With cryptocurrency being the hot topic nowadays, it seems that technology-backed currency is set to take over paper currency.
Stealing the limelight from bitcoins, the US government is soon rolling out regulatory compliant digital currency, oilcoin, which will be supported by verified oil reserve assets. The initial token sale of the cryptocurrency, which is known as Initial Coin Offering (ICO), is expected to take place in January next year.
This means that in order to buy an oilcoin, the buyer will exchange the ongoing legal tender currency for oilcoins. The exchange, price of one oilcoin token versus the fiat currency, will be decided by the authorities.
Unlike bitcoins, oilcoins are backed by the US government - which makes it safe to use.
The oilcoin concept was formulated by an expert panel, which includes Former Commissioner, Bart Chilton, at the US Commodity Futures Trading Commission between 2007 and 2014. Chilton seems to be supportive of the digital currency idea. He claimed that the bitcoin futures are safe, even though they are unregulated, and believes that they will stabilise the cryptocurrency.
How will oilcoins work?
Oilcoins will work like tokens, where each oilcoin will represent the value of one oil barrel. The oilcoin white paper document states that the oilcoin will be supported by "an undivided interest in a bundle of oil assets which include physical oil, oil futures and interests in oil producing properties." The assets will hold the aggregate value, approximately to the aggregate value of all the oilcoins in circualtion.
If one possesses oilcoins, the owner can only exchange the digital currency in exchange for oil barrels, and other oil-associated assets.
The document argues, "By linking each OilCoin token to existing and verified real world assets, OilCoin enables holders of digital and fiat currencies seeking to preserve wealth, lock in gain and/or avoid loss to acquire, hold and transfer intrinsic value in digital token form."
One of the major reasons for oilcoins to come into circulation is to meet the increasing demand of the global oil market.The aim is to expand the oilcoins and the supporting oil reserves in tandem to maintain an approximate equilibrium between the USD price of a single oilcoin and an oil barrel in the global market, bearing in mind the interests of the oilcoin buyers.