In this post we describe a futures contracts between miners and market makers that is enforced by the bitcoin blockchain. Miner and market agree on a Exahash to BTC price on a fixed date (expiry date). On the expiry date, the miner and the market maker execute an atomic trade to exchange the hashrate (and any payouts earned) for BTC.
The protocol described depends on using braidpool hubs as DLC oracles. There are two on-chain transactions required to execute the contract once every contract period - one for the miner to get BTC from market maker and the other for the market maker to get the hashrate (and BTC) earned by the miner.
There’s two 2 of 2 multisig contracts:
- The hub and miner setup a one-way payout rewards channel. This contract is funded entirely by the hub.
- Market maker and the miner enter into a discrete log contract (DLC) with their chosen hubs acting as oracles. The miner “buys” this contract by jointly funding the contract with the market maker.
These two get tied together using an adaptor signature (tweaked public key) from the miner:
- The output of the DLC’s “contract execution transaction” (CET) uses a tweaked public key from the miner. This tweaked key allows the market maker to spend the payout rewards channel output.
- On contract expiry date, one or more hubs sign the DLC outcome, enabling the miner to spend their CET. This DLC outcome depends on the miner’s hashrate as observed by the hubs.
- The miner has to spend the CET to earn BTC for their hashrate. If the miner doesn’t spend the CET, the market maker gets the miner’s funds locked in the DLC.
- As soon as the miner spends their CET, they reveal the secret key that allows the market maker to spend the output from the payout rewards channel.
At the end of the atomic trade, the market maker has the BTC that the miner earned as payouts from the hub, and the miner can’t double spend the hash rate. The miner has the BTC proportional to their hashrate at an agreed up exchange rate in the DLC contract.
Details Coming Soon
We are currently working on a detailed description and will share it with the wider community soon.