logo
logo
Sign in

How the launch of oil-backed cryptocurrencies

avatar
borhan bb
How the launch of oil-backed cryptocurrencies

How the launch of oil-backed cryptocurrencies could change the market(oil profit)

How the launch of oil-backed cryptocurrencies could change the market. At the end of the Venezuelan Petro, it's time for Russia to launch its own oil-backed cryptocurrency. Neft-Coin is about to hit the market, just as Putin set a deadline for cryptocurrency regulation to be set by the Russian State Duma.

This can be a strategic turning point for the oil trade, a market historically pegged to the US dollar and often generating rules and sanctions for geopolitical reasons.
Could oil-backed cryptocurrency adoption change oil trading and bring more transparency to the market? It's hard to say since the players looking to control these cryptocurrencies are the same as those who control oil resources today.

What is oil backed cryptocurrency?

So what exactly is an oil-backed cryptocurrency?

An oil-backed cryptocurrency is one that is backed by the tangible asset of oil and sometimes gas reserves.

This essentially means tokenizing barrels of oil held in reserve to give the cryptocurrency greater credibility and price stability. The oil that backs the coin is meant to counteract volatility, which is a common feature of most cryptocurrencies.
It is a niche worth trillions of dollars. Crude oil is the most exported product in the world. In 2017, crude oil shipments amounted to $ 841.1 billion (just one year after the 2016 market crash). The market is pretty stable right now, and that could make any oil-backed cryptocurrency a relatively stable option.

Currently, members of the OPEC (Organization of the Petroleum Exporting Countries) states and Russia are planning a blockchain-based cryptocurrency platform. This is intended to disrupt the current oil trade and provide exporters with more profits.

The Petro and Other Oil-

Backed Cryptocurrencies The most famous oil-backed cryptocurrency is Venezuela's Petro, but for all the wrong reasons. The myths and controversy surrounding this digital currency, coupled with the country's unstable economy, make oil-backed cryptocurrencies seem like little more than an ingenious way to escape international sanctions.

There is no transparency in the way Venezuela manages its assets, and no one can quantify the country's oil reserves or say whether these tokenized barrels actually exist. In addition, it is difficult to know how much the Petro is really worth, as government sources provide unclear information on the subject.

Despite this, the Petro was certainly a game changer, showing that there was a gap in the asset-backed cryptocurrency market. Maduro's desperate move to free Venezuela from U.S. control paved the way for more credible oil-backed cryptocurrencies.

OilCoin, for example, is backed by barrels of oil and complies with current US regulations and standards for digital currencies. Another oil-backed cryptocurrency is the PetroDollar (PDX), which also operates under US law.

In the UK, Bilur Energy is a cryptocurrency backed by energy commodities. Its value is also calculated based on the price of barrels of oil.
These three oil-backed cryptocurrencies lack state support. And it is a disadvantage that some OPEC members are willing to overcome by creating national cryptocurrencies backed by oil and gas reserves.

Some of the major oil exporters are in fact looking into this option, inspired by Maduro's vision. For example, the United Arab Emirates and Saudi Arabia recently agreed on a plan for a joint cryptocurrency.
Russia embraces oil-backed cryptocurrency
Russia is not a member of OPEC, but remains the world's second largest oil exporter. Russia is preparing to launch its own oil-backed cryptocurrency called Neft-Coin. In addition to the obvious financial benefits, such a move could help the country combat US influence in the market.
The oil-backed Russian cryptocurrency would help traders avoid US sanctions, as well as improve relationships with importers who prefer to trade currencies other than USD, such as China and India.
Also, the Neft-Coin could be converted into crypto-rubles and then into rubles. It would give fewer barriers to Russian businesses, which would not have to use dollars for oil trade.
Possible consequences in the world oil market

For years, crude oil has been priced in dollars, making a historical connection between this asset and the US currency. This led to the notion of "petrodollar", which represented any US dollar paid to oil-exporting countries in exchange for oil.
Oil-backed cryptocurrencies could substitute for the petrodollar, reducing the influence of the United States in oil trading. Digital currencies could provide a way around the existing financial sanctions that the United States uses to control the oil market and, by extension, countries that do not accept its global policy.

A decentralized system on the blockchain could also benefit small oil and gas companies struggling to break into the global market. In addition, it could lead to the emergence of secondary markets for the issuance of corporate debt and shares. Smaller countries could benefit more from their oil reserves and gain financial independence from the United States.

However, backing the currency with physical reserves triggers risks due to price fluctuations. Oil and gas reserves are difficult to quantify not only in Venezuela, but in all other countries that export oil.

Another problem that could slow down the adoption of cryptocurrencies in oil trading comes from the cultural gaps between exporting countries. The success of each national oil-backed cryptocurrency will, after all, depend on the credibility of the country.

Last but not least, there is the problem of blockchain security. As countries begin to launch national currencies backed by such assets essential to the global economy, there is an increased risk of attacks against crypto-based platforms that any of these countries put in place. And the consequences of this could be as dire as an oil spill. https://oilprofitapp.net/de/

collect
0
avatar
borhan bb
guide
Zupyak is the world’s largest content marketing community, with over 400 000 members and 3 million articles. Explore and get your content discovered.
Read more