protocol's credibility and building its user base[3][4][14]. Notably, the $BUT token launch was met with an enthusiastic response, resulting in oversubscribed presales driven by community engagement and strategic airdrops.

How Does Bucket Protocol Work?

Borrowing Mechanism

Users looking to borrow $BUCK start by depositing collateral such as SUI or liquid staking tokens into the protocol. In return, they can mint $BUCK, which can be utilised across various DeFi applications within the Sui ecosystem or staked as sBUCK for potential yield generation[2][12][16].

Peg Stability Mechanisms

1. Tank: This component manages liquidation risks; it redistributes discounted collateral to liquidity providers, ensuring a seamless stabilization process during liquidation events[1][15].

2. Recovery Mode: Triggered in times of market stress, this mode prompts the protocol to rebalance collateral across the system to maintain peg stability [1][16].

Revenue Streams

Bucket Protocol's innovative structure not only provides financial services but also generates revenue through various streams:

• Borrowing Fees: These range from 0.5% to 5% depending on the collateral type.
• Liquidation Fees: Set at 2%, these are levied on liquidated positions.
• Flash Loans/Mints: Generate an additional 0.05% fee, enabling arbitrage opportunities and further stabilising $BUCK’s peg[15][16].

Timeline of Bucket Protocol

| Date | Event |
|————|———————————————————————————————————|
| 2024 | Development phase begins; active community engagement and contributions promote protocol fundamentals[7][9]. |
| January 2025 | $BUT Token Launch: A milestone event where 25% of the total supply is distributed via presales and airdrops[4][6]. |
| January 2025 | Launch of airdrops targeting Aftermath Finance holders and Scallop's veSCA stakers, fostering community growth through token distribution[3][4]. |
| March 2025 | Achieves a total value locked (TVL) of $30 million, establishing itself as a significant player within the Sui ecosystem[14]. |

Unique Innovations Within Bucket Protocol

1. Fixed-Rate Borrowing: This design feature effectively removes variable interest risks, creating a more predictable and stable lending environment[1][6].

2. Integrated Flash Services: Specialises in offering flash loans/mints, presenting users with quick arbitrage opportunities that contribute to maintaining $BUCK’s peg stability[15][16].

3. Staked $BUCK (sBUCK): Users can earn yields through the Bucket Savings Rate (BSR), derived from the overall protocol revenue, ensuring that user engagement directly contributes to ecosystem growth[1][2].

Conclusion

Bucket Protocol emerges as a pioneering force within the DeFi space, leveraging the underlying strengths of the Sui Network to create a robust stablecoin ecosystem. With its innovative approach to financial operations, it prioritises both user engagement and ecosystem stability. As it continues to grow, the focus on maintaining peg stability amid market fluctuations will be crucial. The collaborative ethos, marked by strategic partnerships and community-driven airdrops, reflects the protocol's commitment to fostering a sustainable and decentralised financial future.

Ultimately, Bucket Protocol's progress and ongoing innovation will be closely watched by enthusiasts and stakeholders alike, as it aspires to redefine user interactions with stable assets in the DeFi arena.