Oil Mining Schedule Altcoin

Can blockchain technology contribute to solving global warming?

One existing idea is Solarcoin. This is an altcoin project which sits around $4.2 million market cap right now (rank 62 at this moment). The idea is: People generating solar power can report this to the administrators of Solarcoin. These administrators will send them some solarcoin after verifying the claim. That in turn will give an incentive to generate more solar power.

One solarcoin is valued around $0.12 right now. Since you get one solarcoin for generating 1 MWh of solar power, that works out as an extra income of $0.00012 per kWh, which is rounding error territory.

But I still like the general idea. Try to use blockchain technology to do something about global warming.

I recall that fossil fuel is a limited resource. Like bitcoins. There will only be 21 million bitcoins ever, and there will only be a limited amount of oil available from mining. If you understand that most of that will need to stay in the ground, there will be even less available.

But in contrast to Bitcoin, oil doesn’t have a mining schedule. People dig out whatever number of barrels they want, the only guiding factor being the “invisible hand” of market forces.

This has multiple unfortunate consequences. One of them is the global warming crisis. Another one is that a couple of generations down the line all the oil will be burned and nothing left.

Therefore, it would be a good thing to have a mining schedule like in the Bitcoin network for oil resources. I said so already here in December 2015.

At the time, I discussed the UNFCC setting up a mining schedule, backing it with some blockchain-based oil production rights, and auctioning those off on the market.

But that would require stronger international political will than I see right now. Still most fossil fuel companies don’t understand that they would profit from strong global warming regulation.

So the alternative would be to start somewhere smaller. One candidate would be Saudi Arabia.

They have substantial oil reserves. And they plan to raise funds by selling off shares in Aramco next year.

So here’s an idea, based on the above.

Choose a reliable blockchain infrastructure. I would choose Bitcoin, which has the longest track record of secure operations.

Use some flavor of colored coins to create “oilcoins” at a suitable unit, for example 1000 barrels. Have a “mining schedule” for those oilcoins, which would be pre-mined and put into the market by the Saudi government according to the schedule.

Require anyone buying oil from Saudi Arabia to use the appropriate number of oilcoins, which would be invalidated upon use, just as oil is consumed (burnt) upon use.

Assuming such a system would be set up, how would it work?

For one, whatever value those tokens have is paid to Saudi Arabia at the time the token is released to the market, which may be substantially earlier than the oil is actually sold later on. That would achieve the same thing as selling 5% of Aramco, more or less.

Next, it would send a rather powerful signal to the markets. If you know an exact cap for oil production in Saudi Arabia in 2023 right now, that would raise prices, all other things equal.

If the mining schedule is done like the Bitcoin mining schedule, each period will see less production than the period before. That in turn will mean it makes sense to buy oilcoins now and use them a decade or two later, just as it made sense to buy bitcoins in 2011 and hold them for a decade or two.

Even if that’s not true for some reason, it would for the first time in history become possible to even do such a deal. There would be a market for oil still in the ground.

If you want to keep oil in the ground (I do) that might very well turn out to be a good addition to present market functionality.