Quote from: microRNA on October 14, 2012, 01:22 amah that makes sense now +1i agree hedging can definitely be worth the fee, but then its always annoying if you pay to lose out during the rare chance coins actually happen to go up :)True, but in the event of a price crash Silk Road takes the hit via hedging to ensure buyers don't take the hit as a result of value flux. It also ensures that sellers don't take a hit either.The Escrow Hedging section of the Seller's Guide explains the reasoning quite well, with the part in asterisks being the most relevant here:Quote from: Silk Road Seller's GuideEscrow HedgingUnfortunately, the Bitcoin exchange rate isn't as stable as we would all like it to be, and can fluctuate wildly in a matter of hours, let alone the days or weeks it takes for a package to arrive. Because of this, there is a real danger that the Bitcoins being held in your escrow account will lose value by the time your customers finalize their orders. So, we've given you the option to hedge the future payments you are expecting from escrow such that the dollar value of the payment doesn't change as the Bitcoin exchange rate changes.*****For example, someone purchases one of your 10 btc listings. The dollar value of the order when purchased is $100. Now, a week later when the transaction is finalized, those 10 btc are no longer worth $100, they're worth $50! Because you hedged the escrow, you won't get paid 10 btc, you'll get 20 btc equaling the original value of $100. Of course, the opposite is also true. If Bitcoins appreciate in value while your payment is in escrow, you'll get fewer Bitcoins, but they will still equal the original dollar value.*****The option to turn off or on escrow hedging can be found on your "settings" page. While it is on, the payments for any orders placed with you will be hedged. Payments for orders placed while it is off will not be hedged, but any hedged orders still not finalized will remain hedged.On your account page, your escrow balances are split up between hedged and unhedged orders. All orders are hedged as soon as they are placed and unhedged as soon as you are paid.You can expect a loss of about 4% of your normal payment when using the escrow hedging feature. This is due to the fact that, both when hedging and unhedging, you will lose the bid-ask spread between the available orders that can be used to fill your hedging order.If you need the most up-to-date USD/BTC exchange rate, we recommend mtgoxlive.com.With hedged orders Silk Road pays the vendor the original Dollar value of the order no matter what (less the hedging fee) - as outlined in the Seller's Guide, SR stands to lose quite a bit when the price drops so it wouldn't be fair to ask them to compensate us when the price rises!I just realised that debating the above is totally unnecessary! :-X I agree with you, it's annoying when you pay 4% to lose out if Bitcoin value increases. Christ I need to get out more haha.- grahamgreene