One of the hardest aspects for merchants wishing to offer their services or product in Bitcoin is volatility, with the cryptocurrency being notoriously fickle in its exchange rate. Hedgy wants to eliminate that level of volatility.

San Mateo, CA-based Hedgy uses the first principles of derivatives combined with the novelty of the Bitcoin block chain to manage Bitcoin price risk, according to the company.

The startup offers two services: BITForward, an Over-the-Counter (OTC) derivative contract on the market, and BITLock, a Bitcoin hedging tool.

BITForward offers a smart contract that is executed between counter parties with what is claimed to be zero default risk. The product promises to allow speculators to gain consistent exposure to the price movement of Bitcoin, enabling them to realize a profitwithout the need to buy or sell the underlying asset.

The more interesting product for merchants who sell goods in Bitcoin is BITLock. The service sees a smart contract executed between counter parties with what is agin claimed to be zero default risk. The hedge in the contract exchange is said to effectively eliminate Bitcoin volatility for miners, merchants, remittance processors and payment gateways by locking in the value of their Bitcoin holdings using margin deposits.

The service overcomes the need for merchants accepting Bitcoin being immediately forced to liquidate their coin holdings to dollars due to the ongoing volatility in the market; it gives merchants the ability to lock in the value of their Bitcoin holdings.

The team behind Hedgy comes with strong backgrounds:Juan Pineda and Tim Olsen (Heads of Technology and Engineering respectively) were both previously employees of Apple, and CEO Matt Slater was the founder of Campus Ink.

The company has so far raised $765,000 in an Angel round from Boost VC.

Its an interesting, be it somewhat risky play into the sometimesmurky world of Bitcoin.

Unlike a good portion of startups today which seem to be a solution looking for a problem, Hedgy definitely addresses a problem: Bitcoin volatility for those who trade in it, particularly merchants in B2C and B2B markets.

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Hedgy wants to eliminate Bitcoin volatility