DeFi
Solana Project Wants to Tokenize Oil Rights – Will Investors Take the Bait? – DL News
- A new Solana project has symbolized lucrative oil and gas rights.
- This is the latest attempt to integrate so-called real-world assets into blockchains.
- But so far, the only product that has successfully become a tokenized product is gold.
A new Solana-based project will bring another real-world asset to the blockchain: rights to oil and gas wells and the royalties that come with them.
The Elmnts project made beta software available to selected users last week.
This will test crypto users’ appetite for real-world assets. Corporate giants such as BlackRock have tokenized nearly $2 trillion in U.S. Treasury debt, according to RWA.xyza data platform that tracks the asset class.
But there have been other attempts to tokenize real-world assets. fizzled outA tokenized uranium product launched in November saw no more than $5,000 in daily transactions volume since February, according to CoinGecko.
And the tokenized commodities market — a sector dominated by Tether and Paxos, both of which offer or tokenized – has remained flat over the past two years, to about $800 million, according to RWA.xyz.
But royalties from oil and gas wells can provide a new, stable and lucrative asset in cryptocurrency markets, one that is untethered from the rest of the cryptocurrency market, where tokens often move in lockstep, said Odai Ammar, co-founder of Elmnts. DL News.
“We now have an asset class where the returns are much more aligned with the crypto ethos,” he said.
“You have an asset class that doesn’t require any capital calls because you don’t incur any expenses – it’s all borne by the oil operator. You just sit back and collect the profits. In Texas, they call it mailbox money.”
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Oil and gas
Elmnts’ four co-founders are James Pacheco, a former private equity analyst at Goldman Sachs; Elias Moreno, a software engineer; and Erich Schmidt, an oil industry veteran who now owns a brewery in Midland, Texas, where 30 percent of the workforce is based. employee by the fossil fuel industry.
Landowners who are located above an oil well can sell the rights to that oil without selling their land. The owners of these so-called mineral rights can then lease part of the land to companies that extract the oil. The owners are compensated with a share of the companies’ profits.
“If the oil operator produced a million dollars [of oil] “This month they are taking the top 25 percent and distributing it to the mining rights owners,” Ammar said.
According to Ammar, royalties on mineral rights are most lucrative in the early years, when the well is most productive. Oil production – and therefore royalties – decline in later years, and wells are typically exhausted after 20 years.
The first offering of Elmnts, a tokenized fund that holds mining rights to land where Chevron operates, will offer yields “in excess of 20%,” Ammar said. Investors will be able to buy “security tokens” that represent shares in the fund.
Security Tokens and Atoms
Elmnts’ first product will be a permissioned platform, “suitable for grandpas and grandmas,” where users can browse different investment opportunities, according to Ammar.
Customers will be able to create an account with an email address and password, a rarity in the crypto economy, where they are expected to log into new platforms using pre-existing crypto wallets.
Elmnts will create an “in-app wallet” upon signup, and users will be able to invest using the USDC stablecoin or ACH, with Coinflow converting users’ money into USDC for on-chain settlement.
Tokenized oil and gas rights will be securities exempt from registration under the Securities and Exchange Commission Rule 506(c)which permits the sale of unregistered securities provided that the purchasers are accredited investors and the company in question takes reasonable steps to verify their accreditation.
“We are leveraging Solana’s capacity token extensions to ensure compliance and program these safeguards from the inside,” Ammar said.
Elmnts will charge a 0.69% management fee, Ammar said. And, as a sponsor of its tokenized funds, the firm will earn 6.25% “in the form of upfront equity” rather than cash fees.
The second product will be a lending protocol called Atoms, where Elmnts security tokens can be used as collateral for crypto loans.
Ammar believes this will be popular with borrowers.
“I have a pledged token that pays me 15%, I didn’t have to go through any KYC, any AML… I come from anywhere in the world except North Korea and the sanctioned countries that we will have to geoblock,” he said, referring to know-your-customer and anti-money laundering requirements.
Elmnts said It will make the beta software widely available “in the coming weeks.”
Aleks Gilbert is DL News” DeFi correspondent based in New York. You can contact him at aleks@dlnews.com.