How Does Bucket Protocol V2 Work?

CDP|Risk B-|7 mechanisms|5 interactions

Bucket Protocol V2 is the first CDP protocol on Sui, allowing users to deposit SUI, BTC, or ETH as collateral to borrow BUCK stablecoin at zero interest. With $12M TVL, it features a stability pool (Tank), peg stability module (PSM), and savings pool. It uses Liquity-inspired mechanics adapted for Sui.

TVL

$10M

Sector

CDP

Risk Grade

B-

Value Grade

D+

Core Mechanisms

6.1.1 Over-collateralized (MakerDAO-style)

CDP positions — deposit SUI/BTC/ETH collateral to mint BUCK at zero interest

Liquity-style zero interest CDP

6.3.2 Fixed-spread liquidation (Aave-style)

Real-time liquidation for undercollateralized CDPs

Immediate liquidation mechanism

6.4.1 Chainlink / external oracle

Oracle feeds for SUI, BTC, ETH collateral valuations

Standard external oracle dependency

4.1.3 Stableswap (Curve-style)

PSM — swap USDC/USDT to BUCK at near-peg rates

Standard PSM like MakerDAO

2.2.1 Direct to stakers / holders

sUSDB Savings Pool — BUCK holders earn yield from protocol revenue

Similar to MakerDAO DSR

1.3.3 Burn-on-action (e.g., burn to mint, burn to register)

Redeem module — BUCK redeemed against most undercollateralized CDPs

Liquity-style redemption mechanism

6.3.3 Gradual liquidation (Euler-style)

Novel

Tank module — stability pool where BUCK absorbs liquidated collateral at discount

Combined stability pool and liquidation on Sui

How the Pieces Interact

Zero-interest CDP↔Redemption mechanismHigh

Zero-interest borrowers reluctant to repay — heavy reliance on redemptions for system health

Oracle feeds↔Real-time liquidationHigh

Oracle latency during rapid SUI drops could delay liquidations, creating bad debt

PSM module↔USDC/USDT reservesMedium

PSM reserve drainage during depeg event removes stabilization mechanism

Tank stability pool↔Mass liquidationMedium

Underfunded Tank during mass liquidation means insufficient BUCK to absorb collateral

sUSDB Savings Pool↔Protocol revenueLow

Yield depends on borrowing demand — drops during quiet markets

What Could Go Wrong

  1. BUCK peg stability depends on multiple modules (PSM, CDP, Tank, redeem) — failure of any could break the peg
  2. Oracle dependency for SUI, BTC, ETH creates liquidation risk during rapid price drops
  3. Zero-interest borrowing may create adverse selection and bad debt accumulation
  4. Sui ecosystem still young with limited DeFi composability for BUCK

BUCK Depeg During SUI Market Crash

Moderate

Trigger: SUI drops 40%+ rapidly, overwhelming the Tank stability pool

  1. 1.Mass CDP liquidations triggered — Tank stability pool depleted
  2. 2.Remaining undercollateralized CDPs cannot be fully liquidated — Bad debt accumulates, BUCK partially unbacked
  3. 3.BUCK holders lose confidence — BUCK trades below $1, PSM reserves drained
  4. 4.Depeg accelerates — Death spiral of selling and lower prices
See all 2 collapse scenarios in the full risk report →

Risk Profile at a Glance

Mechanism Novelty3/15
Interaction Severity5/20
Oracle Surface5/10
Documentation Gaps2/10
Track Record6/15
Scale Exposure3/10
Regulatory Risk5/10
Vitality Risk6/10
B-

Overall: B- (35/100)

Lower score = safer

More on Bucket Protocol V2

Is Bucket Protocol V2 Safe?

Safety analysis

Is Bucket Protocol V2 a Good Investment?

Value analysis

Full Risk Report

All mechanisms & interactions

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