Crypto holders are looking to “buffer” assets to protect themselves against downside risks

In the vast ocean of the crypto industry, well-designed risk management solutions that keep participants’ portfolios afloat are hard to find – those that do exist have clear drawbacks. Take, for example, the commonly used stop loss. While it protects against downward price movements, users can be surprised by a quick market rally and miss out on profits because the stop loss involves immediately selling an asset at the specified strike price.

It’s no secret that participating in the crypto industry is not easy, regardless of a person’s activity level. Passive holders are subject to high market volatility, a known barrier to global cryptocurrency adoption, which creates stress and makes it difficult to predictably grow a portfolio of assets. Many holders are also exposed to counterparty risk on a daily basis, which has resulted in extraordinary losses in scenarios such as the FTX collapse in early November 2022.

For those more inclined to take an active role in the crypto markets, there are sometimes overwhelming complexities, especially when dealing with derivatives and options. Even for those who are more experienced in trading crypto assets, timing purchases and sales to generate a profitable return is generally a complete mystery.

Bumper, an upcoming crypto DeFi protocol launching in August, aims to solve the burden of holding crypto assets. The project’s novel tools have crypto connoisseurs excited to “buffer” their assets to avoid losses and generate returns by contributing liquidity to the ecosystem.

Sensible risk management is emerging

Bumper promises to act as the ultimate safety net for crypto participants and is driven by the mission to protect users from the downside risk of the crypto market. The team behind the protocol calls it “DeFi’s most advanced price protection ecosystem” and has built it to be fully on-chain and decentralized, offering maximum transparency and security.

Bumper’s market design allows anyone to freely participate in price risk hedging in a simple, provably fair manner and without counterparty risk. Bumper is a tool that allows people to protect the dollar value of their tokens and passively generate yield across the DeFi space.

The protocol’s utility token, BUMP, supports the entire ecosystem and network effect of all Bumper price protection market pairs. Every time a user takes a position in the protocol, whether to protect the value of an asset or to provide liquidity to generate income, they are required to have enough BUMP to “lock” them to their position . This basically means that BUMP is the required ticket for the bumper ride – no BUMP, no fun for you. As long as there is a demand for using the Bumper protocol, there will also be a demand for BUMP. The token can also be used to generate yield and provides voting rights, allowing holders to participate in the decision-making that determines the future of Bumper.

Bumper plays defense and offense

Bumper is incredibly easy to use for anyone, but don’t let that fool you. The protocol is a powerful dual-purpose tool that allows users to achieve two main goals: protect assets and generate returns.

Protect

Bumper offers a novel solution that allows anyone in the crypto space to defend against negative price movements by ensuring that selected assets do not fall below a certain USD value in the event of a significant downward price movement. In the protocol, this all happens in a simple and provably fair way, eliminating counterparty risk while leaving the door open to also participate in the upside of the market.

Bumper Price Protection | Source: Bumper

To open a guard position, users only need to decide three things when using Bumper:

• The amount of ETH they want to protect
• The “floor price” of ETH at which its protection “kicks in”
• The amount of time you want active protection for

Let’s look at an example of what happens when the position is closed. Imagine you have 1 ETH that is worth $4,000 at the time of position creation and set a floor price of $3,750. If ETH is worth $4,500 when you close the position, congratulations! You will receive your original balance (1 ETH) back, minus the premium (the cost of protection) that Bumper charges you. If ETH has fallen to $3,500 at the time of closing the position, instead of the value of ETH increasing, you will receive USDC and ETH worth the preset floor price minus the premium.

Earn

Bumper users have the opportunity to earn yield by contributing liquidity to the Bumper protocol using USDC. Since Bumper eliminates counterparty risk through decentralization, it is a safe alternative to using centralized exchanges, especially considering that Bumper offers users the flexibility to customize a position level that determines their risk exposure and profit potential.

Liquidity providers earn income from premiums paid upon closing price protection positions and also from yield farming automatically activated via bumper smart contracts (pooled USDC is staked in yield farming via external DeFi protocols). Under normal market conditions, this offers the potential to generate higher profits than if a user were to engage in direct yield farming instead.

To open a position and earn returns, users only need to decide three things:

• Choose the USDC amount you want to deposit
• Decide which tier you want to join (risk tolerance).
• Choose a period to earn income

Bumper’s plan to revolutionize DeFi

A core element of the vision for the future of the Bumper Protocol is the novel concept of “Bumpered Assets”. Buffered assets will be incredibly useful and could well open new doors for crypto holders, allowing access to liquidity without having to sell assets or take out a risky, unprotected loan. This is how they work.

Every time someone takes a position on Bumper, they receive a buffered asset that represents the position once locked via the bonding bump token. Due to the set minimum price that the Bumper Protocol provides for assets active in a position, Bumper assets maintain a guaranteed minimum value and are not subject to the risk of forced liquidation in the event the market continues to decline. For example, Bumpered ETH (bETH) is equivalent to ETH but without the downward volatility.

Buffered assets are freely exchangeable tokens that can be sold, transferred, locked into smart contracts, or even used as collateral for loans – a use case that could have huge implications for the future of DeFi as it allows lenders to have done this, gives more security. In many cases, they have traditionally been reluctant to lend due to fear of the volatility of crypto assets.

We are preparing to increase crypto assets

For both passive holders and active crypto participants, the new era of asset risk management is upon us; One that allows users to accumulate their assets to protect against volatility, better utilize tokens like ETH to access credit, and much more. When Bumper launches this August, the world of crypto will no longer remain bogged down by unideal solutions.

To stay up to date on all things Bumper and receive important announcements, sign up for updates on the Bumper website homepage, follow Bumper Twitter, and join the Bumper Discord.

This content is sponsored by Bumper.

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