A blockchain technology startup, Hedgy, has emerged from Adam Draper’s Boost accelerator with $1.2 million in funding and has unveiled its smart derivatives offering.

The offering aims to leverage the Bitcoin blockchain’s “smart contract” potential. The general theory is that the blockchain can serve as a decentralized tool to help enforce and settle contract obligations. Separately, we have been seeing increasing activity bringing derivative instruments to bitcoin.

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Hedgy’s offering caters more towards bitcoin miners, who make capital investment in hardware and incur continuous operating costs. For them, bitcoin price uncertainty is a significant concern; unanticipated drops can easily render operations unprofitable. Hedgy allows them to set up derivative contracts enabling them lock in a fixed price at which their bitcoins can be sold.

Parties to a transaction initiate their interest on Hedgy Chat, where they negotiate contract terms. The details are submitted to the “Hedgy Oracle”, and both counterparties make a margin deposit to a given address. The contract is signed by both parties. The contract is then settled via the blockchain, either upon expiry or when market activity meets certain conditions set in the contract.

The process is mostly automated, aiming to cut down the cost and time spent on such hedging strategies. Like the general concept of smart contracts, it also seeks to decentralize away from a single authority. However, in cases like these, Hedgy’s systems and custodianship do play some role in the process.

Ten investors contributed to the funding round, including DFJ’s Tim Draper, Salesforce CEO Marc Benioff and Sand Hill Ventures.