Autonomy Capital & Bumper Finance

Intro

Autonomy Capital is excited to announce not only our investment in Bumper.fi, but also our intention to support their long term vision and assist with their growth though community & marketing initiatives. Our goal is to help elevate Bumper.fi to the point that the crypto community as a whole recognizes how beneficial the Bumper Protocol can be to maximizing long term gains in both crypto and USD denominations.

TL:DR

  • Innovative idea that addresses a real pain point
  • Very easy to use
  • Developed by Block8 which had a hand in developing Synthetix
  • Revenue model well designed, for profit organization
  • The team are veterans in the Crypto space

In a nutshell, the Bumper Protocol allows people to take protection from volatility by paying a fee to liquidity providers to cover their position in case a threshold price is reached. Lps on the other hand, provide liquidity in exchange for that fee and other economic incentives.

IN SHORT: set the price you want to protect and if the market drops, your asset will never fall below that price in terms of USD. More importantly, if the market pumps, your position is repurchased and one would be able to have exposure to asset appreciation. For this protection you pay a nominal premium, as low as 3% p.a. and if the price rises from your protected floor, the premium drops to negligible levels.

You can jump in and out of protection as often as you want and eventually expand to protect virtually any crypto asset, including your whole portfolio (and not only crypto in a sense).

COMPONENTS

There are 2 pools:

  1. Volatile assets pool- asking for protection , ETH is the first asset on the roadmap with WBTC soon to follow. Other assets will be added as liquidity grows
  2. Stable assets pool- providing protection, USDC liquidity

TAKING PROTECTION

  • Users protect their assets by attaching a wallet to the Bumper Protocol Web3 dApp. Bumper charges a nominal floating daily premium, which proportionally drops as the protected asset price increases in value.
  • Users choose the amount and price of ETH to protect (further assets will be added in future releases of the protocol as described above).
  • In return, the protocol locks the ETH in the Bumper smart contract and debits back a corresponding amount of Bumpered ETH (bETH).
  • bETH is a fungible token that represents a claim over the underlying asset pool at a secured price point.
  • To end protection, users send their bETH or equivalent value back to the protocol.
  • Bumper then reconciles and returns the protected amount, minus any premium fees back to the user’s wallet.
  • Users can jump in and out of protection as often as they wish.

LIQUIDITY PROVISION

  • Liquidity providers use the Bumper Protocol dApp to send USDC to the protocol to receive a yield (further stablecoins will be added in future releases).
  • In return the protocol sends the user a corresponding amount of Bumpered USDC (bUSDC). This is a fungible yield -bearing token, pegged to USDC, but which increases correspondingly over time due to the accrued yield. You can transact and trade this token as you would any other.
  • Users who wish to withdraw their USDC can simply redeem their bUSDC from the protocol and Bumper returns their original supplied USDC plus accrued interest back to the user’s wallet.

It’s worth noting, the stablecoin liquidity pool generates a yield to attract inter-protocol Total Value Locked (TVL). Furthermore, since the pool is covering only ‘virtual’ liabilities, a large percentage can be sent to other protocols (i.e YEARN) to earn a secondary yield, in addition to the premiums paid by protection Takers.

Risk interchange between protection Takers and Makers is conducted through a pool-based, deferred-transaction approach. The near-zero slippage engine collates every position that is instigated by either a Maker that supplies stablecoins, or a Taker that supplies a volatile asset.

  • Every position that is created debits or credits a respective number of assets from the Liquidity Reserve or Asset (non stable) pool.
  • Fungible bAsset tokens take their place, representing a share on either the corresponding asset pool, or a claim on the Reserve, at an agreed price.
  • The protocol imposes a minimum period before changes to a given position can be made.
  • Bumper dynamically reacts to the aggregate amount of liability presented by the Asset pool as the ratio of Asset pool to stablecoin reserve will vary as Takers and Makers open and close their positions.
  • Moreover the protocol is segmenting Maker risk into a tranched hierarchy and measures a set of ratios against the relevant risk settings in order to understand the current liability of the Reserve and in order to calibrate the premiums to attract the necessary liquidity to keep the ratios within the defined risk boundaries of the system.
  • The above mentioned modulation will be programmed via a function that is upgradable by the governance (first order incentives) and should these first order incentives fail to bring the ratio back to balance, the protocol itself will open up to arbitrage bots and community permissioned trades .
  • Any resulting realized loss will be significantly mitigated, if not completely resolved, by the redistribution to the higher incentivized tranches, with a final backstop prudential capital reserve to manage any realized debts.
  • Depending on the volatility level of the market the protocol will distribute premium fees based upon risk appetite, so makers who believe volatility is temporary can move to higher tranches and earn greater yields or vice versa.
  • The Prudential Capital Reserve is a USDC reserve that kicks in if all the rebalancing mechanisms prove insufficient to bring back ratio equilibrium.
  • Bumper will basically be the savior of last resort.

REVENUE MODEL

Bumper earns a 0.5% fee from protection Premiums and 0.25% from the Stablecoin Reserve. Therefore every $200m (or less) locked into the protocol, generates $750k in revenue. The target is a TVL of $1bn within the first year of launch, translating into $3.75m annual revenue.

CONCLUSION

With Bumper you can pay a small premium to protect against volatility affecting negatively your portfolio and at the same time benefit from the volatility affecting positively your portfolio. The premium you pay to protect is trivial respect to the Xs we are used to experiencing in these markets.

So at the end with this elegant solution Bumper’s team is delivering a very well needed service with very big potential for many different applications and maybe even other “tokenized” asset classes.

About Autonomy Capital

Autonomy Capital is a self-funded VC that aims to not only provide early round financial support to projects but also to actively provide guidance through networking, marketing strategy, community management, and exchange listings.

DYOR

Autonomy Capital
Website: https://www.autonomy.capital/
Twitter: https://twitter.com/AutonomyCapitaI
Medium: https://medium.com/@Autonomy.Capital

Bumper
Website: https://www.bumper.fi/
Twitter: https://twitter.com/bumperfinance
Medium: https://medium.com/bumper-finance

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