Got my attention drawn to something I believe I've talked about in at least two occasions in the past:
Perps based on Hashrates
I mean, I'm surprised this has not existed all this while, or if it does exist, it's clearly not popular.
Sincerely, this should have been a thing before NFTs or RWAs and DePINs narratives, Bitcoin has been instrumental to crypto's adoption, so why not put a bet on the one thing within that network that is largely free moving?
What Even Are Perps?
"Perps" is short for "perpetual contracts," a type of derivative in crypto and traditional finance markets. Unlike traditional futures contracts, perpetual contracts don’t have an expiration date. This means traders can hold onto them indefinitely, as long as they maintain the required margin.
ChatGPT
If you were a noob like myself, you probably would have been calling perps, futures, despite always seeing it clearly written *perpetuals within exchange apps.
In my defense, Perps are just futures without an expiry date.
Now I know that all that's been said up there may still be confusing for newbies, so here's what trading Perps looks like:
You pick an asset pair, e.g BTC/USDT. Your job is simply to predict if the price will go up or down from any entry point you choose, and if you're right, you'll earn based on your margin size(capital within the contract) multiplied by your selected leverage(a useful feature that can either make you rich or send you back to your parent's basement, usually a multiplier for base rewards like this: 2x 3x 5x 10x 20x).
Remember now that this is a perpetual contract, so you don't really earn or lose until you close your position on your own or it gets liquidated, to which point you lose your capital.
That my friend, is the essentials, for deeper knowledge, DYOR.
Bitcoin Hashrate Perps | WTF are those?
Since perpetual contracts, as a derivative, don't require buying the “underlying” asset whose market value is being mirrored, anything can be made into a perp and traded by market participants.
Variational, a newly developed decentralized derivative protocol which also recently received $10.3 million in seed funding, is developing an infrastructure for “perp-ifying” everything - as it dubs it.
While originally conceived for crypto underlyings, perps hold the potential to greatly improve trading across various asset classes. By "perp-ifying" other markets that have been historically difficult to trade, such as predictions, hashrates, NFTs, volatility, interest rates, and more, traders could enjoy the benefits of perps–simplicity, leverage, and shorting–across a set of markets that are otherwise inaccessible.
The future of perp-ification unlocks a plethora of new use-cases and opportunities for traders. Hashrate perp markets, for example, could be used by institutional and retail crypto miners to hedge their operations. Prediction perp markets could attract much deeper liquidity, making them significantly more efficient and reliable than existing betting platforms.
I have personally found interest in Hashrate trading as hashrate is an energy-inclined metric within the Bitcoin network and most likely swings with less human manipulation.
This autonomy creates room for a fair playing field for speculating and betting on the Bitcoin network’s operations.
If you look at prediction markets for example, several events being betted on can be manipulated, just as the Bitcoin or general crypto price swings can be manipulated by market makers and/or institutional traders.
By taking things to the network layer, we have less room for manipulation as that generally involves real world costs. Of course miners could attempt to influence outcomes but significant shifts can be easily tracked and not exactly sure that such actions would be legal.
That said, also considering that this is all built on a decentralized layer, the blockchain, there's even more community advantage to adopt or get involved.
Of course, bitcoin will likely not be the only blockchain of focus when Hashrate Perps become a mainstream thing, but it will surely attract one of the biggest pools of bets and will serve as a unique way for miners to offset costs.
Posted Using InLeo Alpha
Not really understanding the entire logic anyway yet when you consider words like;
This autonomy creates room for a fair playing field for speculating and betting on the Bitcoin network’s operations.
It chuckles me, does the market consider fair plays?
The market - people - never play fair because it's generally not extensively profitable.
Very interesting that degens want to bet on hashrate!
This is true but use of the word "just" is a little misleading.
The lack of expiry date creates huge differences.
For example if I buy puts or calls options and the market doesn't move in my favor I will lose everything I spent buying the contract. This isn't true with perps unless my position gets liquidated. And speaking of liquidated... calls and puts CANT get liquidated, which is the biggest difference of all.
The fact that options can't get liquidated makes it much harder for market manipulators to bust aggressively leveraged positions. Perps make it much easier for centralized exchanges to cheat their clients using their own insider information to trade against degens.
Also, market makers that sell options contracts need to hedge their positions or they'll be open to insane amounts of risk. This is because crypto is volatile and the profit on selling such a contract is static/capped while the losses are theoretically limitless (on calls anyway). Perps do not have this problem because the bulls are hedged against the bears and the fund rate financially incentivizes balance (normally the longs paying the shorts yield via fund-rate).
Certainly, there are many differences, and my wording did make the "expiry date" appear as the only outstanding factor.
That said, being someone not heavily involved with traditional finance, a lot of its concepts can be a tad confusing.
For example, I talked about "Futures" specifically, but you referenced "Options" in your comment, now I question if they are the same thing, I mean, I've always considered them different?
My understanding is that options involve paying a premium which(could?) becomes the only loss incurred in an event of the trade not being profitable, while with Futures,that does not exist and you can lose everything. Maybe I'm wrong?
That said, the funding rate is indeed an interesting piece of perpetual contracts, one that noob traders generally don't understand how it works, I've literally found people scream at exchanges over these fees and I can't blame anything more than the absence of proper guides on how these things work, extensively.
I personally began trading Perps without understanding(learning?) how they work, fundamentally.
I guess it's degen before learning.
I am learning all this stuff for the first time this year as well.
I wanted to say that options are a type of future, but the Internet doesn't seem to agree.
Even though the only difference between a future and option is the lack of the option.
A futures contract forces the trade after a certain amount of time while options do not.
The Internet likes to classify them as "derivatives"
Oh look I have have this in my archive from... 2019... lol.
Ah, yes, derivatives, the one word I have to look up the meaning every time I want to use it.
Thanks to BitMex, we have Perps within crypto as I wouldn't trade options or futures even if I was offered the capital for free.
That said, ChatGPT frames "the lack of option in futures" contract as the "absence of obligation," essentially why the "premium fee" exists in options, to get away from the "obligation" of fulfilling the contract.