What is Bumper? You might think it’s that bit on the front of your car that affords some protection in the event of a crash. However, in the world of crypto, Bumper provides more than just protection from a small prang in your vehicle. It’s protection from the worst gremlin of all… Volatility!
Bumper is a DeFi protocol which provides price protection for your crypto assets. It is designed to provide a simple method for token holders to ensure they don’t lose out in the event of a market downturn, whilst simultaneously ensuring they benefit in case the market rips upwards.
That’s right. Bumper solves the problem of volatility, making sure you don’t lose out whichever way the market goes.
Anyone can use Bumper. It’s been designed to be fully decentralised, and it doesn’t require you to go through a signup or identity verification process.
All you need to do is connect your crypto wallet and you can start to use the dApp immediately. In order to open a position, you’ll need some BUMP tokens, which are available on Uniswap.
Bumper effectively solves the problem of downside volatility.
You know those times when you just don’t know which direction the market is going to go? Bumper makes sure you don’t lose out in the event it tanks, but equally you don’t miss out if it rips.
When you realise the significance of what Bumper does, you will experience an ethereal glow which makes you feel safe and protected, because, well, effectively, when you use Bumper, you are!
Bumper took one problem to solve, volatility, and actually ended up coming up with a number of novel features and a range of useful functions.
Bumper exists not to compete with other protocols, but to bring something new to the crypto ecosystem which makes it easier for crypto enthusiasts to sleep better, knowing that whichever way the market goes, they are able to ride the ups and downs inherent in crypto like a boss.
Furthermore, Bumper is extensible, meaning that not only is it possible for Web3 developers to plug their own products and services into it, but we fully encourage it. We believe that Bumper’s unique architecture is perfectly suited to being incorporated into existing, and some as yet to be even conceived, protocols which drive crypto adoption and general usage.
Bumper defines two major actors in the protocol: Makers and Takers.
When a Taker opens a position, they choose how long they want to protect their crypto for, and the price which they want to set as their floor. The Taker then deposits their crypto into the Bumper smart contract, and they are given a Bumpered Asset token in return, for example if they deposit ETH, they get a Bumpered ETH (bETH) token whilst their position is open.
When the position closes, if the price of the protected asset is below the floor price, then they get this amount back in stablecoins.
However, if the price is above the floor when it closes, then they simply receive their original crypto asset back.
This means that no matter what the market does, the Taker always knows their crypto is worth at least the floor amount (minus fees and premiums charged for taking out the protection).
On the other side, the Maker is a liquidity provider. They deposit their stablecoins into Bumper’s capital pool via the smart contract, and in return also receive a ‘Bumpered’ token, this time representing their deposit of USDC.
As Takers pay premiums, this is added to the capital pool, and so the makers as a whole are earning on their deposits. Furthermore, because Takers are disincentivised from closing their positions until the end of their term, much of the Capital pool can be put to work yield farming on other DeFi protocols.
This generates additional yield too, which benefits the Makers, not only from the additional earnings, but from being able to gain the benefits of yield farming in one place, without having to constantly look around for the best opportunities (and of course paying lots of gas and network fees from the different farms).
More importantly, the Bumpered asset (which both Makers and Takers hold whilst they have an open position) will be fungible and tradable, allowing them to be used in other DeFi protocols, for example for collateralising a loan, with the added benefit of reducing or negating the risk of being liquidated if the market changes (because of the floor price baked into the Bumpered asset).
Under the hood, the protocol continually rebalances and ensures that protection is always available for Takers, whilst maximising the yields for Makers. The system is designed to withstand virtually all price scenarios, and acts as a superior way of providing protection compared to stop losses and options desks.
The Bumper DeFi protocol provides a market for Takers to buy price protection, whilst Makers earn yields by providing liquidity, in a decentralised and provably fair manner.
Whilst this is a very simple overview to the Bumper system, there is a lot more to learn about, and we highly recommend reading our Flashpaper and Litepaper to really understand how this innovative price protection system works, as well as how Makers can earn yield and Bump token holders can support the protocol through staking.
If you’d like a nice visual summary, we recommend visiting here.
Being part of the community of Sentinels is the best way to stay informed, and we strongly recommend joining our Discord server to be part of the conversation.
Disclaimer:
Any information provided on this website/publication is for general information purposes only, and does not constitute investment advice, financial advice, trading advice, recommendations, or any form of solicitation. No reliance can be placed on any information, content, or material stated on this website/publication. Accordingly, you must verify all information independently before utilising the Bumper protocol, and all decisions based on any information are your sole responsibility, and we shall have no liability for such decisions. Conduct your own due diligence and consult your financial advisor before making any investment decisions. Visit our website for full terms and conditions.
In this article, we compare using Bumper with Put Options and examine its advantages for DeFi traders wanting to trade volatility with more flexibility.
