ZiyenCoin is the world’s first successful attempt to tokenize oil. It is used not only to crowdfund rights to extract oil, Ziyen Coin will allow to streamline the supply chain in the oil market, currently ridden by way too many intermediaries. Further, the token by Ziyen Inc will allow consumers to track the origin of gas in their cars. How far will tokenization in the oil industry go? Will tokenization influence the price of gasoline? Our Editor-in-Chief talks with Alastair Caithness, Ziyen Inc CEO:
Q1: You are a non-traditional oil company, not only in your blockchain efforts. You attempt to create sustainable means to produce oil using renewable energy. Please explain how you go about it?
A1: Ziyen Inc. is a technology-driven energy company incorporated in the State of Wyoming, U.S.A. in April 2016. Ziyen Inc. was originally a software company which provided information on the oil, gas, power and energy sectors, Ziyen Intel specializes on business information, contracts, news and information by developing cutting edge procurement and supply chain software to provide clients with intelligence on industry specific government and private contracts. Seeing a unique opportunity, the company strategically pivoted and created an oil and energy company by securing the first oil asset in 2017.
Ziyen Energy was created to capitalize on information and opportunities in the oil and gas marketplace with the intent to produce oil in the U.S. utilizing advanced extraction methods and technology implemented and guided by career experts in the oil and gas industry. Ziyen intends to produce oil by securing and developing smaller, marginal oil fields in the U.S. that have been otherwise overlooked by major oil companies yet can still provide multi-million- dollar yield potential. Ziyen Energy currently has 18 oil assets based in the Illinois Basin, which covers Illinois, Indiana and Kentucky.
ZiyenCoin is a new division created by Ziyen Inc., which will focus on oil blockchain and will be in collaboration with leading industry professionals to develop technology that will greatly reduce oil and energy operational costs. Given the data-intensive opportunities available through the growth of the internet, the oil industry sees blockchain as vital means to transform the ways the industry manages and shares data.
The company will launch an energy trading platform to tokenize the producing assets of oil and energy companies which will allow investors to easily trade these tokens creating a new level liquidity to be introduced across the industry.
Q2: Nowadays most major oil companies have invested in blockchain, Exxon, BP, Shell did, to name the few. What is the difference between their efforts and yours?
A2: The blockchain is a decentralized ledger which tracks and records all transactions, contracts and maintains data decentralized form across different locations, eliminating the need for a central authority to store and control records. The leading global oil operators including Exxon, Shell, Saudi Aramco, Chevron, Equinor, ConocoPhillips, ADNOC and Marathon Oil are now all investing in developing the oil blockchain, however, they are still in the pilot stages and focused on projects which are focused on sharing seismic data and utilizing smart contracts for the trucking industry and fracking.
Ziyen Inc. aims to be the first company to deploy tokenized energy assets on the Ethereum blockchain, and then operate a full project on the blockchain utilizing smart contracts.
Once this is successfully accomplished, Ziyen Energy will have created a model and proof of concept for this system which will be rolled out across an entire industry.
Q3: What is ZiyenCoin? May I call it a digital copy of a barrel of oil? You called ZiyenCoin a hybrid model when you have compared it to Bitcoin. Why?
A3: ZiyenCoin is the first Oil & Energy Security Token Offering (STO) to be filed with the SEC. ZiyenCoin is an equity backed token against the assets of Ziyen Inc.
The token is a digital asset that is tracked in a blockchain. The company’s security tokens will be deployed on the Ethereum blockchain and will utilize a smart contract that follows the ERC20 standard but adds certain features of traditional securities.
The company has engaged the services of Prime Trust LLC, who are a Nevada registered company providing custody, trust and escrow services.
With Prime Trust’s transaction technology, you can now invest in ZiyenCoin with minimal friction, regardless of whether the investor is remitting funds to escrow via wire, ACH, check, credit card, Bitcoin or Ethereum.
I call it a hybrid model, as it will operate on a permissioned blockchain and has been formed as an SEC Security Token Offering rather than a pure cryptocurrency.
Q4: What asset do you tokenize? Is it oil, is it rights to extract it (mineral rights)? What is your goal in oil tokenization?
A4: The energy trading platform will be a subsidiary of Ziyen Inc. and ZiyenCoin.
In the current market, investments in oil and gas projects by operators–or those with a working interest in the project– are essentially immovable and restricted to that specific project.
By tokenizing the producing assets on a trading platform which will allow investors and companies to easily trade these tokens, a new level liquidity will be introduced across the industry.
The energy trading platform will utilize an energy utility token; it will be available to both small and large operators who can benefit in listing their producing asset to trade these tokens based on a project-by-project basis on the blockchain.
Shell will trade Shell Energy tokens, BP will trade BP Energy Tokens, Exxon will trade Exxon Energy Tokens.
Q5: If you were to tell the industry of the purpose in oil and gas tokenization, how would you formulate it?
A5: The first customer to use the energy trading platform will be Ziyen Energy. We are fortunate to be in a position to place our own oil assets onto the energy trading platform. Once the process is refined, it will be available to operators who can begin utilizing the platform in order to tokenize their own assets and ultimately trade them.
How big can the platform grow? Under the current structure, the platform can be scaled out to operate with as little as one or as many as thousands of projects located around the globe.
The oil industry is currently worth over $5 trillion per year, and to put that in perspective – Bitcoin would have to rise to $250,000/Bitcoin in order to have the same industry valuation.
This comparison measures the magnitude and potential of the oil and energy industry. By creating an energy trading platform – which will provide fixed cost savings from an operational perspective and provide a system to unlock billions of dollars – new level liquidity will emerge for the oil and energy industry and therefore, the global economy.
Q6: Why did you choose Ethereum blockchain for your tokenization programme?
A6: Although commonly associated with Bitcoin, blockchain technology has many other applications that go way beyond digital currencies. In fact, Bitcoin is only one of several hundred applications that use blockchain technology today.
Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.
Ethereum is a global, decentralized platform for money and new kinds of applications. On Ethereum, you can write code to build applications accessible anywhere in the world, this is why we are using Ethereum.
Q7: Do you also plan to employ blockchain to streamline supply chain? Will users be able to trace origin of the gas they put in their cars back to you?
A7: Great question, A key interest in Ziyen is to use a percentage of the proceeds raised in this offering, to further develop the tokenization of the energy trading platform and implement carbon reduction protocol. This is to incentivize the major energy companies to produce energy by reducing carbon emissions and receiving credits for this effort.
Ziyen Energy Trading Platform will serve as a solution to climate change by serving as a universal carbon credit. Just as country-controlled (fiat) currencies are subject to political instability and inefficiencies of cross-border transactional charges, the global carbon credit market is inefficient, under-regulated and therefore, suitable for unification under Ziyen’s Energy Trading Platform. Ziyen did not invent the carbon credit market but intends to disrupt and unify it under a central energy trading platform.
Q8: Where are you going to trade your tokens outside the American tZERO? Any confirmed agreements so far?
A8: The first ZiyenCoins will be minted in July. They will be restricted under rule 144, which is an SEC Regulation before they will be free trading.
This holding period is for 12 months. This is first example of how Wall Street and traditional securities are now getting involved in tokenization and the cryptocurrency space.
In addition to tZERO we will want to list on multiple trading platform across the world.
Q9: Will tokenization influence the price of gasoline to end consumers and how?
Q9: Another great question and I’m not a person who wants to give price targets on the future oil price, as there are so many other factors that affect the price of gasoline, including supply, demand and government taxation. I think in terms of the idea about oil price fluctuations and how much volatility we’ve seen, it has a lot to do with uncertainty.
People have to remember that this is a are very early-stage project on the blockchain, and we just haven’t seen early-stage tokenization project valuation play out in public markets previously.
The short answer is there’s still so much uncertainty on a number of levels: adoption, regulation, scaling, the list goes on.
However, despite the skepticism, blockchain and decentralized ledger technology will revolutionize elements of the energy industry and Ziyen intends to be at the forefront of this change.
Q10: Your conservative estimate on the tokenization in oil and gas, short term, mid term, long term?
A10: We are targeting to have the platform operational by October of this year, and the first oil assets from Ziyen Energy will be tokenized on the platform. We will then look to make further acquisitions and list those oil assets on the platform.
By the end of the year we will have the platform open for US Operators to also list their producing assets on the platform. We envisage small to medium sized oil companies who operate in the peripheral basins in America, including Illinois, Wyoming and Oklahoma will start listing on the platform.
Once we have the platform operating at its full potential we will open up to the major operators in the Permian at the start of 2020, before launching it globally.
I envisage in 18 months from now having in excess of 1000 independent oil projects tokenized on the trading platform, which will prove to be one of the best use cases of the Blockchain since the invention of Bitcoin.