SynFutures, a decentralized derivatives exchange, announced that it will launch Bitcoin (BTC) hash rate futures, which is a derivative that can trade important risk factors that affect the earnings of Bitcoin mining. Starting today, SynFutures can start trading Bitcoin mining difficulty with packaged BTC.
Since the Nakamoto consensus is embedded in the mining difficulty adjustment mechanism; mining output may fluctuate, resulting in various hash rates in a given time.
Recent events, especially China’s crackdown on Bitcoin mining, have also affected the hash rate of Bitcoin and other digital assets.
With the start of China’s “Great Migration”, the Bitcoin mining ecosystem is expected to undergo tremendous changes; new mining organizations and regions have filled the gap left by China, which historically accounted for 70% of Bitcoin’s global hash rate % the above.
Although a lower hash rate is a concern for many people, other industry contributors believe that it will bring more mining and trading ecosystem opportunities.
Through hash rate futures, SynFutures opens the door for traders to hedge against the risk of fluctuations in the difficulty of Bitcoin mining; and arbitrage the prices of futures and mining rights in a fully decentralized environment, and carry out arbitrage based on future mining difficulty transaction.
Decentralized computing power futures
In order to create hash rate futures products, SynFutures designed an oracle; a device that connects the blockchain with off-chain data to verify Bitcoin block headers and extract mining difficulty, rather than aggregate contributions from feeders. This ensures that the oracle is completely trustless; anyone who can upload Bitcoin block headers can contribute to the maintenance of the oracle.
SynFutures’ futures contract design draws inspiration from interest rate futures; it is used for trading or hedging interest rate changes. Rather than just an abstract mining difficulty number; each hash rate futures contract represents the expected block mining reward in BTC during the difficulty reset period of a given difficulty level. It can perfectly hedge the change of mining difficulty.
In addition, each future difficulty reset block may have a futures contract expiring on that block to meet hedging needs. In addition, miners can now easily hedge with derivatives instead of looking for specific suppliers and counterparties to negotiate prices.
- Shorting computing power futures-hedging the risk of increasing mining difficulty and locking in the amount of newly mined BTC.
- Short BTC/USD futures – lock in total USD revenue with the amount of BTC implied by the above hash rate futures.
- Look forward to electricity futures-to determine the cost of electricity.
“Securitization of mining activities is an idea that our team has been working on; because we have extensive experience in traditional financial markets and the mining industry. With the development of the mining industry, we want to give traders the opportunity to make the most of this time ; And hedge all factors that affect its mining revenue.”
– Rachel Lin, founder and CEO of SynFutures
Hash rate futures is the latest product released by SynFutures, and SynFutures is now introducing new users through it Closed alpha.
The upcoming products include:
- Automatic hedge – One-click solution for hedging the “non-permanent loss” risk of various DeFi AMM trading platforms.
- Cross margin – A way to offset positions to diversify and reduce margin requirements.