Bitcoin Halving Binary Option Brought About by LedgerX | News ICORating
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Bitcoin Halving Binary Option Brought About by LedgerX

Bitcoin Halving Binary Option Brought About by LedgerX

A cryptocurrency exotic option is introduced: the LedgerX Halving Contract (LXHC). On a 5 February blog post, the American-regulated derivatives exchange and clearinghouse, LedgerX, explains how their new product works.

‘The LedgerX Halving Contract (LXHC)... will allow you to get a fixed payoff if the next halving block (#630,000) happens before a certain date and time. If the block is discovered after, the contract expires at zero.’

– LedgerX, A New Type of Contract. For a New Type of Asset.

This binary option by LedgerX concentrates on the halving of bitcoin blocks. The halving, which bisects the number of new bitcoins generated, occurs with an approximation of once every four years. The most recent bitcoin halving happened in 2016; where the 25 BTC produced was cut to 12.5 BTC. The next halving is quantitatively estimated to transpire on 25 May 2020.

According to the post, speculators and providers of liquidity will be intrigued with regards to the date of halving.

With that said, LedgerX’s LXHC allows participants a ‘fixed payoff’ provided the halving takes place before a specific day and hour. If the event occurs after it, the ‘contract expires at zero’, meaning those who lost the bet gain nothing. The trading platform calls this as an ‘extremely clean binary payoff’ that can be verified by each participant, exhibiting the merit of a public blockchain.

Binary Carries a Binary Economic Risk

Due to binary options being a ‘yes or no’ wager, it is commonly considered as gambling and is eschewed by Wall Street desks. But, LedgerX points out that in bitcoin ‘there is a fundamental economic risk that is binary.’

To expound on such a notion, LedgerX gives an example,

‘...imagine you are an oil producer such as Exxon Mobile and know that one day in 2020, the number of barrels of oil you extract will go down by half, forever. But you’re not certain which date that will be. This would materially impact planning for investment and operations. Bitcoin miners face this exact risk approximately every 4 years for the block reward that they earn.’

– LedgerX, A New Type of Contract. For a New Type of Asset.

Another LedgerX Offering

Just this month, the derivatives exchange presented LXVX, a bitcoin price volatility index, where the market’s ‘bitcoin fear’ is gauged.

Image credit: Unsplash

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