New LedgerX Halving Contract (LXHC) Product Allows Users to Bet on 2020 Bitcoin Halving Outcome
The halving of bitcoin block rewards is common and is based on the number blocks mined, considering that Bitcoin has a finite supply of tokens, which is the way it was meant to be. Every block comes with a reward for the miner that creates it, starting at 50 BTC at the beginning of these mining opportunities. The pace that this mining reward has halved has varied in the length of time it takes, but it always cuts in half at 210,000 blocks since the last halving. So far, there have been two halving events with another to come, dropping to 6.25 BTC per block, which is why LedgerX has decided to cash in on this opportunity.
There are many estimated dates on exactly when the halving will take place, though one time that many seem to agree on is May 2020. No one will know the dated until it happens, which can vary based on the blocks being posted in the network and other variables. If anyone wants to make a wager, LedgerX is opening this door, allowing anyone who analyses the network to have a method of betting.
LedgerX announced the new option in a blog post, saying that this is a new hedging instrument that could benefit bitcoin miners. Elaborating, the company stated,
“Bitcoin is unique in that there is a fundamental economic risk that is binary. To give an analogy, imagine you are an oil producer such as Exxon Mobile and know that one day in 2020, the number of barrels of oil you extract will go down by half, forever. But you’re not certain which date that will be. This would materially impact planning for investment and operations. Bitcoin miners face this exact risk approximately every four years for the block reward that they earn.”
Presently, the firm is offering contracts with particular times that the halving will finally happen, but any occurrences after the selected times will not be paid. Right now, there are five contracts, starting with March 27th and ending on July 31st, which is clearly the safest dated. There is no specific date that these contracts will be made available, but the plan is to offer them before this quarter ends. While the users can determine what they’re willing to risk. LedgerX still will profit minorly with each bet.
CEO Paul Chou believes that this betting service offers much more than just a way to win some extra cash. In an email to CoinDesk, he said,
“Even if you do not trade the contract directly, we are offering the prices the market has for free to everyone.”
“It’s similar to other commodity markets where, when you are planning on how many people, resources and infrastructure you want for the next year, you can view derivatives markets to see how profitable people are expecting it to be.”
As the mining gets closer to this halving, it will definitely cause some shutdowns in operation. However, there is even a chance the halving will happen sooner than the projected timeline. Chou commented,
“If someone got really lucky and found a ton of blocks over the next two months a lot of miners would go out of business sooner than expected.”