Recently I started thinking about how parties could form a kind of derivative contract by pooling some cryptocurrency at a multisig address. I posted about it earlier this month here:
https://bitcointalksearch.org/topic/m.11515522Since then I've done a few examples by hand to demonstrate the idea. I did them using clams instead of bitcoin since clams has a "clamSpeech" part of a transaction. This let me write out the details of the contract in a way that is readable and must be cryptographically signed by the parties. The same thing could be done with OP_RETURN in bitcoin, it just wouldn't be as nicely visible on explorer websites.
I also worked out the relevant algebra and wrote it up, with the examples, as a short paper:
http://willmathforcrypto.com/multisigderivs.pdfIf you want to get a quick idea for how it works, here is one the examples with links to a clam explorer showing the transaction details.
Alice and Bob had some clams on June 23, 2015. Clams were trading at $1.60 at the time. They pooled some of their clams together into a 2-of-2 multisig address. Alice put in about $1.59 worth and Bob put in about $1.30 worth. The signed agreement is that the next day Alice gets $1.59 worth of clams out of the pool and Bob gets the rest. The "value" is based on the price at 10AM on June 24, 2015.
Here's the transaction making the contract and funding the multisig address:
http://clamsight.com/tx/f84f28e813118b78d7d03c535042bc94fa1f32de3d8a599854d45866f481783eThe price of clams at 10AM on June 24 turned out to be $1.73, so Alice got approximately $1.59 worth of clams out of the pool and Bob got the rest which were worth $1.53. Essentially Alice sold her volatility risk to Bob and as a result Bob realized a gain of over 17% when the price went up 8%.
Here's the transaction settling the contract.
http://clamsight.com/tx/b0a0312c7724c1b130300b9c5ae9db23148ed6194985d4b4879dca17fb889a0aThe actual transactions have a little extra clams in them to take care of mining fees and a "security deposit," as explained in the paper.
There's also an example showing how Alice shorted the price of clams.
I suspect this idea is already out there, and is possibly already in use. If so, I'll be happy if someone points it out. In general, feedback on the idea is welcome.