Hedging hashrate enables miners and pools to reduce their variance while maintaining ownership over their hashrate and block templates.
Currently the only mechanism to reduce variance is hashrate aggregation into pools. Variance based pooling pressure incentivises mining pool centralization.
Hedging hashrate enables a sustainable decentralization of hashrate. The DLCs can be structured to incentivise pools to maintain lower global hashrate because a smaller probability pool yields a higher variance reduction.