Bumper: The DeFi Revolution in Crypto Risk Management Begins NowSponsored
As a crypto user, how do you manage risk? It’s an interesting question and for many in the space, the answer would typically be “oh, I set a stop loss”. Of course, there are some sophisticates who hedge risk positions with options, but you rarely hear any ...
By: Bumper • Loading...Sponsored
As a crypto user, how do you manage risk? It’s an interesting question and for many in the space, the answer would typically be “oh, I set a stop loss”. Of course, there are some sophisticates who hedge risk positions with options, but you rarely hear any other alternatives.
Does it seem at all surprising in such a highly volatile growth market, worth trillions of dollars, that managing portfolio risk is often afforded such little consideration? It’s especially puzzling as the industry frequently records double-digit price drops, which in the tradFi world would spell armageddon for traders and businesses alike.
The fact is that, although tools such as stop losses and options can help users to limit losses, they're far from perfect. Setting stops on an exchange can lead to premature exits and lower than expected selling prices, not to mention the risk that a price-drop was a temporary blip that quickly reverts back to the upside causing the investor to miss out on fresh gains. Options on the other hand can be costly and are highly complex, generally appealing to a much smaller subset of crypto enthusiasts.
Introducing Bumper, the DeFi protocol that's set to revolutionise how we protect our crypto assets with a simple-to-use, price-efficient, and reliable alternative to traditional risk management tools, designed for the DeFi age.
Bumper lets crypto holders protect the dollar-value of their wallets whilst being able to enjoy the upside gains if it goes up. This is achieved by attracting yield seeking liquidity providers on the other side of the market to pool together to ‘assume the risk’ and in return make a passive return from the premiums charged to those protecting their assets.
The Bumper Advantage
Bumper presents a completely new way of thinking about risk management in the crypto space functions. Yeah, of course, everyone says their product is a ‘paradigm shift’, but in this case it happens to be fundamentally correct. So what exactly sets Bumper apart from existing models?
Bumper's unique value proposition lies in being a straightforward risk management solution with baked in good value for users. Unlike traditional hedging tools and products, there’s no need to be a finance quant, or even a well-seasoned trader to understand and use it effectively, and this simplicity does not compromise its functionality, but rather enhances it, making it an accessible tool for a broad range of crypto holders.
More importantly, the secret sauce under the hood of the protocol ensures there’s a balance of risk and reward designed for maximum price-efficiency. Bumper’s premiums for protection are calculated incrementally, based largely on the volatility in the actual price path. This creates a level playing field for all users who are no longer engaged in a directly combative ‘zero-sum’ game against another trader.
Bumper’s maxim is delivering fair protection for a fair price - and extensive backtesting against historical price action demonstrates, on average, that using Bumper significantly lowers premiums for hedging risk whilst simultaneously generating improved yields compared to options desks.
How does Bumper work?
To ‘bumper’ one’s tokens (the Bumper team believe that the act of bumpering ones crypto will soon become eponymous with risk management in the crypto space) users choose a price floor below which they won’t suffer further losses should the price tumble, before depositing their tokens into the protocol’s smart contract.
Once the user's tokens are bumpered, if the market price drops below this floor, the protection kicks in, ensuring that the value of the user's assets does not fall further. It makes no difference whether the price then jumps back above the floor, nor does it matter how many times this happens.
What’s important is the market price when the term ends - if it’s below the floor, the user exits with stablecoins to the value of the floor, leaving their locked assets in the protocol. Conversely, if the price is equal or above the floor, then they simply reclaim their locked assets.
Secondly, Bumper is designed for the DeFi age. By leveraging the power of smart contracts to provide a decentralised and trustless system, there are no intermediaries and no requirement to give up the keys to your crypto (à la centralised exchanges). Everything is managed by the smart contracts, which in turn are governed by the protocol’s DAO.
Moreover, Bumper is accessible to everyone. Whereas many options platforms are centralised, requiring users to undergo yet more KYC identity checks, and unavailable in some jurisdictions, Bumper is pure DeFi, and accessible to anyone with a Web3 wallet.
Bumpering Your Crypto and Earning Yields
Bumper’s retro looking dApp has been designed to be extraordinarily intuitive to use, regardless of whether users wish to protect their assets from downside moves, or earn a yield depositing stablecoins.
For protection seekers, once they’ve connected their wallet to the dApp, there are literally just three parameters a user needs to select to open their position.
Firstly, they choose how much of their selected asset they wish to have bumpered, for how long (the minimum is thirty days), and their chosen floor price, and then it’s just a matter of confirming and approving the transactions in the connected wallet.
Similarly, for earners, it’s a simple case of choosing how much to deposit and for how long, and finally selecting a risk tier - the higher the risk, the higher the potential return - and of course then making the usual approvals in their Web3 wallet.
There’s one other thing you need in order to open a position with Bumper, and that is to hold an amount of BUMP tokens, and the way in which this works is really innovative, and an inspired way to drive token demand.
The BUMP token - the key to using Bumper
Users who want to protect or earn are required to ‘bond’ a certain amount of BUMP tokens into the protocol, effectively removing them from circulation until the position is closed. This means that users are merely pledging their BUMP tokens for the duration of their term, marking a significant departure from many DeFi protocols where tokens are spent or burned.
The BUMP token also has a dual purpose as a governance token, allowing holders to stake their unbonded tokens into the protocol in return for voting rights in Bumper’s DAO.
Redefining Risk Management in Crypto
Bumper has been designed to be a DeFi alternative to traditional tools like stop losses and options, with an appeal across the board from the greenest to the most experienced and sophisticated investors, making a whole new world of interesting strategies possible.
From protecting from further downside in a protracted bear market to locking in profits without missing out on more upside potential in a pumping bull run, Bumper doesn’t just prevent losses, but maximises profit opportunities in the inherently volatile crypto markets.
The protocol also opens the door to a wholly new DeFi primitive which could feasibly shape the market in some pretty profound ways.
For example, when users deposit their tokens they are returned ‘bumpered’ asset tokens, representing the locked asset with a minimum redeemable price. The team envisions this being able to collateralise a loan from a DeFi lending protocol, marking a major step in eliminating forced liquidations in the event of market crashes. Neat!
It's clear that Bumper isn't just another DeFi protocol but a groundbreaking solution with the serious potential to redefine risk management in the crypto space. With its unique blend of simplicity, efficiency, and fairness, Bumper is poised to become an essential tool for a wide range of crypto enthusiasts, from novices to seasoned traders.
Bumper is due to launch on August 31st 2023, you can register to earn your share in $250,000 of early adopter incentives paid in BUMP to those who are first to Bumper their crypto.
Keep your eyes on Bumper is its looking set to revolutionise the game of crypto investing.
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