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How Bumper DeFi Protocol Protects the Price of Your Crypto

Bumper — DeFi Price Protection

Volatility is the enemy of crypto. If you’ve been awake at 3am grasping for your mobile phone, you’ll be familiar with Bitcoin’s rollercoaster ride. Volatility prevents institutions from entering, it relegates retail investors to the side-lines and causes positions to be liquidated.

Surprising then, that the raft of available tools to give us comfort and peace of mind are so poor. Stop-Loss is a universal tool that trades you out if your asset price drops, which is great, unless of course the price recovers and you miss out on the surge. Option desks offer ‘Call’ and ‘Put’ options, but they are too complex, clunky and expensive for the casual user.

BUMPER solves this fundamental problem using a radically innovative DeFi protocol. Set the price you want to protect and if the market drops, your asset will never fall below that price. Importantly, if the market pumps, your asset rises too. Naturally, for this protection you pay a nominal premium, as low as 3% p.a. Better still, if the price rises from your protected floor, the premium drops to negligible levels. The elegance of BUMPER is that you can jump in and out of protection as often as you want and eventually expanding to protect virtually any crypto asset, including your whole portfolio.

BUMPER, therefore, works well in either a bear or bull market. Let’s look at an example of taking BUMPER protection, in the recent 2021 bull market.

1. January 8th you protect 1 BTC at $40k, expecting the market to drop.

2. Indeed, the market retraces down to approx. $30k

3. January 20th you redeem your BUMPERED BTC for $40k, pocketing $10k profit (minus premium fees)

4. You buy 1 BTC at $30k and then re-protect at this price.

5. You’ve benefited from your BUMPERED BTC rising to nearly $50k (minus nominal premium fees)

How Do I Take Out Bumper Protection?

There are two sides to BUMPER, those taking protection who pay a premium, and those providing stablecoin into a liquidity reserve who earn a yield.

Taking Protection

Bumper — Purchase Protection

In just 6 clicks you can now protect the value of your crypto assets. For instance, should the price of ETH rise, you have the freedom to let it roll-on, knowing your premiums will be trivial, or exit and re-protect at the higher price.

Protect your assets by attaching your wallet to the BUMPER DApp. You can choose the amount and price of ETH to protect (further assets will be added in future releases). In return, the protocol locks the ETH in your wallet and credits a corresponding amount of Bumpered ETH (bETH). bETH is a fungible token that will not fall below the protected price. Similarly, to end protection you send your bETH, or the current value of ETH, back to the protocol. BUMPER then reconciles and returns the protected amount, minus any premium fees back to your wallet. You pocket the difference. You are free to jump in and out of protection as often as you wish.

Earning A Yield

Bumper — Deposit Liquidity

To earn a yield, use the BUMPER DApp to send USDC to the protocol. You’ll receive a yield arising from premiums paid by those taking protection (further stablecoins will be added in future releases). In return, the protocol sends you a corresponding amount of Bumpered USDC (bUSDC). This is a fungible yield-bearing token, pegged to USDC, but which increases correspondingly over time due to the accrued yield. You can transact and trade your bUSDC, as you would any other. Importantly, since the stablecoin liquidity pool is highly incentivized, it attracts deposits from other protocols seeking a yield. Furthermore, as the pool is covering only unrealised liabilities, a large percentage can be sent to other protocols (i.e YEARN) to earn a secondary yield, in addition to the premiums you receive from those taking protection. If you wish to withdraw your USDC, simply withdraw your bUSDC or equivalent value from the protocol and BUMPER returns the collateral to your wallet.

What’s Under The Hood?

This is where it gets complicated.

On one side BUMPER has a pool of ETH and on the other side a pool of USDC stablecoin. BUMPER’s basic principle is to swap each Taker’s ETH into USDC, when it falls below their protected floor. Doing this on a DEX would incur intolerable slippage, TX and Gas fees. Instead, BUMPER maintains an internal ledger to keep track, as ETH is swapped in and out of USDC. Before ETH drops below an acceptable level (resulting in a loss), BUMPER opens itself to arbitrage bots to rebalance. In the event of a fast and dramatic drop, the protocol rebalances on DEXs. This ensures that the protocol makes good on any redemptions from either Takers or Makers. In any event, a separate risk pool covers any realised losses, which are nominal, due to numerous redundancy measures built into the protocol. Finally, BUMPER dynamically alters the premium it charges and the yields it pays out, to maintain a perpetual equilibrium between the pools.

The result is an extremely efficient instrument that flatlines volatility while attracting a highly incentivized USDC pool to earn a yield.

BUMPER was conceived by the founders of INDX (the guys who have been yield farming since 2017). They realised BUMPER needed some serious architects, mathematicians, and developers. With a DeFi protocol this sophisticated, there was only one candidate at the top of their list - Block8, based in Sydney. This is the company that designed and then built Havven.

BUMPER is currently fundraising with leading institutional investors.


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