Finance moving on-chain will change everything. Financial instruments are just an outstanding use-case for the blockchain. DeFi offers more efficient processes, cheaper operations, and faster delivery of digital assets, and that will massively increase efficiency (and thus yield-generation) in the financial system.
Bumper is poised to tap into this exponential growth of DeFi as it pushes crypto towards an illustrious future. DeFi protocols like Bumper that allow DLTs to mirror and then improve upon core financial services will usher in a better and more equitable financial world.
Hedging Against Liquidation
A key part of any healthy, sophisticated financial system is the ability to hedge against volatility. It helps create the confidence to participate fully in the market and maximize capital efficiency, as investors do not have to liquidate their assets in order to meet their obligations.
Bumpered assets used for crypto-collateralized loans will have inherently less volatility, and thus can be used to reduce over-collateralization requirements for a collateralized debt position (CDP), increasing the overall credit supply to the individual and the market.
It also frees up more collateral to be employed in yield-farming, both within the Bumper protocol and without. For savvy traders, Bumpered assets can be a great way to put crypto resources into yield-farming that would otherwise have to be held in reserve to manage risk, leading to a more mature financial market overall.
Protecting Retail Speculators and Crypto Institutions from Volatility
A more simple use for Bumper, and one that promises retail uptake, would be the creation of a safety net for a general feeling of bearishness about what’s to come for a single asset. Inherently, if the speculator is taking a long position on an asset, they do not want to liquidate that asset in volatile conditions so with Bumper they don’t have to, and they capture the upswings as crypto moves to mass adoption.
For larger institutions, the use-case is more stark. Compliance dictates that companies holding large amounts of crypto must hedge against the risk on their balance sheets while they serve their user base – whether it is large, powerful, or both. This is a fiduciary duty; and is perhaps likely to be regulated as the ‘great onramp’ begins.
Amidst this climate, Bumper offers an instant, flexible, efficient, and powerful economic instrument that can integrate at pace with companies existing balance sheets, and provide a sure footing to even newer, giant players at a stroke.
Fiduciary Responsibility for Traditional Companies
It’s not just the crypto markets that stand to benefit from this total solution on-chain price protection. We’ve already seen large traditional companies start buying cryptocurrency to boost their balance sheets, with Tesla being a notable example.
These publicly listed entities want to manage fiat inflation risk or diversify their holdings, but need to manage risk appropriately. Bumper will be on hand to help these companies invest, while remaining within acceptable risk parameters.
How Bumper Could Interface With All of DeFi
Bumper will offer price-protection that will utilise collective asset pools to mitigate asset price risk. From the individual to the largest institution, the Bumper protocol will provide a simple, few clicks solution to asset protection that will plug seamlessly into the DeFi ecosystem.
The composability of DeFi means that as Bumper’s protocol grows, it will be able to offer the security against volatility that everyone craves – not just pro traders. Who knows how far this could go but the possibilities could be quite far-reaching and may even be able to support tokenized securities in the future.
It’s not just individual assets, but entire pools can be Bumpered to provide a foundation for onboarding investment. Structured products like this can be packaged easily for investors in DeFi V2 using Bumper as an underlying building block.
More retail users are onboarding into the DeFi ecosystem to take advantage of the possible yields. Bumper will hope to form alliances with major wallets like Coinbase and Metamask, and could allow those users an embedded method of safeguarding their holdings.
It’s this every day hedge against volatility that will allow DeFi speculators to leave their money in the market, even when things are looking bearish, and thus contribute to a more thriving crypto economy.
Giving DeFi the Bump It Needs
DeFi has barely begun. Finance just makes more sense on-chain. Yet all complex financial systems need risk management, and Bumper will be the simple, packageable financial instrument that ensures protection with all kinds of risk, and for all types of investors. DeFi’s innate composability means exponential growth is guaranteed, and Bumper will be enshrined as a foundation brick upon which the financial towers of the future are built.
Disclaimer: This is a paid post and should not be treated as news/advice.