CME Group filed a patent for Bitcoin mining derivatives

posted 6 months ago
Derivatives giant CME Group is looking to patent a way for bitcoin miners to hedge against operational risks.

As detailed in a patent application published last week by the US Patent and Trademark Office, the proposed system would receive data from the bitcoin network as a means of keeping contracts up to date – monitoring metrics like network difficulty and price.

The filing is notable as bitcoin mining is a kind of commodities production. Miners expend energy and manpower in exchange for newly minted bitcoins.

Yet, the ever-rising difficulty of mining can mean ever-encroaching costs for for miners. With the mining derivative, "a miner can lock in a projected growth rate of the difficulty factor", the patent filing reads.

The application goes on to explain:

"If the network hash rate grows faster than anticipated, the income from mining may fall, but the variation and settlement of the futures or the funds received by exercising a cash-settled call option contract would cover the loss. On the other hand, if the difficulty factor grows more slowly than anticipated or falls, the contract would lose value or the call option premium would expire as worthless, but a miner would make more money than expected on mining operations."

Per the application, CME envisions the bitcoin mining derivative as a way to position against the depreciation of mining hardware as well.

Tags: bitcoin, blockchain, news