Introduction

Abstract

We present AnyHedge, a Bitcoin Cash futures contract that aims to mitigate volatility through trading of risk in a peer-to-peer, non-custodial, blockchain enforced, fully collateralized way. With trust reduced to a blind oracle, the futures contract offers a unique set of advantages and disadvantages over existing stability solutions. AnyHedge is transactional in nature and does not require a central point of failure. The user experience is different from traditional fiat or stablecoin based solutions. As liquidity increases, it enables a variety of automated, behind-the-scenes use cases aimed at taming volatility. Compared to alternative solutions, AnyHedge has a unique set of difficulties and respective mitigations.

Introduction

Ten years since the creation of Bitcoin, thousands of cryptocurrencies of various network sizes have emerged offering a wide variety of functions, properties, and trade-offs. By removing middlemen, offering alternatives to unsatisfying monetary policies, and protecting against financial censorship, Bitcoin and its derivatives have achieved some success as currencies.

While usage across the cryptocurrency ecosystem has grown through market cycles, volatility still hampers widespread use and adoption. To have utility, a floating currency, whether sovereign-backed or market-based, must allow users to hold it for a reasonable period of time without fear of losing purchasing power. The current reality however, is that the value of any given cryptocurrency routinely moves more than 10% in a single day due to poor liquidity, speculation, and the relatively small size of the cryptocurrency market. Some people think that a critical mass of adoption will naturally solve this problem, but that critical mass remains elusive for all cryptocurrencies.

In this paper, we describe AnyHedge, a Bitcoin Cash collateral based solution to the volatility problem that does not require any system-wide central points of failure, has limited exposure to potential programming flaws, is difficult to censor, and does not require system-wide coordination to function. All parties involved in the system do not have to send, receive or hold any external asset at any point, and are only dependent on price oracles which they can freely choose.