Christian Martin and Leonard Nuara have visited quite a number of conferences dedicated to bitcoins. Being 49 and 55 years old respectively, they have all the rights to feel a bit too mature, when compared to the rest of the audience. “Everyone else is 25 and good-looking,” grumbles Nuara.
The greybeards are doing their best to help bitcoin grow up. Their company, TeraExchange LLC, runs a bitcoin trading platform, where bitcoin owners can shed some of the risks, connected to crypto-currency operating.
Operating bitcoins still means undergoing certain risks. Let’s imagine that your business accepts bitcoins as one of payment options. And, say, February the 21-st, 2014 was a good day for you, leaving you with hefty crypto-currency funds. You didn’t rush to exchange bitcoins to dollars or euros the very same day. However, next Monday you realised with a shock that bitcoin rate plummeted by 20% over the weekend.
In order to avoid such kind of mishaps, Matin and Nuara implemented an old-fashioned idea in a new digital reality: hedging. The partners spent seven months to develop swap for the trading pair U.S. dollar to BTC and to register the agreement with the U.S. Commodity Futures Trading Commission.
Nowadays any trader, willing to lock bitcoin in usd price, can use TeraExchange’s system to find a buyer willing to pay that price in 30 days or 60. The buyers - hedge funds and professional traders - are ready to work with timeframes of up to 4 months. Bitcoin rate is quite volatile. During 9 months of 2014, the rate has been fluctuating between $314 and $915.
“I don’t expect anyone to be making markets in bitcoin out two years anytime soon,” Martin speculates.
Young traders are also willing to try their hand at hedging. Earlier this year a new service Hedgy Inc has been launched. Its founders are 23-year-old Matt Slater, former Apple engineers Juan Pineda and Tim Olson, as well as designer Warren Paul Anderson. Hedgy is a system of bitcoin hedging using blockchain - the very algorithm of crypto-currency generation.
Blockchain is an online ledger that tracks all the bitcoin transactions. With the help of blockchain one can verify the deals in terms of certain times and conditions. A future sell bitcoins deal, operated with Hedgy, will be encoded in blockchain. Both parties put 20% of the contract value in escrow. Should the bitcoin price go up or down, the escrow will make automatic payment to compensate the loss to the inflicted party. This operation is non abortable and the collateral is irremovable.
TeraExchange platform has been successfully launched and in full operation now. Hedgy is looking for new venture investments. Old meets new to solve the same problem: how to minimize the risks for bitcoin owners?