Bumper’s Simulation Report: DeFi Performance Maximised

We’re delighted to announce the release of our protocol simulation report, a comprehensive evaluation of how Bumper performs against real crypto price action.

Unleashing Price-Efficiency and Enhanced Yields 

This report is the culmination of over 2 years of research and development, and demonstrates that Bumper delivers price-efficient protection, as well as improving average yields compared to existing options desks - whilst remaining fully solvent at all times.

To test the protocol’s effectiveness, an agent-based simulation was developed to replicate Bumper's protocol design with very high fidelity and test the protocol's mechanisms and user behaviour in response to external inputs.

The goal, ultimately, was determine whether Bumper could operate in a dynamic environment while still meeting its economic objectives, referred to as the ‘trilemma’, which are to:

• minimise Taker premia, 
• maximise Maker yield, 
• ensure constant protocol solvency. 

Simulation Methodology

The simulation provides an understanding of the dynamic environment in which Bumper must reliably operate, informs the protocol’s mechanisms' effectiveness, and assists in prototyping new functionality. It also plays a crucial role in determining an appropriate set of parameters used to fine-tune the protocol’s mechanisms.

Employing thousands of digital ‘agents’ using an Agent Based Modelling (ABM) approach, the simulation was designed to observe the performance of the protocol over numerous different price paths and parameter combinations.

Backtesting was conducted using genuine price data, including throughout 2022 during which we saw some of the biggest ‘Black Swan’ events in crypto history (the collapse of FTX and Terra-Luna), as well as unprecedented Federal Reserve tightening and rate hikes, all factors which exacerbated the bear market.

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Key Findings

The report highlights a number of key findings which all point to Bumper as a viable and efficient DeFi risk-management solution in virtually all economic scenarios.

For the TL;DR, the key findings from the report are that Bumper: 

• provides reliable protection with competitive premia,
• delivers attractive yields independent of any token incentivisation schemes,
• remains fully solvent throughout all scenarios,
• has a surprising correlation with Black-Scholes, despite using different inputs and methodology for calculating premia.

As a result, we finally have the detailed proof which allows us to confidently assert that Bumper emerges as a superior risk market compared to traditional crypto options desks.

And the real kicker is that Bumper is DeFi through and through, offering access to everyone, unlike centralised options desks which often do not provide services to customers from certain countries (including the USA).

Download Bumper’s Simulation Report

Ready to deep-dive into the next revolution of DeFi? 

‍Download the Simulation Report now.

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