value volatility – Are there any tutorial papers on the hyperlink between vitality markets and Bitcoin mining?


I’m eager to see if there have been any tutorial papers which have studied the hyperlink between bitcoin miners and vitality markets, in-particular, if there’s a so referred to as ‘no-arbitrage’ requirement, or a hedging technique for miners, that exists.

Suppose there’s a miner, Bob, who’s mining gear produces a set hashrate and isn’t part of any mining pool. The choice, whether or not Bob ought to mine or not, depends upon the next variables (some are random):

  • The spot value of electrical energy (Random)
  • The spot value of Bitcoin (Random)
  • The community issue (Random)
  • The community hashrate (Random)
  • Block reward (Deterministic)
  • Tools depreciation (Deterministic)
  • Transaction charges (Random)

Bob needs to make sure that in expectation, mining yields a revenue. After all this depends upon these aforementioned variables. Bob additionally needs to make sure that if mining is not worthwhile with the spot costs, maybe there’s a manner he might nonetheless mine, by utilizing vitality market or cryptocurrency derivatives to hedge in opposition to this.

Or, if it might not be worthwhile to mine, he might lease his computation as cloud providers for a set, deterministic price per given time interval, to make sure his equipment is not idle. Conversely, he might select to mine a completely totally different cryptocurrency that might yield a revenue, after all, in expectation.

My speedy, non-academic “hunch” tells me that there’s a hyperlink right here, or a manner to make sure that miners have extra certainty when mining, utilizing spinoff merchandise to hedge themselves in opposition to sudden drops within the value of Bitcoin, or sudden will increase in the price of electrical energy. And the dynamics can be attention-grabbing to review.

I used to be questioning if there have been any tutorial papers printed, which could deviate from what I’ve talked about above, however embrace some related ideas. I’ve seen different solutions on this web site which have explored related questions, seen right here. In addition to an educational paper on the sustainability of bitcoin mining, seen right here.

Supply hyperlink

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