At its heart, Bumper is a risk management tool which provides price protection for crypto assets from downside volatility and market crashes. Although Bumper shares some similarities with Stop Losses, Options Desk and insurance policies, there are significant differences in Bumper’s architecture, functionality and approach to managing risk.
Bumper is a price-efficient, trustless and provably fair risk market, governed by its community without third party intermediaries.
Bumper protects your crypto assets from losing value when the price goes down, but conversely, you don’t miss out if it shoots back up, even if it previously dropped below your chosen floor level.
Although Bumper’s underlying architecture is highly complex, using the browser based dApp is simple, allowing positions to be opened immediately with a minimum number of clicks.
Bumpered assets represent your protected asset with the downside volatility removed whilst your position is open. These are composable tokens that can be used as collateral for a loan, with the risk of forced liquidation reduced, if not eliminated entirely.
Premiums are based on measured volatility over the course of a position, with premiums applied simultaneously to all protection positions incrementally, making hedging risk substantially more price-efficient.
Bumper establishes a fair procedure for fairly distributing both gains and losses in a risk market (traditionally adversarial, zero-sum games between two individuals in which there always emerges a winner and a loser).
Bumper’s underlying philosophy draws upon the Rawlsian theory of Distributed Justice, which champions the idea that groups of responsible people will naturally establish “a fair procedure” for determining the ‘just’ distribution of primary goods and resources.
Bumper replaces the traditional, opaque pricing of Options markets by charging premiums based on the actual volatility of a crypto market, as it happens in real time. This ensures that the cost of protection is directly proportional to the actual risk that liquidity providers are exposed to in any given time period.
Using Bumper is a bit like a God-Mode cheat code for your crypto assets.
Bumper is built on the Ethereum blockchain, and sports one of the largest codebases in the entire DeFi space.
The native BUMP token doubles as both a governance and a utility token, and is required by participants who wish to open both protection and earning positions.
Bumper is built using a quadratic multi-pooled architecture, in which two distinct pools handle deposited funds, with a further two separate pools dedicated as both asset and capital reserves.
The protocol state is measured at regular intervals, along with real-time price data, and state changes are compared with configurable targets. These targets inform where rebalancing mechanisms need to be executed in order to maintain the overall health of the system and ensure sufficient liquidity for upcoming withdrawals.
You can find more out about how liquidity pools, pricing mechanics and rebalancing works in the Bumper Litepaper.