Overview

Bumper is a DeFi price protection protocol built on Ethereum.

Bumper is a decentralised software application which establishes markets for measuring and exchanging blockchain-based asset price risk. It provides a set of mechanisms and functions which allow users to protect the value of cryptocurrencies (such as Staked Ether (wStETH), wrapped Bitcoin (wBTC), and others) by holding deposits of a price-volatile token for a fixed period of time. These deposits are pooled, and collectively incur a regular, dynamic premium. Those who take a price protection position in the protocol are known as “Takers”.

As these premiums accumulate, they are used to incentivise similar deposits of a price-stable token into a corresponding pool, which serves to back the protected value of the price-volatile token. The protocol makes the stablecoin available to individual Takers in the event of a claim. A position is able to claim the protected value from the stablecoin pool when the measured value of the backed cryptocurrency is below the individual floor price at the time of expiration. The originally protected asset is left within the protocol.

Those who make the stablecoin available in the protocol seek to develop a yield from negative price volatility of the backed cryptocurrency. They are known as “Makers”.

Bumper is completely decentralised, autonomous and permissionless. Use of Bumper is completely free, however participants must lock the native protocol token (BUMP) into the system to access market functions, which is returned when the position is closed. This is known as Bonding. BUMP is also needed to participate in (decentralised) community governance activity.

The system can be calibrated to withstand any price volatility scenario, however, tuning the system to withstand all volatility scenarios would result in untenably high premiums for Takers and low yields for Makers. To accommodate for a range of risk perspectives on each side of the market, participants select an engagement level which serves to segment them into risk-based tranches relative to one another. These segments are also used in calculating Taker premiums and Maker yields.