Key Concepts and Functions

BTC Fees Index

The BTC Fees Index is the underlying protocol benchmark. The index tracks the median sat/vB per block, by taking the sat/vB of all txs within a block and finding the median. The index is constructed by collecting and organizing data from Bitcoin network nodes.

SilicaPool

A SilicaPool is the set of all long and short positions within the same period (e.g. April 1 - April 30). Users can enter, trade, or close their positions anytime during the Pool’s period. The pool tracks the rolling average of the index since the start (e.g. April 1). Upon settlement (e.g. April 30), the final payout is based on the average of the median Sat/vB per block across all blocks during the pool’s period.

Orders

Orders allow users to enter into long or short positions at specific prices. Users can create limit orders indicating their price (in Sat/vB) and order size (in vB). If other users find this order favorable, they can fill it to take on the opposite side. Users can also fill outstanding orders instead of creating their own orders.

Cap

Cap is a predetermined upper bound on the pool’s payout. The cap is required to limit the downside of the short positions. The cap’s value is set before the pool starts, based on recent historical data.

Floor

Floor is a predetermined lower bound on the pool’s payout. The floor is required to limit the downside of the long positions. The floor’s value is set before the pool starts, based on recent historical data.

Core Functions

Buy

Users who expect the average network transaction fees to increase over the Pool’s period.

• To enter into a buy position, the user has to submit an upfront payment:

Payment = (price - floor) * size​

• The user will receive a number of NFTs that represent their buy positions in the pool. The user can then freely trade these NFTs. All buy positions in the same pool are fungible regardless of their price.

• Upon settlement, the user burns the NFTs to claim their payout:

Payout = (min(cap, max(avg(index in Pool’s Period), floor)) - floor) * size

Long position

​Sell

Users who expect the average network transaction fees to decrease over the pool’s period.

• To enter into a sell position, the user has to submit an upfront

Payment = (cap - price) * size

• The user will receive a number of NFTs that represent their sell positions in the pool. The user can then freely trade these NFTs. All sell positions in the same pool are fungible regardless of their price.

• Upon settlement, the user burns the NFTs to claim their payout:

Payout = (cap - min(cap, max(avg(index in Pool’s Period), floor))) * size

Short position

Risks and considerations

• Market Volatility: Changes in the chosen index can affect the contract outcome.

• Smart contract Risk: The smart contracts may contain bugs or vulnerabilities that can be exploited by malicious actors or cause unintended consequences