OP_DIFFICULTY To Enable Difficulty Hedges Without an Oracle and 3rd Party

Every financial market has bets, some are bets on the availability of a certain product, the price of a certain product at a certain point in time and on productivity and all markets depend on supply and demand, in metal markets the supply is the amount of metal that was produced this year, in Bitcoin that amount is fixed so people can’t bet on it. What you can bet on is how much it costs to mine Bitcoin at a certain time, specifically the difficulty, as the difficulty rises miners need more powerful, and probably more expensive, machines to be able to compete.

For anyone wanting to enter the mining business, this is the biggest risk there is, and while commodity markets offer futures and options to hedge risks, currently Bitcoin doesn’t employ this.

That’s why developer Tamas Blummer suggested the OP_DIFFICULTY, an opcode to enable hedges without any 3rd party interference, settled on the blockchain.

The scheme works by a new opcode putting onto the stack the value of the current difficulty of the block it was included in, the script could then settle the bet by comparing the value on the stack with a predetermined value, this is used to settle a bet between two (or more) parties on the value of the difficulty. The transaction would then be broadcast by the winner without the need of an oracle or a 3rd party.

The scheme is still far from implementation and had a few modifications suggested by developer Peter Wuille but if successful this could bring a different financial aspect to the Bitcoin blockchain, we’re interested in seeing how this goes forward.

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