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.
  • Redemption Fee - One-time fee when users redeem $BUCK.
  • Flash Loan Fee - One-time 0.05% fee.
  • Liquidation Fee - There is a 0.25% fee would distribute into the Well.

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 is different 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 large redemptions/borrowing.
  • The fee decay over time ensures that both 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 not only gets back the original $SUI, but some extra amount of $SUI since the protocol uses the oracle-based redemption ratio.
  • All the steps above can achieve within a single transaction, meaning you don't need to provide collateral. It’s the so-called Flash Loan.
  • Flash Loan services play a crucial role in the Bucket Protocol, providing extra liquidity to both 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 there is another 0.25% of the collateral will go into the Well.