Bucket Protocol is a decentralized finance (DeFi) protocol on the Sui blockchain that functions as a Collateralized Debt Position (CDP) platform. It allows users to borrow a native, USD-pegged stablecoin by locking up various crypto assets as collateral. The protocol is designed for capital efficiency, offering features such as high loan-to-value ratios, leveraged trading, and yield-generating savings products. ^{[1] [2]}​

Initially launched with the BUCK stablecoin, the protocol has undergone significant upgrades, most notably transitioning to USDB (Bucket Dollar) as its primary stablecoin. It has established itself as a foundational liquidity and lending primitive within the Sui ecosystem. ^{[1] [3]}​

Overview

Bucket Protocol operates on a model inspired by Liquity on Ethereum but is purpose-built for the Sui network's object-centric architecture. The core function allows users to open an isolated debt position, referred to as a "Tank" or "Bucket," by depositing collateral. Against this collateral, they can mint (borrow) the USDB stablecoin. Each debt position is represented by a unique non-fungible token (NFT), making the position itself a transferrable asset. The protocol aims to provide borrowing with predictable, fixed costs rather than variable interest rates that fluctuate with market conditions. ^{[1] [4]}​

The protocol's stability and solvency are maintained through a combination of mechanisms, including mandatory over-collateralization, a Stability Pool funded by users to absorb liquidated debt, and a redemption system that creates an arbitrage incentive to keep the stablecoin pegged to the US dollar. The platform has evolved significantly since its launch, introducing new tokens, upgrading its liquidation engine, and changing its primary stablecoin to enhance safety and capital efficiency. ^{[2] [3]}​

According to its official documentation, the protocol's vision is to serve as a robust and decentralized liquidity layer for the Sui ecosystem. A quote from the project's developers highlights its core value:

"Bucket Protocol is a decentralized borrowing protocol that allows you to draw 0% interest loans against [SUI] - (https://iq.wiki/wiki/sui) or other assets as collateral... Bucket Protocol is purpose-built for capital efficiency on [Sui] - (https://iq.wiki/wiki/sui), drawing inspiration from Liquity's proven model while introducing unique features tailored for the [Sui] - (https://iq.wiki/wiki/sui) ecosystem." ^[4]

History and Development

Bucket Protocol's development began with early support from the Sui ecosystem. In May 2023, the project received a grant from the Sui Foundation, and in June 2023, it won first place in the DeFi & Stablecoin track of the Sui x KuCoin Hackathon. ^{[2] [4]}​

The protocol launched its testnet in July 2023, followed by its V1 mainnet launch in August 2023, initially supporting SUI as collateral and introducing its first stablecoin, BUCK. The platform gained early traction, surpassing 10 million by July 2023. ^{[2] [3]}​

Protocol Upgrades

Bucket Protocol has undergone several major upgrades to refine its architecture and offerings.

• Bucket V2 (Early 2024): In February 2024, the protocol launched its V2, which introduced the BKT governance token, an "instant Dutch auction" liquidation model, the sUSDB savings module for earning yield on the stablecoin, and an integrated decentralized exchange (DEX). This upgrade required users to migrate their positions from V1 contracts. ^[2]
• The Major Upgrade (Late 2024): In September 2024, the protocol announced another significant architectural overhaul that transitioned the CDP structure from static "Vessels" to more flexible "Buckets." This change allowed users to manage multiple isolated positions for the same collateral type under a single wallet, enabling more sophisticated risk management. Alongside this upgrade, the protocol launched the Bucket Point System to reward user activity, with points intended for conversion into a future airdrop of its governance token, BUT. ^[5]
• Transition to USDB (2025): The protocol executed its most fundamental change by transitioning its primary stablecoin from BUCK to USDB (Bucket Dollar). This process was managed through a multi-phased migration plan that began around October 2025. The new model abolished the 0.3% one-time borrow fee in favor of an interest-only fee structure and removed the system-wide "Recovery Mode" to simplify risk management for users. During the migration, a 1:1 conversion path was provided for users to swap legacy BUCK for the new USDB and move their positions to the new system. The original BUCK token was subsequently repurposed to function as an index token for Liquid Staking Tokens (LSTs). ^{[1] [6]}

In August 2025, the protocol formally announced the transition from its pre-token "Drops" reward system to the official BUT governance token. By November 2024, prior to some of these major upgrades, the protocol had reported a TVL of $38 million and was ranked among the top 10 projects on Sui. ^{[5] [7]}​

Technology and Core Mechanics

The protocol is built around several interconnected components designed to ensure stability, solvency, and capital efficiency.

Collateralized Debt Positions (Tanks)

The core of the protocol is the CDP mechanism, where users create individual positions called "Tanks" (also previously known as "Buckets" or "Vessels"). In a Tank, a user deposits a supported collateral asset to mint (borrow) USDB stablecoins. Each Tank is an isolated position, meaning the risk associated with one type of collateral does not impact positions backed by other assets. The ownership of each Tank is represented by a tBUCK NFT, which is transferrable and makes the debt position itself a tradable asset. The system is designed to support a high Loan-to-Value (LTV) of up to 90.9%, which corresponds to a Minimum Collateral Ratio (MCR) of 110%. ^{[1] [2]}​

Supported Collateral

The protocol accepts a diverse range of assets as collateral to enhance capital efficiency across the Sui ecosystem. These include:

• The native SUI token
• Sui Liquid Staking Tokens (LSTs) such as afSUI, haSUI, and vSUI
• Wrapped assets, including Wrapped Bitcoin (BTC) bridged via LayerZero
• Yield-bearing tokens from other protocols, such as Scallop's sCoins ($SCA, sUSDC) ^{[1] [8]}

Peg Stability Mechanisms

​USDB's peg to the US dollar is maintained by three primary mechanisms:

1. Over-collateralization: Every USDB in circulation is backed by a surplus value of crypto assets locked in the protocol's Tanks.
2. Redemption: This mechanism creates a price floor for USDB. Users can redeem USDB with the protocol at any time to receive 1, as traders can buy it cheap and redeem it for a profit, creating buying pressure that restores the peg. A redemption fee is charged and distributed to BUT token stakers. ^{[1] [3]}
3. Peg Stability Module (PSM): The PSM creates a tight price band around $1 by allowing users to swap USDB for other approved stablecoins like USDC at a 1:1 ratio, minus a small fee. This allows arbitrageurs to correct price deviations in either direction, and it also helps consolidate stablecoin liquidity on Sui. ^[5]

Liquidation System

The protocol employs a multi-layered liquidation process to manage under-collateralized debt and ensure solvency.

• Stability Pool: This is the first line of defense. Users can deposit their USDB into the Stability Pool to act as liquidity providers for liquidations. When a Tank's collateral ratio falls below the minimum requirement (e.g., 110%), its debt is repaid by burning USDB from the Stability Pool. In return, the Stability Pool depositors receive the liquidated collateral (often at a discount) as a reward, along with ongoing BUT token emissions. ^{[1] [4]}
• Redistribution: In the event the Stability Pool is depleted, the protocol redistributes the debt and collateral from the liquidated Tank among all other active Tank holders. This serves as a secondary, collective backstop mechanism. ^[5]
• Removal of Recovery Mode: An earlier version of the protocol included a "Recovery Mode" that was triggered if the system's Total Collateral Ratio (TCR) fell below 150%. In this mode, any Tank below the TCR could be liquidated. This feature was removed in a late 2025 upgrade to simplify user risk management, allowing borrowers to focus solely on their individual position's health. ^[6]

Protocol Tokens

Bucket Protocol utilizes a multi-token model to facilitate its operations, governance, and reward systems.

Token	Ticker	Function
Bucket Dollar	​USDB​	The primary, USD-pegged stablecoin of the protocol, minted against collateral. It is used for borrowing, savings, and within the Stability Pool.
Bucket Token	BUT	The protocol's utility and governance token. It can be staked to earn a share of protocol revenue from borrow and redemption fees and to vote on protocol parameters. The token was also referred to as BKT in V2 documentation.
Bucket USD	BUCK	The protocol's original stablecoin. Following a major upgrade, it was phased out as the primary borrowed asset and repurposed to function as an index token for Derivatives (LSDs).
Tank NFT	tBUCK	A non-fungible token that represents ownership of an individual CDP (Tank), making the debt position itself a tradable and transferrable asset.
sUSDB	sUSDB	A yield-bearing receipt token representing USDB deposited into the protocol's savings module, "The Bottle."
Delegated Escrow BUT	deBUT	An escrowed version of the BUT token used for vesting and distribution. deBUT holders can participate in governance but cannot transfer the tokens until they convert to BUT.

This information is synthesized from multiple sources detailing the protocol's tokenomics and evolution. ^{[1] [2]}​

Products and Features

1. Borrow: The core function where users lock accepted collateral in a Tank to mint USDB. ^[8]
2. Earn (The Bottle & Stability Pool): The protocol offers two primary ways to earn yield. "The Bottle" is a savings feature for USDB and other stablecoins, generating a variable yield from liquidation gains. The Stability Pool allows users to deposit USDB to earn liquidation profits and BUT token rewards. [[https.bucketprotocol.io/earn][Bucket Protocol Earn Page]]
3. Leverage: A "one-click" feature that enables users to take on leveraged long exposure to collateral assets like SUI and BTC. In a single transaction, the protocol loops the process of minting USDB, swapping it for more collateral, and depositing it back into the Tank to achieve up to 11x leverage (90.9% LTV). ^[1]
4. Swap: An integrated token swap interface within the protocol's dApp, allowing for easy conversion between different assets in the Sui ecosystem. ^[1]

Security

Bucket Protocol's codebase is open-source and publicly available on GitHub for community review. The team has prioritized security through multiple smart contract audits conducted by reputable blockchain security firms, including Movebit, Hashlock, Quantstamp, Ottersec, and Zellic. ^{[9] [2]}​

In addition to audits, the protocol maintains an active and ongoing public bug bounty program on the HackenProof platform. The program offers financial rewards to security researchers for the responsible disclosure of potential vulnerabilities in its smart contracts and web application. ^[4]​

Integrations and Ecosystem

Bucket Protocol is deeply integrated within the Sui DeFi landscape. Its functionality relies on and supports numerous other projects:

• Oracles: The protocol relies on the Pyth Network for high-fidelity, real-time price feeds to accurately value collateral and assess the health of Tanks for liquidation. ^[7]
• Liquid Staking Protocols: It increases capital efficiency for SUI stakers by accepting LSTs from protocols like Aftermath Finance (afSUI), Haedal Protocol (haSUI), and Volo (vSUI) as collateral. ^[2]
• Decentralized Exchanges (DEXs): The USDB stablecoin is integrated for trading and liquidity provision on major Sui DEXs, including Cetus Protocol and Kriya DEX. These integrations are also essential for the protocol's own swap and leverage features. ^[2]
• DeFi Partnerships: The protocol has formed partnerships with other DeFi projects like Scallop, MoleFi, and AlphaFi to expand the utility and adoption of the BUCK and USDB stablecoins. ^[7]

Future Vision

According to official communications, the future roadmap for Bucket Protocol includes expanding its accepted collateral types, with a particular focus on additional LSTs and the potential integration of Real-World Assets (RWAs). The team also aims to evolve the protocol from a CDP platform into a foundational liquidity hub for the entire Sui ecosystem and is exploring a cross-chain strategy to expand the reach of USDB to other blockchains. ^{[2] [7]}​