Bumper is a DeFi protocol which protects your crypto from price drops and market crashes whilst simultaneously making sure you don't lose out in case the price pumps. Protection seekers pay a premium for doing so, which is earned by liquidity providers who deposit stablecoins, which are used to pay out claims.
Users of protection set a floor price for their ‘unstable’ asset (eg. ETH), and if the price crashes, their asset will never fall below that floor price. Importantly, if the price rises, they retain their native asset as the value increases, thus removing downside risk but still capturing the upside potential.
The Bumper protocol aggregates sellers of risk (Takers) and buyers of risk (Makers) into separate but decentralised, non-custodial pools. The protocol is constantly monitoring a variety of ratios governing the balance of those pools, and then uses incentivised mechanisms to retain that balance to provide the required price protection.
Put simply, Bumper can provide protection for the price of your crypto assets. This means that the volatility that we have all become aware of in the crypto market can be mitigated in exchange for a fee.
As a result, you can invest into a cryptocurrency, and then 'bumper' some or all of it and wait until the value of that asset rises.
Then, at what ever point you want to sell your assets, you'll never lose less than your set price floor. Considering this, you could wait until the asset price rises and then Bumper that price, effectively removing any chance that your whole crypto portfolio will suffer from heavy losses. On the other side, Makers have the opportunity to earn yield, not only from premiums which are collected by the Bumper protocol, but also from the automated Yield farming capabilities which the system makes possible. All of these benefits mean that using Bumper can make crypto a sustainable long-term investment choice.
When it comes to our Team, we are proud to say that we’ve gathered some of the best people in the industry for their positions. We strive to provide excellence in what we do and are happy to say we’ve got amazing work dynamics at Bumper. We’re very dedicated, passionate and supportive of each other with years of experience combined in the Blockchain space. We also enjoy a diversified team from all over the world which enriches us with different knowledge and culture.
A Stop Loss places a sell order to an exchanges order book when the threshold is triggered, converting your crypto asset to stablecoins or fiat (assuming the order is filled, which it isn’t guaranteed to be). But if the price rebounds, you end up missing out on upside gains.
Bumper preserves upside gains whilst protecting your wallet's value from drops without transferring your tokens to an exchange. Your token isn’t sold when the floor is crossed, unlike when using a Stop Loss.
Bumper’s price protection is a novel alternative to the Put Option with significant benefits for both sides of the market.
You can buy a Put option without having to own any tokens. It’s essentially a gamble based on price movements with a fixed premium paid in advance. You either win, and thus can exercise your option (or just take profit), or you lose and are returned nothing.
Bumper protects tokens that you already own, and its premiums are calculated dynamically and applied incrementally, based on actual market volatility. When your position is closed you either claim stablecoins to the value of your floor, or you retrieve your original token (minus the premium).
Unlike a Put option, Bumper returns a composable ‘Bumpered asset’ to the protection taker. It also allows protection terms to be renewed (extended) if required.
On the other side of the market, yield seekers generate income over time without the need to continually price, write and locate buyers for Put contracts. Bumper’s pooled architecture facilitates earning from multiple different positions even while reducing exposure to losses from individual contracts.
Yes, and the protocol seeks to minimise fees to be as low as possible. The fees levied on Takers are a function of market risk; so as the market conditions degrade (i.e. with increased volatility or down-side risk markers), then the premium (fee) will adjust accordingly. This ensures that the fees only accumulate for the risk that the protected asset presents, meaning that they can be as low as possible.
The beauty in Bumper with this approach is that it doesn't have any long-term unsustainable incentives that we find in other protocols. The incentives balance in real time based on the internal state of the protocol and a measure of the external prices of the protected assets, including the fees for Takers and yields for Makers.
Doesn't the high number of daily transactions for a user's account incur some kind of additional risk?
No, the clever thing about the protocol is there's no real need to do lots of transactions.
Bumper works like an aggregated ledger, monitoring and maintaining the relevant ratios that keep the protocol stable, it limits that transaction security risk and reduces things like slippage down to an irrelevant problem.
The protocol is extremely efficient and robust and more than capable of dealing with BlackSwan events.
Drops in price are a two-part problem. Firstly, the actual level of drop and secondly, the time it takes to drop and/or recover. The worst-case scenario is a big and fast drop with an elongated flatline. Bumper is well-equipped to handle those kinds of drops.
So, yes, Bumper can be tuned to in fact withstand any kind of market drop, and has undergone in-depth modelling of many different scenarios to ensure that the protocol is as robust and cost-effective as possible.
There is only one theoretical kind of market drop that Bumper cannot withstand, and that is if the price of ETH goes to 0 instantaneously and stays there for an infinite amount of time. So as long as that doesn't occur, then there are a set of parameters under which the protocol works.
You’ll need to read Bumper's technical documentation to fully understand the mechanics of how Bumper deals with flash crashes, but the protocol is extremely efficient and robust and more than capable of dealing with BlackSwan events and the kind of drops recently witnessed.
Users deposit stable coins into the Bumper protocol in order to open Maker positions. The Bumper smart contract balances both the pool of stablecoins with the more volatile crypto asset. For a more in-depth description of how the protocol's economic and rebalancing system works, we highly recommend reading the Litepaper.
The BUMP token is woven into every facet of the platform and is the first entry point to the Bumper ecosystem — since both protection “Takers” and liquidity providing “Makers” need to deposit BUMP tokens to begin interacting with the protocol. The token also acts as the governance token for the protocol, allowing users to stake their BUMP in return for voting rights. Read more about the BUMP token here.