FTX, a Binance-backed crypto derivatives platform, is now offering futures contracts for Bitcoin hashrate, enabling miners to hedge on the mining difficulty.
The launch came nine months after the derivatives exchange first floated the idea of launching such a futures contract tracking the mining hashrate.
Announced on Friday, these contracts, upon expiry, will settle on the “average” BTC mining difficulty over a period of time.
“Each Hashrate Future has an expiration start and end time. The start at the beginning of a quarter and end at the end of the quarter,” FTX explained.
Unlike the futures contracts of any assets and commodities, determining Bitcoin mining hashrate is difficult.
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“It’s impossible to exactly measure hashrate–the best you can do is approximate it from block times and difficulty,” the derivatives platform stated. “However, given that difficulty adjustments attempt to maintain 10m block times, over long periods of time the average hashrate will be proportional to the average difficulty. So that means that, roughly speaking, difficulty futures should behave similarly to hashrate futures.”
The exchange has already listed three such contracts – the first will expire on Q3 2020, while the other two will expire on Q4 2020 and Q1 2021 respectively.
With the recent halving of Bitcoin mining rewards, the mining hashrate is hovering around its peak and the mining difficulty has also seen a record high. Given this uncertainty, there is also a demand among the miners to hedge on their business to minimize risks.
Going beyond crypto
Launched last year, FTX has become one of the well-known crypto derivatives exchanges with its perpetual contracts. It also raised $8 million last year and is backed by giants like Binance, Consensus Lab, and Proof-of-Capital.
FTX also recently introduced a futures contract based on the oil prices as the futures prices for Western Texas Intermediate (WTI) index went negative last month.