Turbulent Times and How On-Chain Price Protection Could Be Just the Tonic
Will anyone rid me of this turbulent coin? Crypto goes up, and crypto goes down. These are the growing pains of a bright, decentralised crypto-orchestrated future among believers. To retail users and hardened traders, these zig-zag graphs are frightening. No zooming out can compensate for months of gains wiped out in a single tweet.
To hedge against such disasters, some play cautious, some play faster, and many don’t play at all. Crypto’s volatility has been the trump card of a sceptical media. The significant gains used as a tool to gull the guileless; promise the earth and give them a handful of sand. Better luck next time. It has been a nitro boost and a poison to crypto’s adoption into the mainstream. It has often occluded crypto’s real progress as developers race to utilise this groundbreaking new technology.
Any complex financial system needs a way of neutralising excessive risk, especially as more mature and regulatory compliant clientele arrive on the blockchain. Bumper is the first decentralised, pure on-chain risk management and price protection protocol. Standardly, a trader would have to move assets off-chain to set up stop-losses or would have to liquidate assets for stablecoins or fiat if they were fearful of an imminent downturn, or were shocked by a sudden stalactite of red.
Should the market rebound – as it has consistently done – significant gains can be lost due to a moment of fear. Worse, liquidating assets or moving them off-chain in this manner stops them from participating in the DeFi ecosystem, whether earning yield, staked as collateral for loans, or wrapped in a more significant financial product. Thus, volatility reduces the capital efficiency of the individual and the institution – as so much must be hedged – and that impacts the general health as a whole.
Bumper would allow holders of crypto assets to set a price floor by paying a premium. The protection is created by other platform users who stake USDC for a yield. Both Takers and Makers of protection must stake $BUMP to unlock these features. Yield is also paid on staked $BUMP, which provides the protocol with a ‘safety module’ backstop. By staking your excess $BUMP, a user could offset some of the premiums with the earned $BUMP, especially as the protocol grows.
Once a policy is taken, a representative asset, or ‘Bumpered’ asset, is given out in return for the protected asset. This is interoperable with ERC-20 DeFi protocols and could be used to participate in the wider DeFi ecosystem. Should the worst occur and the price of the asset drops precipitously, then the Bumpered asset can be returned to the protocol in exchange for the protected USD price the user locked in.
It allows for price protection to happen in a decentralised, on-chain manner. The $BUMP token and unlocking utility also confer governance rights, and Bumper is currently working with milestoneBased on the creation of a DAO to further burnish and direct this mission.
At the start of February, Bitcoin slumped below $37,000, down from far loftier all-time highs. The path to adoption will have plenty of volatility left in it as the general and crypto public continue to define the value of the blockchain economies rearing up. Bumper adds a level of maturity to that market by offering risk-management and price protection for anyone from retail to institutional users.