Volatility Hedge

Suppose you have 1 million USD in bitcoin and want to avoid the volatility of bitcoin. You find a business that's willing to absorb the volatility for you such that:

  • when bitcoin depreciates by 30% for instance, the business will give you 30% of 1 million USD

  • when bitcoin appreciates by 30%, you will give the business 30% of 1 million USD

You can use trustBounties to implement that contract. Both you and the business will each lock a certain sum (say 1 million USD) in a trustBounty and update the terms of your trustBounty to the specifics of your contract (this is basically immutable and like the terms of a contract that you sign).

Also make sure that the Claimable By parameter of your trustBounty is the wallet address of the business and that the business' Claimable By parameter is set to your wallet address. This way, only you will be able to claim funds from the business' trustBounty and vice versa.

In the event bitcoin appreciates by 10% for instance, the business will make a friendly claim to your trustBounty to request for its due (100,000 USD) and in the event bitcoin depreciates by 10%, you will make a friendly claim to the trustBounty of the business to request for your due (100,000 USD).

If one party were to not accept to fulfill a legitimate friendly claim, the other party can proceed to do a non friendly claim on its trustBounty which will create a litigation and have the trustBounty's community of voters vote on whether the claim is legitimate or not.

This is a trustworthy, decentralized way to hedge against the volatility of certain assets you might hold.

To find a counter party that will purchase your asset volatility, you can create a request on the Futures' CanCan channel

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