user44: One of the most common reasons I hear that Bitcoin is "not ready for prime time" is that because of its wildly oscillating valuation businesses can't accept bitcoins without becoming speculators.  In my own experience trying to use bitcoins for business, I have found this to be quite true--at the very least, it is a significant problem.
The most common solution I hear offered for this problem is that the emergence of a stable, high-volume futures market may allow for businesses to transact in bitcoins while ignoring market volatility.
If this is the case, it leads me to wonder--is there any way to incorporate some sort of futures market directly into the Bitcoin protocol?  That way bitcoins themselves, like gold, could oscillate up and down according to market demand, but through some sort of digital derivative on them, people could trade much more stable values.  Are there theoretical and practical barriers to this?  What are they?

user412: Parties can agree to a contract for forward delivery and payment on anything, including Bitcoin.  In the absence of a formal exchange, the parties must accept the risk that their counterparty is unable to perform according to the contract, and must work out the legal details of each contract individually.  A formal exchange such as CME or COMEX performs due diligence on the buyer and seller and holds margin as a security deposit against the ability of the parties to perform, such that the exchange can safely act as the counterparty to both the buyer and seller in the futures contracts.  Exchanges also standardize the terms of the contracts, which reduces legal costs and increases fungibility of the contracts, which greatly improves the liquidity of the futures contract market.
So an exchange dealing in Bitcoin futures contracts would be required.  The exchange could be built from scratch by a party with the capital required to take on the counterparty and trade settlement roles, or an existing recognized exchange could be convinced to add some Bitcoin contracts.  The recognized exchange approach would go a long way toward accomplishing the goal of stabilizing the value of the currency. 

user405: Silk road's hedged escrow is a first step in this direction, and seems to work.  But all the "trades" are bilateral (SR is always one of the parties) and you can't "buy" the "contract" unless its to hedge a sale made through the SR website.

44: <p>One of the most common reasons I hear that Bitcoin is "not ready for prime time" is that because of its wildly oscillating valuation <strong>businesses can't accept bitcoins without becoming speculators</strong>.  In my own experience trying to use bitcoins for business, I have found this to be quite true--at the very least, it is a significant problem.</p>

<p>The most common solution I hear offered for this problem is that <strong>the emergence of a stable, high-volume futures market may allow for businesses to transact in bitcoins</strong> while ignoring market volatility.</p>

<p>If this is the case, it leads me to wonder--is there any way to incorporate some sort of futures market directly into the Bitcoin protocol?  That way bitcoins themselves, like gold, could oscillate up and down according to market demand, but through some sort of digital derivative on them, people could trade much more stable values.  Are there theoretical and practical barriers to this?  What are they?</p>
 412: <p>Parties can agree to a contract for forward delivery and payment on anything, including Bitcoin.  In the absence of a formal exchange, the parties must accept the risk that their counterparty is unable to perform according to the contract, and must work out the legal details of each contract individually.  A formal exchange such as CME or COMEX performs due diligence on the buyer and seller and holds margin as a security deposit against the ability of the parties to perform, such that the exchange can safely act as the counterparty to both the buyer and seller in the futures contracts.  Exchanges also standardize the terms of the contracts, which reduces legal costs and increases fungibility of the contracts, which greatly improves the liquidity of the futures contract market.</p>

<p>So an exchange dealing in Bitcoin futures contracts would be required.  The exchange could be built from scratch by a party with the capital required to take on the counterparty and trade settlement roles, or an existing recognized exchange could be convinced to add some Bitcoin contracts.  The recognized exchange approach would go a long way toward accomplishing the goal of stabilizing the value of the currency. </p>
 405: <p>Silk road's <a href="https://dkn255hz262ypmii.tor2web.org/index.php?topic=819.0" rel="nofollow">hedged escrow</a> is a first step in this direction, and seems to work.  But all the "trades" are bilateral (SR is always one of the parties) and you can't "buy" the "contract" unless its to hedge a sale made through the SR website.</p>
