Not all swans are white. Sudden market destruction is not the distant generational fear it used to be. Since Nicholas Taleb’s seminal treatise ‘Black Swan’, the markets and the investors in it – we’d like to think – have been more cognizant that sometimes things don’t always go to plan – and the charts don’t always shimmy and sway to a particular pattern. Volatility in the market, including violent and rapid onset downswings, is a feature and a bug – particularly when it comes to crypto.
Thankfully, there are protocols aiming to protect user assets against radical downswings, and one prime example of a project spearheading crypto asset protection is Bumper.
Today, we are excited to interview Gareth Ward, the COO of this novel protocol.
We’ve seen a lot in DeFi so far that I would consider as ‘trad-fi retrofitting’. This is probably due to DeFi being quite nascent but there are platforms that merely offer a crypto version of what already exists in traditional finance. In the area of price protection, we see crypto options platforms that offer the same options service but suffer liquidity issues and the same expensive cost to the user as the traditional solution. Besides the fact they were invented in the 1970s and somewhat limited in crypto, they offer nothing unique, and haven’t tapped into the power of DeFi. Where the risk is directly put on the buyer of the option, at quite an expense, the crypto version is offering nothing different.
Bumper does something different and takes the concept of price protection another step further. By utilising all the benefits of DeFi such as pooling, Bumper is inherently designed around decentralised systems. The pooling of risk buyers and risk sellers allows us to exploit the very essence of DeFi, and not simply be just another retrofitted copycat.
A lot of the team come from different backgrounds but it would be safe to say we are probably all quite aligned in our thinking and belief in crypto, in general. None of us are highly experienced traders, and we’re people who want to benefit from the space, but at the same time still have a life where we’re not watching the charts till all hours. To do this, you need a secure way to manage the risk that the high volatility in crypto presents. Out of that desire, we created Bumper.
We certainly looked at the DeFi space and thought about where it was lacking and, through a concerted effort, we came to the conclusion it was price protection. If we could solve that, make it easier, then it will fundamentally change how anyone manages risk.
At the moment we have 8 full-time people and then we have about 30 external people, both suppliers and partners, that we work with.
We essentially create a marketplace where we match buyers and sellers of risk. Now, that’s the very simple explanation and could be done a number of different ways but the way Bumper works is by creating two pools, one with the unstable asset and the other with the stable asset. The ‘Takers’ of protection deposit their unstable asset (eg. ETH), and the ‘Makers’ provide the stable asset (eg. USDC) to the pool. Both these pools exist in a balance, managed by half a dozen different ratios. When the ratios fall outside of their set parameters, the protocol implements a series of first order dynamic mechanisms, and others, to bring the protocol back into balance.
The main one of these is the price for the policy itself. Because the premium a Taker pays for their protection is paid to the Maker (minus a small clip for the protocol), this acts as an incentive for Makers to add liquidity when the premiums go up, and subsequently disincentivises the Takers.
It’s a balancing act but is driven by the algorithms that define the parameters and the costs within the system.
From the start of our build we wanted to make sure this was an easy experience for users. There’s no point offering price protection if you can’t get it quickly and easily. We’ve also embraced the 80s vibe throughout our website and in the dApp. Once you enter the dApp, you kind of enter an 8/16-bit world, much like the movie Tron. That was the inspiration and it also aligns with the simplicity we want to deliver. We’re all 80s kids so we have fond memories of that time too.
The Makers earn in two ways. The first is through the Taker’s premiums and the second is through the yield we garner when we put the stable pool out to external liquidity platforms. So, instead of putting into that pool directly, you can do it with us and also receive the premiums. Finally, you get daily BUMP rewards as part of your bonding, much like Compound do.
The LPP did very well. Over $25m came in throughout the period and the initial rush was extremely positive. With steady growth throughout, it’s allowed us to get the token out there and into many future user’s hands.
Pre-Sale is happening now and we have limited tokens. It’s going well and we’re seeing a lot of interest, even while everyone’s in Bitcoin riding the pump! Best thing to do is get over to bumper.fi asap as it ends on Thursday, October 21 at 12pm UTC.
It’s really the fundamental aspect of the price protection but the ease with which users will be able to interact with it is where we separate ourselves from the pack.
The $BUMP token is really important to the platform, and for a user, so both the protocol and the user are aligned. This is often quite rare and absolutely at the heart of what crypto and tokenisation should create. The token will be required by a user, Taker or Maker, and this will mean they need to ‘bond’ their tokens to the platform based on how much of their asset they’re adding to the protocol. The token is also needed to help in rebalancing the protocol. Furthermore, in the future we expect to develop a loyalty program which will give more options and greater yields for the participants, depending on how much they own. We also are looking to be able to allow users to pay fees with the token itself.
First thing’s first is that we want to get it live and working well. Once we’ve refined the parameters then we will add more assets to the list on both the stable and unstable side. After that, we want to move to a Layer 2 solution and then look to integrate directly with a variety of lending platforms. There are plenty more opportunities we envisage but we know development is a rollercoaster ride so we’re keeping our roadmap considered and targeted for now. The possibilities are truly endless as Bumper could be a key Lego piece in DeFi so watch this space!
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