How Are Hashrate Derivatives Used to Manage the Economic Risks of Mining Operations?

Hashrate derivatives are financial instruments that allow miners and investors to hedge against or speculate on the future hashrate of a cryptocurrency network. Miners can use these derivatives to lock in a future price for their computational output (hashrate), protecting their revenue from increased mining difficulty or falling token prices.

For example, a miner could sell a hashrate future to guarantee a certain income level, transferring the risk of hashrate volatility to a speculator. This provides miners with more predictable revenue streams, aiding in financial planning and operational stability.