GM, this is your Daily Bolt briefing
As the last couple of days have shown, volatility is a force to be reckoned with in crypto…
In today’s edition, we’re sharing some notes on Bumper, a project that lets you hedge against rapid downside volatility risk, while still retaining the upside volatility potential that makes crypto so exciting.
And if you’re curious about innovation in the lending markets space, we’ve included notes on Timeswap, an Oracle-less and permissionless market for borrowing and lending.
Stay alert, stay informed ⬇
1/ The Edge Podcast - Oracle-Free Lending and Borrowing with Timeswap
Preview: Ameeth from Timeswap discusses Timeswap, oracle-less markets, non-liquidatable loans, and more! Click here to listen to the full episode (42 mins).
Read our Note (10 mins) and save 32 mins.
DeFi Dad introduces Timeswap as a protocol that offers isolated lending and borrowing pools over set timeframes. It aims to allow the creation of fully decentralized lending/borrowing markets without intervention.
DeFi Dad emphasizes the unique attributes of Timeswap, notably its fixed-term lending/borrowing with isolated pools and the absence of an Oracle.
Ameeth describes Timeswap as a fully decentralized lending and borrowing protocol. He says that Timeswap is similar to Uniswap in terms of full decentralization, where once contracts are deployed, the team has no control over it. This means anyone can create a market, trade against it, and build upon it independently.
Ameeth says that while money markets are decentralized, they often rely on DAOs or specific individuals to determine risk parameters. This can impede scalability and involve reliance on Oracles, which come at a cost.
Ameeth says that Timeswap's model is similar to Uniswap's in its decentralized and Oracle-less nature, relying on market-driven models instead of individuals. This general design comes with trade-offs, including potential inefficiencies compared to more centralized designs. Ameeth compares the current version of Timeswap to Uniswap v2, with hopes for future versions to increase capital efficiency.
He emphasizes that Timeswap allows for non-liquidatable loans and is entirely Oracle-less. This reduces the risk of Oracle manipulation hacks. Ameeth believes there's a need for such lending and borrowing markets beyond the most popular crypto tokens, opening up opportunities for a broader range of communities and economies.
DeFi Dad notes the different isolated lending and borrowing markets available, with a specific mention of an opportunity to borrow $USDC against $ARB, the token on the Arbitrum L2 network.
DeFi Dad mentions that these markets have a set expiry date, using August 15th, 2023 as an example, and highlights options with varying levels of over-collateralization, such as 130% and 149%. DeFi Dad asks about the risks lenders take, such as borrowers not repaying their debt, and asks Ameeth to explain the concept of the "transition price."
Ameeth explains that the "transition price" is useful for calculating the current collateralization for a transaction. He refers to the example DeFi Dad provided: a pool expiring on August 15th with 94,000 $USDC liquidity, an APR of 4%, a Collateralized Debt Position (CDP) of 130, and a transition price of 0.9.
Ameeth elaborates that, as a lender, if a user lends into the pool, there is currently about 130% of the dollar value of $ARB token collateralizing the lent position. For example, if you lend $100 into the pool, approximately $130 worth of $ARB token is locked against the lent position.
2/ blocmates - Introduction to Bumper Finance
Preview: Jedi and Gareth discuss the launch of Bumper Finance, its features, possible challenges, and opportunities. Click here to listen to the full episode (67 mins).
Read our Note (6 mins) and save 28 mins.
Bumper Finance is a protocol that protects users from price volatility.
Gareth says that Bumper's journey began approximately three years ago. He thinks that the inception of Bumper was influenced by the initial growth and potential of DeFi.
He talks about the initial exploration phase where they tried to pinpoint a specific problem in the DeFi space, and he adds that they initially looked at Collateralized Debt Positions (CDPs) and the requirement for over-collateralization when borrowing.
He adds that their initial focus shifted after extensive scoping and research.
Gareth says that the end result of their research and exploration was the creation of Bumper.
Gareth says that Bumper aims to address the risk of price volatility in the crypto market, and he highlights the daily volatility in the crypto market, comparing it to living in a "war zone."
He says that Bumper allows users to protect the price of their assets. For instance, if someone has $1000 worth of ETH and wants to protect 95% of its value, they can set a floor at $950.
He adds that if the price of $ETH drops significantly, users can make a claim and exit their position, ensuring they receive the protected amount.
He says that users pay premiums for this protection, which benefits the liquidity providers on the other side of the protocol.
Gareth explains Bumper Finance's mechanism using a simple analogy. The protocol has two sides: takers (who want to protect their assets) and makers (who provide liquidity). Takers send their assets (e.g., $ETH) to the protocol and take out a policy, while makers provide stablecoins to support potential claims.
He emphasizes that Bumper operates on incentives. Takers are incentivized to protect their assets, while makers earn premiums as yields.
Gareth differentiates Bumper from traditional methods like stop losses and options. Bumper offers a more efficient and dynamic pricing mechanism.
He highlights the benefits of Bumper, such as not being subjected to sudden price drops and still retaining the asset.
Jedi says that Bumper's mechanism is similar to running longs and shorts in futures trading.
Gareth clarifies that while futures trading involves taking positions based on potential future outcomes, Bumper operates as a social contract between buyers and sellers of risk. The protocol determines the optimum price point, reducing the risk associated with decision-making.
He shares that Bumper is set to launch at the end of August 2023.