By Myrna M. Velasco
Houston, Texas – ‘Oilcoin’, a digital currency that will be tied to a barrel of oil commodity, is seen as the next big trend that will infiltrate energy trading – aligned with the genre of bitcoin and other cryptocurrencies.
Daniel Eisner, co-founder of OilCoin Digital Reserve, told participants at the CERAWeek 2018 here, that “oilcoin” delves with the process of “tokenization of oil” as a commodity.
So far, the Organization of the Petroleum Exporting Countries (OPEC) is biting into the idea of digital currency trading for oil commodities – but getting it done viably is still a subject of the global oil producer’s comprehensive study.
“We are studying how the oilcoin works and how does it integrate into the financial markets,” OPEC Secretary General Mohammed Sanusi Barkindo noted.
Eisner emphasized the ‘oilcoin’ had been developed “as part of the digital currency reserve or cryptocurrencies being traded in markets.”
He explained “if we will have the ‘oilcoin’ as a token, that token represents a barrel of oil, and we can trade that token.”
If this experiment with ‘oilcoin’ succeeds, it has been indicated that the next one on the trading bloc could be “tokenizing a kilowatt hour of electricity” – for this to become part also of the digital currency offers in the marketplace.
Nevertheless, Eisner qualified that to differentiate ‘oilcoin’ to other cryptocurrencies wherein transparency and integrity issues are being raised, this energy-based digital currency will be unique because it shall be the first one that shall be registered with relevant regulators, such as with the Securities and Exchange Commission.
“What occurred to me as we developed ‘oilcoin’ was the notion that the practices around cryptocurrencies don’t comply with securities laws. And we thought about this – that the issue of digital tokens is the issuance of securities; and people of all sorts would just want certain laws to protect that and to achieve ultimate transparency,” he said.
Eisner added such will take “a transformative turn in the blockchain, because this will be the first kind of digital currency that shall be officially registered as a security.”
“So how do we do that? We have a coin issuer, we issue as many coins as the other cryptocurrencies do, but we don’t do it where like governments take the money and use it for future developments. What we do is: we take the capital and put that into a core asset, so they (oilcoin investors) end up owning an asset that has an aggregate value equal to the value of the cryptocurrencies upon issuance,” he narrated.
He emphasized that “overtime, we will maintain that valuation as we issue additional coins. Then we take the proceeds – and then monitor the pricing and that asset value and keep everything in parity for the investor.”
In the world of innovation in energy markets, blockchain refers to creation of opportunities or re-designing business models; and for industry participants to think differently a lot about practices that have emerged into doing business.
“Traditionally, these were just done on the basis of analog tools but have transformed over time with technology advancements, transparency and business systems being built on trust as part of the equation,” Eisner expounded.