FTX Exchange Launches Futures Product Tracking Bitcoin’s Mining Difficulty


Crypto derivatives platform FTX has rolled out a new product that will track the difficulty of mining Bitcoin over three months. Dubbed Bitcoin hash rate futures, the product has launched as announced on Friday allowing both retail and institutional investors to speculate on the hash rate and mining difficulty of the flagship blockchain network.

You may have noticed that the new derivative product is named hash-rate but in essence, it tracks the mining difficulty. This is because the two metrics are directly proportional and according to FTX, it is impossible to track the bitcoin hash rate.

However, given that difficulty adjustments attempt to maintain [10-minute] block times, over long periods of time the average hash rate will be proportional to the average difficulty.  So this means that roughly speaking, difficulty futures should behave similarly to hash rate futures.

Bitcoin’s hash rate is the measure of the amount of computing power contributed by the miners to solve arbitrary computing puzzles. On the other hand, the mining difficulty, a figure directly influenced by the hash rate is the measure of how difficult it is to solve those puzzles. This essentially means that the higher the hash rate the easier it is to mine bitcoin.

bitcoin mining

Over time this would mean that bitcoin blocks will be mined faster than expected. Bitcoin blocks are mined every 10 minutes but his time frame changes according to the amount of hash rate. To ensure the 10-minute time frame is respected, Bitcoin readjusts the mining difficulty every 2016 blocks (or roughly every 2 weeks) to match up with the network hash rate.

FTX first expressed an interest to launch the hash rate futures back in August last year in a blog post. At the time it wrote: “We’re hoping to launch options in the next couple months, and are looking into hash rate, BTC dominance, and commodity futures.”

Well, they didn’t launch in the expected timeline, however, nine months down the line, we now have bitcoin hash rate futures product. The product will more instrumental towards the miners as opposed to retail traders and investors. This is because miners face the risk of investment in bitcoin mining hardware following fluctuations in both price and mining difficulty.

The platform currently lists three hash rate futures contracts for trade, the first one and second expiring in Q3 and Q4 respectively while the third one spills over to 2021 and expires at the end of next year’s first quarter.

The value of the first two contracts is already up 6% and 13% respectively showing increasing demand.

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