Oil & Gas News

Oil Royalties Go Crypto with Elmnts Launch

Elmnts, Crypto, Solana

A new Solana-based crypto initiative, Elmnts, is set to revolutionize the blockchain space by introducing the tokenization of oil and gas well rights, along with the accompanying royalties.

Elmnts recently launched its beta software, giving select users early access to this innovative platform. This project aims to test the appetite of crypto enthusiasts for real-world assets, an area where major players like BlackRock have already made significant strides. According to RWA.xyz, BlackRock has tokenized nearly $2 billion in US Treasury debt, highlighting the growing interest in this asset class.

However, not all attempts at tokenizing real-world assets have been successful. For instance, a tokenized Uranium product, launched in November, has struggled to maintain trading volumes, recording less than $5,000 in daily trades since February, as per CoinGecko data. Similarly, the tokenized commodities market, dominated by Tether and Paxos’s gold tokens, has stagnated around $800 million over the past two years, according to RWA.xyz.

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Despite these challenges, Elmnts co-founder Odai Ammar believes that oil and gas royalties offer a unique, lucrative opportunity for the crypto market. Unlike other crypto assets that often exhibit correlated movements, these royalties provide a steady income stream independent of broader market trends.

“You now have an asset class where the yields are much more aligned with the crypto ethos,” Ammar explained to DL News. “You have an asset class that does not require any capital calls, because you’re not incurring any expenses — that’s all on the oil operator. You just sit back and collect. In Texas, they call it ‘mailbox money.’”

Innovative Leadership and Strategic Vision

Elmnts boasts a diverse leadership team, including James Pacheco, a former private equity analyst at Goldman Sachs; Elias Moreno, a software engineer; and Erich Schmidt, an oil industry veteran turned brewery owner in Midland, Texas, a city deeply intertwined with the fossil fuel sector.

The model Elmnts is promoting allows landowners to sell the rights to the oil beneath their land without relinquishing ownership of the land itself. These mineral rights can then be leased to oil companies, who pay the rights owners a share of their profits. As Ammar detailed, “If the oil operator produced a million dollars [of oil] in this month, they take off the top 25% and distribute it to the mineral rights owners.”

While royalties from leasing mineral rights are most lucrative in the initial years of a well’s productivity, they tend to decline as the well ages, typically depleting after around 20 years. Elmnts’ inaugural offering is a tokenized fund owning mineral rights on land operated by Chevron, promising yields exceeding 20%. Investors will be able to purchase security tokens representing shares in this fund.

User-Friendly Platform and Financial Products

Elmnts aims to create a user-friendly investment platform, allowing customers to explore various opportunities with just an email and password — a stark contrast to the complex wallet connections typically required in the crypto space. Upon signup, Elmnts will generate an embedded wallet for users, enabling investments via the USDC stablecoin or ACH, with Coinflow handling the cash-to-USDC conversion for on-chain settlement.

These tokenized oil and gas rights will be considered securities exempt from registration under the SEC’s Rule 506 (c), which permits the sale of unregistered securities to accredited investors, provided the company verifies their accreditation. “We’re leveraging Solana’s token extensions to ensure compliance and program those guardrails from within,” Ammar noted.

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Elmnts will charge a management fee of 0.69% and earn 6.25% equity as the sponsor of its tokenized funds, rather than charging a cash commission fee.

The second product in Elmnts’ pipeline is a lending protocol named Atoms, where the company’s security tokens can be used as collateral for crypto loans. Ammar is confident about its potential, stating, “I have a promissory token that’s earning me 15%, I didn’t have to go through any KYC, any AML … I’m from anywhere in the world, minus North Korea and the sanctioned countries that we will have to geo-block.”

Elmnts plans to make its beta software widely available in the coming weeks, marking a significant step forward in the tokenization of real-world assets on the blockchain.

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