Imagine an insurance against rising difficulty.When you do the calculation whether a miner will be profitable or not you should make an assumption about the future difficulty (most interesting is a time frame of 3 months). Wouldn't it be nice to insure yourself against the possibility of a higher difficulty?
The website we have in mind is very simple. First you choose an insurance amount (the amount you will be payed if the insurance condition is met). Lets say you choose 1 BTC. Now the site offers you prices for a specific difficulty at a specific time.
E.g. on 01.01.2015
> 75B 0.5 BTC
>100B 0.2 BTC
>125B 0.1 BTC
>150B 0.01 BTC
The people who run this site would have done some math and calculated the likelihood of these events. This way, they come up with these prices. However - the prices would be such that the odds for the people who run the site are better than the odds for the users. The people who rund this service want to make money with it and they take a risk. Consequently, a free market is a better backbone for such a site. In such a case different people place difficulty predictions which compete against each other to offer the best price.
Basically we have been running such a market place for 6 months:
https://www.fairlay.com/event/category/bitcoin/difficulty/ In theory it is already possible to insure yourself against rising difficulty. However, our design was developed for all different kinds of predictions and is not especially targeted at the needs of the insurance users. It is counterintuitive to predict/bet on something that you don't want to happen, despite the fact that this is basically what all insurance policies do. A fire insurance is basically a bet that your house will burn down. If it happens you "win" money, if not you loose the money you have "placed".
Different participants will profit from an insurance site in different ways:
1. Miners who buy an insurance policy can hedge against the difficulty risk and get a more stable reward from their mining activity.
2. Miners who don't buy a insurance policies will get a realistic impression on the likelihood of the difficulty development -- because the price is not fixed, market movements are easy to discern.
3. Market makers who concern themselves with the analysis of difficulty growth can profit from the site by using their own expertise to offer prices that favor the. However, they still have to compete against others, ensuring fair prices for the users.
4. We as a marketplace take a 2% fee on the pay-out money.
5. Maybe you because we are looking for partner and would share the fees.
a) Do you think there is a market for mining insurance?
Under what conditions would you buy such an insurance policy?
b) We are looking for partners
All of our team members are very much into the crypto space. However, our mining experience is very limited. Back in September 2012 one of us bought a Single at BFL which came roughly one year later and was sold on in December 2013. And that is it. For this reason we are looking for someone who is really into mining/ profitability calculation and difficulty forecasts, ideally with a website on this topic.
Moreover, if you are interested in taking the other site of the insurance bet we can help you to set up a connection to our trading engine/ API.
If you are more interested in the topic some more reads on the topic: