What is Scallop? Institutional-Grade DeFi Lending on Sui

‍Key Takeaways

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• Scallop is the first DeFi protocol to receive a grant from the Sui Foundation, reinforcing its status as a core project in the Sui ecosystem.

• The platform raised $3M in Q1 2024 and supports advanced features like sCoins, flash loans, and a Pro Trader SDK.

• Scallop’s native token, $SCA, fuels utility and incentives across the platform, while its vote-escrowed counterpart, veSCA, unlocks governance rights, reward boosts, and referral benefits—aligniang long-term participation with deeper protocol influence.

• With over $130M TVL, Scallop is one of the top-earning lending protocols on Sui, offering high-performance DeFi tools for both retail and pro users.

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Introduction

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Decentralized finance is evolving beyond simple token swaps and into full-fledged financial ecosystems. Scallop is one of the leaders in this evolution, offering a secure, scalable, and institution-ready lending protocol built on the Sui blockchain. Whether you're a passive lender, an active borrower, or a DeFi builder, Scallop creates the tools and infrastructure to help you succeed.

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In this article, we will break down what Scallop is, how it works, and how to get involved using Backpack.

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What is Scallop?

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Scallop is the first DeFi protocol officially backed by the Sui Foundation, making it a key player in the growth of the Sui ecosystem. Launched in 2021 by Kris Lai, the platform delivers a robust decentralized money market that includes lending/borrowing, flash loans, a trader-friendly SDK, and unique token mechanics. 

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Designed to be transparent and composable, Scallop allows users to interact directly with smart contracts without intermediaries or custodians.

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Key elements of the protocol include:

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• Lending & Borrowing Pools: Supply or borrow assets to earn interest and incentives.

• sCoins: Interest-bearing tokens representing deposits.

• Flash Loans: Collateral-free loans that must be repaid within a single transaction.

• Vote-Escrow Governance: Lock up $SCA tokens for voting power and rewards.

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Funding and Backing

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Scallop was the first DeFi protocol to receive a grant from the Sui Foundation, underscoring its importance as a foundational pillar of the Sui ecosystem. In Q1 2024, it raised $3 million in a strategic investment round co-led by CMS Holdings and 6th Man Ventures.

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The round drew participation from a strong lineup of backers—including KuCoin Labs, Mysten Labs, and Blockchain Founders Fund—reflecting broad conviction in Scallop’s vision to become the leading lending protocol on Sui.

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Key Features and Benefits

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• Lending & Borrowing: Earn interest by supplying assets or borrow by using crypto as collateral. Scallop supports flexible withdrawals and real-time interest accrual.
  
  
• sCoins: Tokenized proof of deposits (like sSUI for SUI), which grow in value over time due to accumulated interest.
  
  
• Flash Loans: Borrow large sums with no collateral as long as you repay within one transaction—ideal for arbitrage and DeFi strategies.
  
  
• SDK: Scallop offers open-source SDK for developers to build innovative DeFi products and solutions on top of Scallop.
  
  
• Vote-Escrow Model: Lock $SCA tokens to participate in governance and earn rewards, promoting long-term commitment.
  
  
• Composability: Scallop smart contracts are fully autonomous, permissionless, and integrate seamlessly with other Sui dApps.

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Scallop Incentive Programs and Airdrops  

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Scallop’s incentive structure is anchored by veSCA, the vote-escrowed version of its native token $SCA. By locking SCA, users gain access to a suite of yield-boosting features and exclusive benefits across the protocol.

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Borrowing Incentives — Up to 4x APR Boost

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Users who lock SCA to mint veSCA can receive up to a 4x boost on their Borrow Reward APR. The multiplier is determined by the proportion of veSCA a user holds relative to their borrowing amount, measured against the total protocol activity.

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For example, if the base APR is 25%, users with the maximum boost receive 100% APR in SCA rewards.

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Referral Program — Earn from Borrow Fees

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Scallop’s referral program rewards users who lock SCA for veSCA by allowing them to earn a portion of the borrow fees generated by their referees. The more veSCA a referrer holds, the greater their reward.

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Referrers can earn up to 40% of their referees’ borrow fees, while referees can receive up to a 20% discount, making it a mutually beneficial system that strengthens long-term engagement.

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Loyalty Program — sSCA Rewards at Milestones

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Scallop’s Loyalty Program rewards veSCA holders whenever the protocol reaches specific revenue milestones. At each milestone, Scallop conducts a token buyback and redistributes those tokens to veSCA holders.

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The more veSCA a user holds, the greater their share of the reward pool. This mechanism aligns long-term participation with protocol growth and ensures that active contributors benefit directly from Scallop’s success.

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How to Get Started with Scallop

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1. Download Backpack

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Get Backpack and set up your wallet on the Sui network. The Sui network was recently added to Backpack, so you must enable it manually.  This will be your gateway to interacting with Scallop’s DeFi features.

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2. Supply Assets to Earn Yield‍

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Visit Scallop’s official app and connect your Backpack wallet. Deposit tokens like SUI, USDC, and other supported assets into Scallop’s lending pools to start earning Supply APY passively.

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3. Borrow Against Your Collateral‍

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Head to the Collateral Pools, deposit assets as collateral, then navigate to the Borrowing Pools to borrow supported tokens.

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4. Earn Incentives
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When you borrow, you’ll start earning rewards in SCA and SUI via Borrow Reward APR—an incentive paid out for participating in Scallop’s lending markets..

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5. Boost Rewards with veSCA
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To maximize your returns, lock $SCA to mint veSCA. This unlocks up to a 4x boost on your Borrow Reward APR and additional perks like referral rewards and loyalty program access.

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Future Prospects

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Scallop is not just another DeFi protocol; it’s laying the groundwork for institutional-grade finance on Sui. With a growing TVL, cutting-edge tooling, and strong community backing, Scallop is poised to become a central player in Web3 finance. 

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Expect continued expansion in trading tools, integrations, and incentive layers throughout 2025 as the Sui ecosystem gains more hype and users who are looking for dynamic Sui DeFi protocols. 

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Ready to engage with Scallop, the Sui DeFi lending and borrowing protocol? Download Backpack, connect to Sui, and explore the Scallop ecosystem today.

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