Hi,

This is my first post to this list -- even though I did some tiny contributions to bitcoin core I feel quite a beginner -- so if my idea is stupid, already known, or too off-topic, just let me know.

TL;DR: a trustless contract that guarantees minimum profitability of a mining operation -- in case Bitcoin/hash price goes too low. It can be trustless bc we can use the assumption that the price of hashing is low to unlock funds.

The problem:

A miner invests in new mining equipment, but if the hash-rate goes up too much (the price he is paid for a hash goes down by too much) he will have a loss.

Solution: trustless hash-price insurance contract (or can we call it an option to sell hashes at a given price?)

An insurer who believes that it's unlikely the price of a hash will go down a lot negotiates a contract with the miner implemented as a Bitcoin transaction:

Inputs: a deposit from the insurer and a premium payment by the miner

Output1: simply the premium payment to the insurer

Output2 -- that's the actual insurance

  There are three OR'ed conditions for paying it:

  A. After expiry date (in blocks) insurer can spend

  B. Both miner and insurer can spend at any time by mutual agreement

  C. Before expiry, miner can spend by providing **a pre-image that produces a hash within certain difficulty constraints**

The thing that makes it a hash-price insurance (or option, pardon my lack of precise financial jargon), is that if hashing becomes cheap enough, it becomes profitable to spend resources finding a suitable pre-image, rather than mining Bitcoin.

Of course, both parties can reach an agreement that doesn't require actually spending these resources -- so the miner can still mine Bitcoin and compensate for the lower-than-expected reward with part of the insurance deposit.

If the price doesn't go down enough, the miner just mines Bitcoin and the insurer gets his deposit back.

It's basically an instrument for guaranteeing a minimum profitability of the mining operation.

Implementation issues: unfortunately we can't do arithmetic comparison with long integers >32bit in the script, so implementation of the difficulty requirement needs to be hacky. I think we can use the hashes of one or more pre-images with a given short length, and the miner has to provide the exact pre-images. The pre-images are chosen by the insurer, and we would need a "honesty" deposit or other mechanism to punish the insurer if he chooses a hash that doesn't correspond to any short-length pre-image. I'm not sure about this implementation though, maybe we actually need new opcodes.

What do you guys think?

Thanks for reading it all! Hope it was worth your time!