Protocol Revenue

Revenue is from the user and to the user.

How does Bucket Protocol generate revenue?

  • Borrow Fee - One-time fee when users borrow $BUCK from the protocol.

  • Interest Fee - Fixed interest rate from different collateral type borrowing

  • Redemption Fee - One-time fee when users redeem $BUCK.

  • Flash Loan Fee - One-time 0.05% fee.

  • Liquidation Fee - A 0.25% fee would be distributed into the Well.

  • PSM Fee - A fee charged while swapping between other stables and $BUCK.

1. Borrow Fee & Redemption Fee

  • A one-time fee is applied when BUCK is borrowed and when SUI is redeemed.

  • Borrowers pay a borrowing fee on loans as a percentage of the issued amount (in BUCK). Redeemers pay a redemption fee when redeeming SUI.

  • Note that redemption differs from loan repayment, which is free of charge.

  • Borrow Fee & Redemption Fee also consider the trend of the Borrow/Redemption: increasing with each redemption as a function of the redeemed amount and decaying over time when no redemptions occur. This design is meant to prevent extensive redemptions/borrowing.

  • The fee decay over time ensures that borrowers' and redeemers' fees "cool down" while redemption volumes remain low.

  • Fees have the 0.5% floor (except in Recovery Mode) to protect the redemption facility from misuse by arbitrageurs front-running the price feed.

  • And a 5% ceiling to maintain the system's attractiveness to borrowers even when the monetary supply contracts due to redemptions.

2. Flash Loan Fee

  • The Bucket Protocol natively contains two pools: the Sui Bucket, holding $SUI deposited as collateral by borrowers, and the Tank, holding $BUCK deposited by Tank Contributors. Arbitrageurs can leverage these large pools for flash loans to generate profits.

  • For instance, if the $BUCK price deviates down 5% to its peg at any DEX, then the user can borrow a large amount of $SUI via Bucket Protocol to purchase discounted $BUCK. The user uses $BUCK to redeem the loan. By doing so, the user gets back the original $SUI and some extra $SUI since the protocol uses the Oracle-based redemption ratio.

  • All the steps above can be achieved within a single transaction, meaning you don't need to provide collateral. It’s the so-called Flash Loan.

  • Flash Loan services are crucial in the Bucket Protocol, providing extra liquidity to the protocol and the entire Sui ecosystem. While not free, this service is remarkably affordable, charging flash loan users a 0.05% fee. This fee is distributed to those who support the protocol by offering liquidity and stability.

P.S. Ensure your profit exceeds 0.05% when using Flash Loan for arbitrage.

3. Liquidation Fee

  • The user who triggers the liquidation initially receives 0.25% of the collateral as a reward, and another 0.25% of the collateral will go into the well.

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