What is Bunni? DeFi Protocol Guide

Bunni served as a liquidity engine aimed at boosting Uniswap v3 liquidity provision through two main elements: a mechanism for converting Uniswap liquidity positions into tradeable ERC-20 tokens and a vetokenomics framework designed to promote Bunni liquidity engagement.

On October 23, 2025, Bunni's development team declared permanent closure via X (previously known as Twitter) in response to a serious security incident where roughly US$8.4 million was extracted from its underlying smart contracts.

Overview

Timeless Finance, which also developed Timeless, a yield market protocol, created Bunni. The platform centered on a Uniswap wrapper mechanism that converts Uniswap positions into ERC-20 tokens rather than non-fungible tokens (NFTs). This structure intended to deliver improved gas efficiency, as liquidity providers (LPs) with identical price ranges and pools could possess identical ERC-20 tokens, thereby lowering transaction costs. Additionally, this design was intended to facilitate straightforward integration with standard financial applications, given that such applications are designed around token standards rather than NFTs.

Bunni's primary token, the Liquidity Incentive Token (LIT), functioned as the core mechanism for rewarding liquidity. Drawing from Curve's vetokenomics approach, the system utilized Balancer LP tokens to stake votes in exchange for veLIT, granting LPs a potential 5x incentive multiplier. The protocol also incorporated call option tokens distributed as LIT rewards, enabling the system to build treasury resources independent of price movements while giving committed participants chances to obtain LIT at reduced rates. Through merging these mechanisms, Bunni sought to establish a competitive and attractive approach to facilitating DEX liquidity incentives.

Tokenomics

LIT (Liquidity Incentive Token)

LIT (Liquidity Incentive Token) functioned as Bunni's core token, serving to encourage liquidity provision activities.

LIT Distribution

The token featured a total cap of 1 billion LIT, allocated through the following structure:

oLIT (Call Option Token for LIT)

• Community (72%): Comprises multiple allocation categories, with 45% designated for gauges under a 4-year halving mechanism, 11% maintained in the protocol reserve for purposes including grants and security reviews, 10% distributed through a Liquidity Bootstrapping Pool (LBP), and 5% released to veMPH participants across 4 years through a rewards pool.
• Team (25%): Subject to a 4-year vesting schedule.
• Investor (3%): Routed to the protocol reserve with an initial 6-month waiting period, followed by 1-year vesting.
• Airdrop (1%): A 1% allocation, with 0.25% directed to early Timeless & Bunni participants and 0.75% to engaged Uniswap v3 LPs.

Partnerships

Bunni x Gravita Protocol

On June 17, 2023, Bunni disclosed a collaborative agreement with Gravita Protocol, which specializes in producing GRAI, a stablecoin with minimal price volatility created through crypto collateral mechanisms. The partnership was structured to deliver multiple advantages:

• Yield Maximization: Strengthen income-producing positions by combining Gravita's secured borrowing mechanisms with Bunni's liquidity enhancement tools. This integrated methodology permits holders to generate returns simultaneously on their locked collateral and outstanding positions, resulting in higher cumulative yields.
• Improved Liquidity and Interoperability: Bunni's ERC-20 conversion layer streamlines the process of furnishing liquidity for Uniswap positions, facilitating potential combinations with Gravita's infrastructure.
• Voting Rights and Reward Distribution: Depositing LIT alongside ETH on Bunni and converting it through the veLIT mechanism grants participants decision-making authority. Participants qualify for supplementary earnings in ETH and BAL tokens. Additionally, they acquire decision power regarding reward allocation across their participating pools.
• Strengthened Capital Efficiency: The union of Gravita and Bunni functionality elevated capital optimization, enabling participants to experiment with novel approaches for enhanced and diversified capital utilization.

Bunni Shutdown and $8.4 Million Exploit

In early September 2025, Bunni DEX experienced a critical security incident where around US$8.4 million was taken from its smart contracts on both the Ethereum and UniChain blockchains. The attack targeted a custom Liquidity Distribution Function (LDF) within Bunni, exploiting a "logic-level" flaw that permitted bad actors to alter underlying computations and remove funds using flash loans combined with precision-loss attack methods.

Following this incident, Bunni's total value locked (TVL), which had rapidly expanded to several tens of millions, sharply contracted, and on 23 October 2025 the team declared that operations would cease indefinitely.

In their official announcement, the team explained that the investment needed for a recovery involving independent security assessments, engineering work, infrastructure monitoring and business expansion would exceed six to seven figures, resources they determined were no longer obtainable.

Despite the decision to terminate, Bunni confirmed that user withdrawals would stay enabled temporarily and that leftover protocol reserves would be dispensed among BUNNI, LIT and veBUNNI holders according to a predetermined point-in-time record. As a final step, the Bunni team converted its version 2 contract code from a proprietary BUSL arrangement to the permissive MIT open-source license, facilitating other programmers to leverage these systems.

The conclusion of Bunni DEX illustrates persisting vulnerabilities in the DeFi sector, where rapidly scaling systems utilizing experimental methodologies face dangers from minute contract design problems. The situation demonstrates the necessity of strong technical safeguards, sufficient operational capital reserves and comprehensive contingency strategies in creating enduring DeFi frameworks.