Introduction

Bucket Protocol is a system that allows people with crypto assets to improve their financial efficiency without unforeseen interest payments. Users place crypto assets into a smart contract and set up a collateralized debt position(CDP). They can immediately generate liquidity by borrowing a stablecoin, $BUCK, whose value is pegged to the US dollar. A Bottle must maintain a collateral ratio level of at least 110%. At any time, $BUCK holders can exchange their stablecoins for collateral. Also, $BUCK's value remains consistently at $1, thanks to a redemption mechanism and automatically adjusted fees.

Bucket Protocol uses a method for immediate liquidation that encourages stable deposits and rebalances between high-risk and low-risk Bottles. This results in a lower collateral requirement than other systems, ensuring overall stability. The protocol's stability comes mainly from the user's economic behavior and pursuit of profit rather than heavy-handed control or monetary policies.

Motivation

Stablecoins are vital to blockchain ecosystems, representing billions of dollars in value. Most are fiat-collateralized, like USDT and USDC, while decentralized variants like DAI and USD are less common, signifying that most stablecoins are centralized. These centralized types face increasing regulatory scrutiny, causing potential risks for users. The Bucket Protocol offers a solution to these problems with a user-friendly, decentralized stablecoin system.

Fiat-backed stablecoins also carry inherent risks, as seen when Circle's USDC lost its value peg to the dollar following financial turbulence at Silicon Valley Bank. This event showed that stablecoin issuers' dependence on a few off-chain financial institutions can jeopardize their stability.

Crypto-asset-backed stablecoins, like Liquity's LUSD, offer an alternative. They proved resilient during the USDC de-pegging event, thanks to an over-collateralization mechanism, acceptance of ETH as collateral, and an algorithm for LUSD stabilization. Such protocols, bolstered by over-collateralization and well-designed liquidation mechanisms, offer a promising alternative to traditional stablecoins. Unifying these new types of stablecoins on a new chain is also essential to consider.

Key Advantages

• Fixed Interest Liquidity: Bucket Protocol allows borrowers access to liquidity with fixed interest. Users can freely use their BUCK stablecoins in the DeFi market.
• Low Collateralized Ratio (110%): Bucket Protocol's novel two-layer liquidation mechanism can instantly liquidate under-collateralized positions, significantly reducing the collateralized ratio while maintaining stability.
• Robust Price Floor and Ceiling: Bucket Protocol incorporates mechanisms to keep BUCK pegged to 1 USD—arbitrage mechanisms and a flash loan service support this.
• Governance-Free Algorithmic Monetary Policy: Bucket Protocol doesn't rely on governance for monetary interventions. All parameters are preset, algorithmically controlled, or immutable, allowing for more autonomous and efficient operation.
• Censorship Resistance: As a decentralized system, Bucket Protocol operates without a centralized authority or special privileges, reducing the risk of interference or manipulation.
• Growth Incentives: Users contributing to the Protocol's stability are rewarded with BKT, the Protocol's secondary token. Staking BKT allows users to earn a share of the Protocol’s revenue from BUCK’s issuance and redemption fees.
• Multi-Collateral: Bucket Protocol accepts several digital asset types as collateral, such as SUI, LSTs allowing flexibility and growth potential.

In summary, Bucket Protocol offers an innovative, secure, and efficient system for users, enhancing market reliability and stability. Fostering a more stable and trustworthy environment provides users with opportunities to contribute to the Protocol’s stability and growth.