Win bitcoins by betting on the hash rate with Futureblock

Volatility seems to be a key component of bitcoin. It’s still early days, but the unregulated nature of this decentralized currency contributes to its price volleying up and then down.

The same can be said about bitcoin hash rates, a measure of the currency’s overall network strength. This statistic also does its fair share of bouncing around, and although most people don't notice it, it is rather capricious like pricing can be.

Bitcoin’s hash rate volatility is a risk to miners who are trying to profit from solving calculations in order to create new bitcoins and confirm transactions, which results in earning a small fee. But a new site called Futureblock offers a way to bet on future hash rate volatility.

It would seem as if betting on hash rates would be a very tiny fraction of the ever-growing BTC gambling market. Ardon Lukasiewicz, who is working on a project called Bitmarkers to allow gamblers to use bitcoin in real casinos, finds it hard to see how Futureblock could be attractive to the masses.

“The site looks nice. [But] the betting isn't fast-paced enough for online gaming. I don't like these ‘binary bet’ websites in general. This subject is far too niche and complex to attract any mainstream attention. Where is the excitement in hash predictions?”

The concept of betting on where hash rates are going will not leave the average gambler salivating, but bitcoin gambling is becoming a large market for network transactions. Betting is actually not the point here, though, since Futureblock is more about bitcoin mining than anything else.

One of Futureblock’s founders, who wishes only to be referred to as 'James', said: "We've been watching bitcoin for a while. We bought a small ASIC miner to see what it’s like.”

After looking at the mining market, it was clear to the founders that something like Futureblock could prove to be useful. “Miners are all using the same spreadsheets when investing in mining equipment. If they are doing this, they have all gotten it wrong. It is not increases in hash rate that are wrong, it's in predicting it.”

Various spreadsheets offer different calculations regarding the future of mining difficulty and hash rates. According to James, miners are following these predictions even though they are often incorrect, which makes it hard to actually make timely investments in mining, specifically in the hardware infrastructure.

James believes this is why Futureblock can be used as a tool for miners. The site offers something called parimutuel betting, which is sometimes also known as the tote.

Parimutuel betting pools all bets together, and odds are then calculated via all the winning bets that are in the pool. “Pooled betting means limited advantages in hedging," said James.

One of the reasons that many don't notice how hash rates fluctuate is that it is more of statistic that miners pay attention to than anything else. Pull up a thirty-day chart of these numbers and you'll see just how much they change.

It's hard to understand this dynamic when looking at a one year graph of bitcoin hash rates, since that amount has increased at a fierce pace due to the advent of ASIC mining hardware.

The founders of Futureblock don't have a specific answer as to why hash rates are not more stable. "There's so many factors in play, it's very hard to say," says James. "Hash rate volatility is probably because of the mining equipment. It's based on the problems being solved, and all the machines pool together." A combination of thousands of machines and numerous pools likely cause the rate to be in a constant state of flux.

No matter what the reason for all of the volatility, Futureblock wants to simply give miners the ability to hedge. The end goal is not just betting on hash rates, but hedging against the unknown future risks of mining. As the network difficulty goes up and mining equipment becomes more expensive, there are substantial financial liabilities in mining bitcoin.

"The idea of this platform is not based on volatility, but more on mining. Corn futures, for example are not volatile. But corn futures are used to hedge against future prices. Our concept is to working to protect miners," said James.

Miners probably need it. The revenues generated from these processes that support the Bitcoin network are falling. And much like farmers, they need to be able to better plan for the future. Futureblock is a tool for that, and there is interest in this concept. During the initial launch, the site had 10,000-15,000 unique daily visits. Now it sees traffic around 2,000 per day, signaling that there is a crowd that wants to profit from pooled betting on bitcoin hash rate performance.

What do you think about hash rate volatility? What are some reasons that you think it behaves in this way? Let us know in the comments.

Featured Image Source: Futureblock