Published in


The Importance of Supplying Liquidity to the Bumper Protocol

At Bumper, two major stakeholders make the protocol work. These are the liquidity providers (makers) and the policyholders (takers). Together, these form a market in which takers pay a premium to protect the value of their assets, while makers earn a premium for supplying liquidity to the protocol and taking on risk.

But all great things have small beginnings. It was true when Satoshi Nakamoto released the seminal Bitcoin whitepaper to a small group of cypherpunks, and it’s still true today, as our growing community gears up for the first phase of our platform launch.

In line with this, we will be bootstrapping the initial liquidity for the upcoming protection mechanism through a 12-week event, known as the Liquidity Provider Program (LPP) — and you won’t want to miss out.

Why Liquidity Is Necessary For the Protocol

Bumper’s primary feature is its protection mechanism. As we previously covered, this allows users to lock in the minimum USD value of their crypto assets over their cover period — limiting their potential downside, while retaining all their potential upside.

To achieve this capability, Bumper needs liquidity providers to contribute USDC to the protocol. This USDC is balanced with the ETH deposited by policy takers and is used to reimburse users if their deposit falls below its protected price floor when they redeem their policy.

The protocol is designed to ensure the ratio of USDC to ETH is always sufficient to cover any potential liabilities. In return for contributing this USDC, liquidity providers earn a yield from multiple streams — including their share of the collective policy fees paid by bumpered users and staking returns on their BUMP deposits.

In the event that the liquidity pool is significantly overcollateralized by liquidity providers, the protocol will be able to integrate with select third-party DeFi applications, such as Yearn Finance and Uniswap, to generate a secondary source of yield — helping LPs maximize their returns for contributing to the protocol.

In short, liquidity providers take on the volatility risk of the policy takers — and are handsomely rewarded for it!

Since each volatile asset has its own pool, while all USDC contributed to a single common pool, Bumper is able to ensure that the aggregate liability presented by the volatile asset pool is always covered by the stable asset pool. Should a large liquidation event occur or the Reserve-to-Assets Ratio (RAR) falls below the minimum threshold for some other reason, the Bumper protocol will automatically open itself to arbitrageurs and other second-order measures to automatically rebalance the pool.

As with many of Bumper’s operating parameters, community governance will determine the relevant risk settings — including the minimum desired RAR.

The more USDC contributed by liquidity providers (makers), the more users can rely on first-order measures to ensure that takers are protected and that makers can be certain of a stable yield. This helps to ensure that the Bumper protocol remains resilient, even during times of extreme market volatility.

The Benefits of Being an Early Supporter

At Bumper, we’re all about ensuring that all stakeholders in the Bumper economy are properly incentivized and maximally protected by the protocol.

As part of this ambition, we’re launching the 12-week Liquidity Provision Program, which will allow you to deposit your USDC to the protocol to farm a yield in the form of BUMP tokens.

As with many things, the earliest adopters are the ones who will benefit most from the program, since the farming yields are expected to reach in excess of 300% APR, but will gradually decrease as the TVL increases.

You know what they say about early birds, right?

The yield is closely tied with the total value locked, since the value of the BUMP token will be set based on the TVL, i.e. reaching $1.80 at $150 million of TVL. The public price at listing will then be set at 33% higher than this, providing an attractive yield for LPP participants.

To find out more about the LP Program visit https://bumper.fi/lpp

Deposits will open July 14, so mark the date in your calendar if you want to be among the first in the door.

But that’s not all, by participating in the LPP, you’ll also be given the opportunity to convert up to 20% of your deposit to BUMP tokens at a special private sale price.

This will likely be the last available chance to purchase BUMP tokens at private sale prices before the public IDO in Q3. To put this into perspective, our original private sale was concluded back in March — and we had to turn away over $32 million in investments to ensure we had enough tokens in reserve for some of our earliest stakeholders (ergo the LPP participants!)

By helping to bootstrap the Bumper economy, liquidity providers are key players in the fight to eliminate the obstacle of volatility in DeFi — likely helping to catalyze its adoption as a result.

Interested in participating? Click here to register for updates to stay in the loop.

About Bumper

Bumper protects the value of your crypto using a radically innovative DeFi protocol. Set the price you want to protect and if the market crashes, your asset will never fall below that price. Importantly, if the market pumps, your asset rises too.

Join the conversation in…

Check out the website: https://bumper.fi

Follow us over on Twitter: https://twitter.com/bumperfinance



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store


Bumper protects the value of your crypto using a radically innovative DeFi protocol.