London, United Kingdom–(Newsfile Corp. – November 15, 2021) – Bumper Finance has announced Price Protection Against Market Volatility. The financial world is seeking to migrate assets on-chain to take advantage of the utilities of DeFi smart contracts in developing their financial instruments for the Web 3.0 economy, an initiative that is often set back by the volatile nature of the cryptocurrency markets.
This is especially true when compared to traditional markets, where asset price-protection is commonplace. Price protection of on-chain assets is one possible use of DeFi that is currently underexploited. Bumper Finance is announcing a new price-protection DeFi protocol that fills this market gap.
The protocol lets takers of protection (Takers) pay USDC premiums to set a price-floor for the current asset. They must also stake $BUMP, the native token of the protocol. The asset is staked and a representative token (which can be deployed into the ERC-20 ecosystem) is provided in its place. After two weeks, Takers can redeem the policy at any time at the value they set, irrespective of the current asset price, and return the representative token to complete the policy and receive its value.
The protocol is capitalised by the makers of this protection (Makers) and the protocol’s capital reserves. Makers earn a yield on their USDC deposits, and can participate in a low, medium, and high-risk pool to earn it. The protocol rebalances these pools in response to the market to ensure collateral-policy ratios are appropriate. There are further mechanisms in place to guarantee policies, including opening pools to arbitrage bots to rebalance it, and a USDC prudential reserve.
Bumper Finance pays out both policies and yield in USDC. It follows the trend of companies using the USDC stablecoin when conducting business on-chain. Visa, for example, did similar when it allowed transactions to be settled with USDC, in partnership with Crypto.com. As well as the USDC, the staked BUMP token, which is the protocol’s native governance and utility token, is redeemed by Takers. It is also earned by Makers participating in the yield-bearing pools alongside their USDC.
Although there are insurance-type protocols which protect assets in the case of Layer 2 error, smart contract risk, exploits and transaction completion risk, Bumper Finance is the first protocol to offer generalised price-protection for the assets it supports. On launch, the asset is ETH, but there are plans to increase the available asset pool after the protocol goes live. It has also planned an upcoming partnership with Panther to ensure ‘privacy by default’ for users of its product.
Financial instrumentation moving on-chain is a process that is expected to continue as the DeFi market continues to grow. Bumper’s announcement of the launch of their new DeFi price protection protocol may be greeted with interest, as traders and investors look for ways to smooth the cryptocurrency’s market’s famed volatility during the 2021 trend of increasing adoption of distributed ledger technologies.
Contact person: Jason Suttie
Email: [email protected]
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