what is serention?
We’ve developed a methodology that hedges the BTC price and hash rate exposures of rig-generated cash flows by: (1) conceiving of rigs as call options on BTC price, (2) using options theory to offset price exposure (e.g. delta hedging), and (3) offloading floating hash rate exposure through a novel BTC-denominated DeFi swap market that settles against an oracle-calculated daily index
WHAT DOES SERENTION DO?
By offering BTC owners already using Decentralized Finance (DeFi) applications a compelling return, we will secure the fixed payer side of the swap.
We apply commonly used options hedging concepts to rig BTC-denominated cash flow streams to smooth them out in USD-denominated terms.
We will employ our own hedging methodology to a small fleet of rigs and publish the results to prove the concept to the broader crypto mining community.
By stabilizing rig-generated cash flows, we can facilitate capital deployment (both debt financings and equity investments) into the mining sector.
SERENTION strengths
The founders have years of experience at top-tier firms, including in traditional finance and at a miner lending company.
Both founders were intimately involved with underwriting, originating, and servicing over $100MM of llens to miners.
By marrying prediction models with modern hedging practices, we believe we can facilitate valuation multiple expansion for miners.
To help educate industry participants, we publish cutting edge research and blog posts.
SERENTION roadmap
SERENTION Faqs
Serention (aka Project Serenity) is a next generation DeFi protocol that enables crypto miners to transform BTC generated by their rigs into stable, predictable USD-denominated cash flows that are finance-able, which will enable the overall industry to grow. This is accomplished by hedging the three main risk components of: (1) power price volatility, (2) BTC price volatility (which is hedged without using derivatives), and (3) hash rate growth, which is addressed by using Project Serenity’s novel, defensible, first mover, BTC-denominated DeFi hash rate swaps market where the settlement index is calculated exogenously through an oracle.
We believe that funding into the mining sector has dried up, in large part, because the revenue and profits generated are too volatile, making the sector effectively uninvestable and unfinanceable. If the cash flows from rigs can be smoothed and a high confidence schedule of pay down can be provided, we believe capital (both investors and lenders) can flow back into the sector.
The founders have deep experience with startups (Merkle Data, PeerIQ), finance (Citadel, Morgan Stanley, Webbank), and academia (PhD in Electrical Engineering from Stanford, MS in Computational Finance from Carnegie Mellon). In addition, they have several years of crypto industry experience, mainly at Anchorage Digital in lending, derivatives, engineering, and data science.
By smoothing out revenues and profits, miners can establish themselves as a consistent cash flow generator and improve access to capital (both debt and equity financing) and expand their valuation multiples, which have compressed after the last downturn.
We conceive of rigs as a bundle of call options on BTC with the strikes and terms of the options defined by fleet, network, and market characteristics. Our methodology is to essentially delta hedge these options without using BTC derivatives. We can hedge the rigs with an open term BTC loan and some cash.
We will provide a platform where lenders can deploy loans to miners, whose rig collateral production will be hedged and transformed into stable, predictable cash flows in USD terms.
The swap will settle at the end of the term. To illustrate the steps involved, we provide the following example.