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The Bumper protocol introduces a unique approach to token utilization known as "Bonding". Unlike many other protocols where tokens are spent to access services, Bumper requires users to bond their BUMP tokens to use the protocol's features. This bond is not a fee; rather, it's a form of collateral that is returned to the user when their protection or earning position is closed.
To use the Bumper protocol for price protection or yield generation, users need to have BUMP tokens in their wallet. These tokens are held as a bond, effectively locked in the protocol and unable to be spent. When a user closes their position, the bonded tokens are released back to them in full, provided they don't withdraw early.
Bonding BUMP tokens has several advantages:
- 1.Normalizing Inflow and Restricting Imbalance: Requiring users to bond BUMP tokens before using the protocol prevents sudden, large inflows, which could potentially destabilize the protocol. This also deters malicious actors from negatively impacting the protocol by depositing vast amounts of tokens all at once.
- 2.Facilitating Future Transactions: Bumper allows users to leave their bond in the protocol when they exit their current position. This means the tokens can be used the next time the user wants to use the protocol, reducing the number of transactions on the blockchain and simplifying portfolio management.
- 3.Ensures Utility: Bonding BUMP in order to use the protocol ensures that there is a true utility for the BUMP token, as users cannot earn a yield, or open a protection positions without first having BUMP in their wallet in order to post the bond into the protocol.
The Bumper protocol's bonding mechanism encourages good behavior among participants and thoughtful utilization of BUMP tokens, as well as encouraging active participation in the protocol, rather than mere price speculation.
BUMP is a true utility token that aligns the interests of all stakeholders in the Bumper ecosystem.