BitcoinAlchemist on Nostr: If you’re not hedging, you’re hoping. Hope is not a business strategy to deal ...

If you’re not hedging, you’re hoping. Hope is not a business strategy to deal with variance risk embedded within Bitcoin

Make money less than 1% of the time vs make money more than 99% of the time?

I would much rather not wait 61 hours for my next payout. I would much rather be making money most of the time. If you’re mining for ocean then you can expect to wait, but that doesn’t stop you from hedging. Any miner can turn their dull waiting time into an opportunity!

By betting against your pool, you can make money regardless if you mine the next block or not, and thus hedge your hashrate. By betting against your own pool you ensure cash flow without further centralizing hashrate.

Miners want stable cashflow (FPPS dominance is evidence of this enough) and small pools with high variance have near certainty of gamblers ruin if they pay FPPS payouts. Hashrate hedging can be employed to enable miners to lower variance without adding too much risk to the pool operator like FPPS.

Hedging hashrate is a win-win for the mining ecosystem. Miners can direct their hashrate to smaller pools and smaller pools can be profitable despite high variance. By hedging hashrate a pool doesn’t need to risk gamblers ruin by offering stable FPPS payouts, and miners don’t need to worry about cash flow risk due to variance.