[MPEx] Introducing O.HASH.C10TH and O.HASH.P10TH

[MPOE-PR]

These are difficulty-based options. Each option entitles the holder to either buy or sell 10 Terahashes (that is ten million million hashes, or about 115.7 Mh/s running for one day) at the fixed price of 0.075 BTC. Obviously if difficulty increases the value of the O.HASH.P10TH increases, whereas if difficulty decreases the value of the O.HASH.C10TH increases.

All options expire on the last Friday of their respective month (so currently April). Based on overall trade volume we might in the future introduce more strikes as well as next month settlements.

You can read their description pages here: O.HASH.C10TH and O.HASH.P10TH. Happy trading!

[Stephen Gornick]

How does one take delivery then after exercising the option?

[nathanghart]

These are difficulty-based options. Each option entitles the holder to either buy or sell 10 Terahashes (that is ten million million hashes, or about 115.7 Mh/s running for one day) at the fixed price of 0.075 BTC. Obviously if difficulty increases the value of the O.HASH.P10TH increases, whereas if difficulty decreases the value of the O.HASH.C10TH increases.

So it's a can't lose?

[ColdHardMetal]

These are difficulty-based options. Each option entitles the holder to either buy or sell 10 Terahashes (that is ten million million hashes, or about 115.7 Mh/s running for one day) at the fixed price of 0.075 BTC. Obviously if difficulty increases the value of the O.HASH.P10TH increases, whereas if difficulty decreases the value of the O.HASH.C10TH increases.

So it's a can't lose?

Look closer.

[nathanghart]

Where's the really embarrassed smiley?
 ?

[guruvan]

How does one take delivery then after exercising the option?

asked about this,  and got the answer it's a cash settlement.

[Sukrim]

There is a larger than 0 chance that 10 terahashes can solve a few blocks... as "hashes" or "mining shares" don't hold value themselves unless they solve a block and are just used for proof of work, I don't really see how they can be paid/valued in cash other than normalizing them similar to "PPS bonds".

This option however is about 10 terahashes (or the coins generated by letting a machine run and solving 10 terahashes), not the coins generated on average by 10 terahashes. If it would work like this always, in a casino you would just go to a table, hand the guy a few cents or dollars and watch how he plays with a few cards, throws some dice or spins the roulette bowl...

Mining is a game of pure luck, if you don't sell averages, then do the actual work you're selling too!

Saving the current version of the bond text, in case it gets "updated":

Call option on 10 Terahashes expiring this month struck at 0.075 BTC.
What this means is that the holder of one option has the right (but not the obligation) to buy 10 Th (that's ten thousand billion hashes, or approximately 2.77 Gh/s running for one hour) for 0.075 BTC. This option expires on the last second on the last Friday of the current month and will be cash-settled.

Put option on 10 Terahashes expiring this month struck at 0.075 BTC.
What this means is that the holder of one option has the right (but not the obligation) to sell 10 Th (that's ten thousand billion hashes, or approximately 2.77 Gh/s running for one hour) for 0.075 BTC. This option expires on the last second on the last Friday of the current month and will be cash-settled.

[MPOE-PR]

How does one take delivery then after exercising the option?

In theory you could arrange for "physical" delivery, but by default it's cash settled.

Look closer.

Good point that 

There is a larger than 0 chance that 10 terahashes can solve a few blocks... as "hashes" or "mining shares" don't hold value themselves unless they solve a block and are just used for proof of work, I don't really see how they can be paid/valued in cash other than normalizing them similar to "PPS bonds".

The formula would be (Block_Reward * 10 * 10^12)/(Difficulty * 2^32). That 10 * 10 ^ 12 stands for 10 Th.

Otherwise it may be I don't understand your objection (if it is an objection?).

[Sukrim]

My objection is that you sell averages instead of chances (which hashes are in the end). 10 Terahashes have a chance of solving between 0 and up to 10 * 10^12 blocks. The average expected value is the one you quoted - you even overpay by 1/65535th. The real value can only be determined by running the "lottery" and really doing the work.

Most lotteries out there pay out 50% or even less from the money they get in. On average this would mean for a 1 USD ticket, I'd go to a counter, give them 50 US cents and they destroy one ticket for me. Still people play the lottery, some even fanatically and some win millions with it. The same goes for mining. You offer the average reward, people buying mining contracts or who pay for GPUMAX are usually more the "lottery type" where you have bigger variance.

[Stephen Gornick]

My objection is that you sell averages instead of chances (which hashes are in the end).

At least paper gold, for instance, has some association with the underlying commodity (e.g., registered reserves held by COMEX) and there are tools used for manipulating prices controlling volatility by imposing margin limits, etc.
 - http://about.ag/futures.htm

How does one take delivery then after exercising the option?

In theory you could arrange for "physical" delivery, but by default it's cash settled.

And is making an arrangement for physical delivery something I can insist on, or instead would it be that if things got squirrely I would be forced to accept a cash settlement (possibly at a price that I might feel is below the prevailing market price at the time?)

[MPOE-PR]

@Sukrim I really think all that discussion is besides the point.

@Stephen Gornick It's not a matter of things "getting squirrely". It's a matter of you carrying enough weight (with MPEx) to be allowed to take physical settlement.

[Sukrim]

@Sukrim I really think all that discussion is besides the point.

Uhm, why?

There is a big difference in offering to do the work of 10 000 000 000 000 hashes or in offering to pay the coins generated on average by these 10 terahashes. Just look at the prices that are paid at GPUMAX or for other mining contracts - they are substantially above PPS values.

Current values for this option are:

(50 * 10 * 10^12)/(1577913.4856767 * 2^32) = 0.0737780131 (at current difficulty)
(50 * 10 * 10^12)/(1515200.79510172 * 2^32) = 0.0768316135 (at the most recent estimate - exact value in 44 blocks)

depending on the mining pool this hashing power might make more than 80 bitcents easily though. And that's just pooled mining. One could also solo-mine and hit a block for 50 BTC with a slightly smaller than 0.2% chance. Far better chances than winning one of the raffles around here though.

[MPOE-PR]

It is besides the point because you are trying to look at it as an avenue to buy hashes, because at the moment the hash market is seriously distorted by the bitcoin-laundering needs of a ponzi scheme. Your approach is akin to discussing the emplacement of an anti-aircraft gun on the criteria of where's the sheep located in the field. Nobody [other than the most naive of the naive] cares where the sheep's located in the field. This option contract exists to allow savvy investors to hedge against the risk of difficulty moving. Quite a different matter altogether from, say, raffles.

Since nobody is forced to make "physical" hash delivery, obviously nobody can be guaranteed hash delivery. This is why the option contract says "cash settled". Should anyone actually want to make hash delivery, that delivery will be allocated to those who are sufficiently active and judged able to handle it (as a for instance of very many possibilities, none of the usual "I was traveling" bs). In case it's not obvious: if you don't trade daily and significantly on MPEx that can't possibly mean you.

Also in case it's not obvious: this means it's very unlikely (very, very, very unlikely) you will be able to scalp 10% on some twenty bitcoins or whatever greedy&poor combination you were contemplating. The period of making 2 bitcoins over 20 bitcoins in a week and thinking you're a grandiose investor is over for bitcoin. The period of making 2k bitcoins over 2 million has started, bitcoin's doing volume now and money making is reserved for the people actually being competent with it. Bear this in mind as a general principle.

[Sukrim]

Actually merged mining several cryptocurrencies and selling them for BTC still gives a considerable markup above 100% PPS. I took GPUMAX only as an example, still I would advise anyone exercising one of these options to insist on MPOE (or whoever sells this option to you in the end) to do the actual hashing work at a pool of your choice and send you the cash generated instead of paying 100% PPS.

It's like selling 10 truck loads of african dirt from a diamond mine for 10 USD, because that's the average value of it considering the chance of finding a diamond in it. What is not priced in are other gemstones (other cryptocurrencies, transaction fees) for example.