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Saturday, 02 May 2015 00:00

Veritaseum Blockchain-based Derivative Contracts Can Save The Mining Industry Featured

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 Bitcoin mining has become a rough business, with much of the mining equipment (and business plans) created at a price point literally multiples above what bitcoin is trading at now. The falling price of bitcoin coupled with a risen difficulty level and increased competition has exposed many mining operations to the specter of insolvency. 

Combine those harsh business conditions with BTC volatility (bitcoin is the most volatile liquid asset that I know of) and a need to pay expenses (some of which are significant such as electricity) in fiat currencies while generating revenues in BTC, and you have a potent brew for failure. Veritaseum blockchain-based smart derivatives can rescue this industry. Let's walk through the operations of Cocoa (name has been changed for the sake of privacy), a young bitcoin entrepreneur who runs a mining operation in Washington state. She competes with national mining operations in addition to mining operations in China who are not only quite large, but purported to have subsidized power costs. There size combined with potentially lower costs put Cocoa in a defensive position, for she struggles with the dilemma of selling her mined coin among the turbulent volatility of the bitcoin markets. She then meets the founder of Veritaseum at the NYC Inside Bitcoins conference and he tells her about the digital, blockchain-based "smart swaps" he's created. He explains that his firm sells expertise as a commodity through their Veritas program and would be happy to create a custom hedging strategy for her at minimum cost. She buys some Veritas, gives him a call and explains her dilemma.

Veritaseum's analysts and engineers create a simple yet effective hedging program that protects both her input costs (electricity) and her revenues (outputs). This is done with leverage to minimize the amount of BTC she has to put at risk and is custom tailored to her specific risk profile.

Veritaseum long Electricity - short BTC swao

Cocoa was enamored by the level of sophistication available in the bitcoin derivative world, but was confused by competing blockchain derivative vendors, so she did her homework and dug in. She compared Veritaseum to Hedgy, a company that got her attention because it employed guys from big brand name Wall Street banks and was backed by big, brand name VCs. Veritaseum's CEO advised here to read "The Evolution That Is Veritaseum: Benchmarking It To Venture Funded Competition", and she was impressed. As a result, she sent us the research that morphed into the following comparison.

Steps Veritaseum Hedgy

System access & Privacy

One of the biggest benefits of bitcoin transactions is privacy. Optimal derivatives and solutions built upon the Bitcoin Blockchain should retain the privacy aspects of bitcoin itself. Veritaseum products require absolutely no identifying infromation, no emails, no usernames, no registrations or account formations, wait times - just click download and start using. Most other products take the legacy model used by traditional institutions that require sign-ins, email addresses and personal information.

 Veritaseum downnload  hedgy registration

Pre-contract discovery

Hedgy relies on 3rd party chat rooms for contract discovery. Potential point of compromise, injects execution risks. Everything is done in session @Veritaseum via your bitcoin wallet. There are no sign ups, registrations, waiting for approval, etc.

 Untitled1

Desired contract terms (& flexiblity of said terms) stated via smart contract & broadcast from Veritaseum servers for others to accept via mouse or screen click

https://chat.hedgy.co, and enter your phone number (Hedgy uses Telegram to power its chat room). Once approved, a Hedgy Host will add you to the private chat group on a rolling basis (you can use Hedgy Chat from any of the Telegram apps listed here: https://telegram.org/apps)"]">Inidcations of interest place submitted to a chat room. Sign up via Hedgy. Navigate to https://chat.hedgy.co, and enter your phone number (Hedgy uses Telegram to power its chat room). Once approved, a Hedgy Host will add you to the private chat group on a rolling basis (you can use Hedgy Chat from any of the Telegram apps listed here: https://telegram.org/apps)

Contract creation

Hedgy uses (apparently arbitrary) 3rd party email to communicate contrat terms and execute the contract. This introduces execution risks and injects additional counterparty risks since you are now facing not only your original prospective counterparty but also your email provider and your prospective counterparty's email provider. Veritasseum provides an internal matching engine to facilitate two parties agreeing upon, and executing contract terms and contracts.

 Untitled2

Contracts are created dynamically in real-time, and on the fly by both parties. They are signed by each party as they are created, even if the contracts have not been excecuted yet. This ensures that the capital is available in full whenever any party sees a contract on offer.

A smart contract template is created and manually initiated by each counterparty via their dashboard. Unique URLs containing encrypted private keys are generated by each counterparty and sent via email. This email must be saved in order to collect settlement. We also recommend using 2-factor authentication for this email account.

Contract Funding, Leverage & Collateral (margin)

For Hedgy, 3.33x leverager is available along with a constant 30% margin requirement allows for the possibiity of contract default, eg. countrerparty risk, particularly during times of extreme volatility for which BTC is known. This risk is materially excacerbated when leverage is applied. This risk does not exist on the Veritaseum platform, even if 1000x leverage is used becaue all contracts are fully funded and collateralized at a minimum of 100%, with the option of posting as much as 10x more colalteral (margin) at the inception of the contract. Vertitaseum allows unlimited leverage with P/L bounded by the capital at risk. In other words, you can only make or lose the amount of money you put up as principal and collateral.

Untitled3

As stated in the step above, contracts are fully funded and collateralized at a minimum of 100%, and can be overcolalteralized up to 1000% (10x) for those who wish to engage in extremely levered contracts and want to lessen the chance of a forced contract unwind due to exchausted capital. Unlimited leverage is available without counterparty or default risk because all contracts are fully collateralized upfront. You are bounded by capital at risk in terms of P/L. This means you can use $100,000 to purchase $1,000,000 worth of price movement, and limit losses (and gains) to $100,000\.

The unique URL takes the user and her counterparty to their deposit page. They must also be logged into Hedgy in order to access these pages. A minimum margin of 30% is required, so Alice and her counterparty deposit 90 BTC to the multi-sig address listed on the page. Leverage of up to 3.33x is allowed.
Contract Execution

 Untitled4

Since all contracts are pre-funded and fully collateralized, all one has to do is click "Match order" in one's wallet to execute a contract, which is then sent to the blockchain, with traceable hashes for all to see.

Once deposits are made, Alice and her counterparty sign the contract, which goes LIVE on the block chain. At any point during the contract, Alice can use a block chain explorer to verify that her and her counterparty's funds are there.
Transparency and audit trail

 track transation

track transation results

 
Trade settlement

 Untitled5

Within 5 to 40 minutes after trade has ended. Settlement is solely dependent upon confirmation on the blockchain

 
Granular control of contracts, similar to exchange-based offerings

 contract acceptance control

Full control over when your contract starts, ends, and when the contract offer ends - embbedded into the contract offer itself and self-executing and enforcing.'

N/A

IP Protection

IP protection offers security for customers and clients in mollifying the risk that hard earned intellectual capital is not pilfered by others, and more importantly as protection and assurance against other entities bringing litigation in the form of patent infgringment and IP suits. Such claims can pose material risk to the operations of the vendor.

 patent to the Future of finance

Multiple patents pending

N/A
Inventory offered

 ultracoinsplash2-1280x640

Vertiaseum offers over 20,000 tickers of exposures to hedge/trade your BTC to and from. For instance, you can trade/hedge BTC into USD, or EUR, or the USDEUR pair, or gold, or hedge your electricity costs through an electricity index, or the GDP or share price of your largest publc client, etc.

Hedgy offers only BTCUSD forwards.
Pricing  0.1% to 0.25%, leverage given at 80 bp 0.0% to 0.40%

With BTC trading at $236, Cocoa uses 100 BTC to hedge a 3,000 BTC position against the USD. BTC drops just over 7% during her contract. This is the result through Veritaseum after all fees and expenses are taken into considertion

3ox levered BTC usd trader

 See also: Using Veritaseum and Veritas to Collateralize and Ensure Physical Delivery of Gold!

 

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“The disintermediation caused by Middleton’s UltraCoin has the potential to disrupt the brokerage industry.” 

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"At least one of the top global money center banks have approached us, and I expect to hear from at least 3 of the top 6!"

MP3 technology combined with innovative business models have cut the music industry profits in half, and they're not coming back!  I query all banking execs, 'Do you want to get MP3'd?'"

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 fortune-logo Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that “what I’m doing right now is a direct threat to fiat merchant banking.” 
hashOG  It’s the perfect storm of disruption, as it renders trading fees, brokerage fees, and those infamous Wall Street bonuses obsolete. The sheer scale of disruption this technology brings with it makes it something to watch. 
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“Veritaseum is ripe for a strategic investor to approach us before the end of the calendar year, likely before we’re able to go for our Series B round. Strategic investors include payment processors, global banks, and innovative technology companies such as Google, Facebook, Microsoft or Apple.”

Vertias Driven Disintermediation

Team Veritaseum is uniquely trained, and highly motivated. Specialists with few equals, immune to the concept of “can’t”!

—Reggie Middleton, CEO and Founder of Veritaseum, Inc.

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