ENEDEX: A Hedging Platform for Miners
Decentralized exchange ENEDEX is the next evolution of quantum-proof, cross-chain energy derivatives trading built on Polkadot, Moonbeam, and DCore for trading traditional and future energy products.
Miners are continuously looking for ways to hedge their exposure. Bitcoin and other crypto asset miners have been forced to employ various strategies to hedge risks. A study by Cambridge Centre for Alternative Finance has concluded that most of these attempts are still “elementary”. Relatively recent developments include future and option trading for Bitcoin and Ethereum, and inevitably other markets will follow suit soon and ENEDEX will be at the front of this development creating a decentralized revolution in energy trading.
Similarities Between Power Plant Hedging and Mining Operations
When a company hedges its position by purchasing a derivative, whether that derivative is a futures contract or an option, it buys a contract to protect itself against the possibility of devastating price change. To hedge against a price increase, the company buys a long contract, also called a call option. To hedge against a price decrease, rather than buying, it can hedge its position by selling a future, or a put option. Many organizations have used the derivatives market and experienced companies have devised other hedging strategies, some simple, some more sophisticated.
Electricity producers operate power plants that use coal and gas as feedstock for power production. This results in the electricity producer being exposed to price movements in electricity and natural gas. To lock in profits, electricity producers trade Spark Spreads to maximize profits.
Hedging Power Plants with Spark Spreads
Electricity producers use standardized futures contracts on an exchange to hedge their exposures and lock in the Spark Spread. The Spark Spread is the theoretical gross margin of a gas-fired power plant from selling a unit of electricity, having bought the fuel required to produce this unit of electricity. The spread defines the difference between the cash streams for a power plant and represents the value that is generated by a power plant producing electricity. Similar spreads exist for other power plant feedstocks like uranium and coal that power nuclear and coal generators and are named the Quark and Dark spread. Investors and traders can profit from changes in the spread through trading in electricity contracts.
Crypto Asset Mining
The similarity between a power plant and a crypto asset mining operation is one of the needs of input. For miners this is electricity, to generate an output, Bitcoin (or any other crypto asset that can be mined). A miner is exposed to the fluctuation in the price of electricity and crypto assets. While most crypto assets can be hedged, utilities that provide electricity to mining operations do not provide optionality and flexibility to the miner to trade around their own electricity usage. Even when the option to lock in prices is offered it is done with huge profit margins and often only on the purchase side leaving the miner without an option to unwind the purchase once the deal has been concluded. But what if miners could trade in and out of a power-to-crypto spread and trade around the fluctuation of power and crypto prices similar to how electricity producers manage their power plants?! What flexibility and opportunity would that provide miners and traders alike to create value? What if this opportunity would exist in a totally decentralized, transparent, peer-to-peer, low-cost, trust-less environment open for all market participants big or small, local or global, young and old?
Electricity trading and hedging in crypto
ENEDEX, the latest development in DeFi and DEX, will enable miners to hedge their financial exposure to electricity prices within the world of crypto in a decentralized environment. Numerous trading spreads linked to regional electricity markets are now able to be quoted in $ENE, $ETH, $BTC, $USDT, etc. This provides miners with an opportunity to hedge their financial exposures and trade around opportunities that arise from locking in and unlocking the electricity versus crypto asset spread, or use the simple approach trading power prices in cryptocurrency denominated products. ENEDEX enables mining operations to maximize their revenue streams by capitalizing on DeFi developments and leverage market opportunities in a decentralized environment combining energy trading with supporting value creation in the crypto mining industry.
ENEDEX listed products including crosses of traditional and renewable energy products in crypto-currency-denominated trading pairs. ENEDEX will be implementing technologies of Polkadot and Moonbeam on top of DCore to offer near gas-less fees and functions as a platform for DeFi developers to build and list decentralized products. A simple and elegant approach, peer-to-peer, transparent, trust-less, and decentralized. Join the revolution!
How to participate?
Buy $ENE and invest in the future of energy! Or when you’re a DeFi developer or active in the energy crypto space please reach out to us on one of the channels!
Join the energy revolution! Private Sale is open NOW, visit www.enedex.org to register!
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