(SYNERGIZING CLEAN TECHNOLOGY, HYDROCARBONS, AND DIGITAL ASSETS – WHILE DOING RIGHT BY THE PLANET)
Blockchain Holdings, Inc. has launched a simultaneous offering of Common Shares and XScrip™ Equity Security Token. The XScrip™ Token is considered one of the first multiple asset and revenue backed equity security tokens in the digital currency world. [1] The Company is offering investors the option to purchase Common Shares as an alternative to a security token purchase.
The thinking behind offering Common Share as well as XScrip™ Tokens is that traditional investors would understand, and have a greater sense of confidence, in a Common Share offering. On the other hand, those that are investing in the digital currency world would appreciate a security token with substantial asset and revenue backing. After the initial 12-month lockup period for the XScrip™ Token, the Company plans to list on a digital exchange to provide further token liquidity. Since the common shares and token price are pegged on a 1:1 stable ratio and are convertible, the Common Shares, upon conversion to the XScrip™ Token, can be subsequently sold on a digital exchange. This multiple investment option and exchange listing solves the problem of traditional private equity investments – lack of liquidity.
The tokenization of equity moves the offering closer to a traditional investment and provides greater security and significantly more potential for revenue participation via dividends and upside than what has been predominantly common in the early days of Initial Coin Offerings, the utility token (coin).
In general terms, as there are so many variations, a utility token is only a subscription service or right of future access to a company’s product and services. On the other hand, a security backed equity token, like the XScrip™ Token, has underlying value. There are tangible assets and a right of future revenue associated with security tokens.[2] The underlying value theory should appear more attractive to institutional investors who are sitting on the fence (but slowly climbing over to the crypto side) as they recognize the significant global monetary activity in this industry. On the other hand, those traditional investors that are still skittish about digital currency can participate through purchase of common shares. Asset and equity backed tokens are the leading edge of what sophisticated investors look for in an investment. Given the significant financial underpinning, securities analysis, and technical expertise necessary to launch a security token, there are only a small number offered in the overall crypto industry. There is even fewer equity tokens offered, like XScrip™ Token, with Common Share options.
Of particular note is that the XScrip™ Token and Common Shares are backed by 100% of the production value of over 1.04 billion barrels of hydrocarbon (oil and gas). Even more unique is the hydrocarbon is to be extracted using patented Geothermic Fuel Cell™ technology.
1.04 BILLION BARRELS (is a lot of oil….)
Located in Colorado’s Piceance Basin, this privately-owned area of over two square miles contains an immense amount of energy. At one time, this area was considered as an energy backup source for the country’s defense. Recovery of these hydrocarbons, while being mindful of the land and environmental impact, has been foremost on the Company’s mind.
Assuming a price of approximately $70 barrel with 100% of the revenue assigned to the XScrip™ Token/Common Shares, the overall underlying monetary gross value is significant. However, gross values are misleading. The cost of production (lifting cost) to bring a barrel of oil to market is substantial and is often 50% or more of the trading cost.
That is why the Company decided to package this XScrip™ Token/Common Share offering with its patented technology.
GEOTHERMIC FUEL CELL TECHNOLOGY
In layman’s terms, the technology was evaluated, lab tested and successfully tested in the ground with the assistance of the Colorado School of Mines, Total S.A. and the US Department of Energy’s Pacific Northwest Labs.
Utilizing solid oxide fuel cell (‘SOFC”) technology in a novel patented design and process, the fuel cells are placed into bore holes in hydrocarbon-rich deposits. The high temperature waste heat from the SOFC process is utilized as the ‘thermal drive’ to release the energy content of the hydrocarbons as a vapor which is then recovered at the surface as high-quality oil along with a fraction of non-condensable gas. [3]
Compelling aspects of the technology are:
(1) Minimal environmental impact:
a. The SOFC process results in dramatically reduced greenhousegases.
b. Dramatically reduced water usage.
c. In-situ approach avoids mining, tailings waste and significant surface impact associated with mining methods.
d. Does not require fracking.
(2) High energy efficiencies and strong economics:
a. The ‘net energy ratio’ – energy produced vs. energy consumed is as high as 22 taking into account that the process utilizes produced gas for fueling on-going operations and the waste heat is the source of oil/gas production.
b. Approximately 50% of the energy output is ‘baseload green’ electricity, of which 85% is surplus and available for sale into power markets under existing FERC Power Marketing license.
c. Overall economics results in net lifting costs lower than most conventional and any competing technologies.
In laymen’s terms, whatever the cost of a barrel of oil is on the market, the lifting cost can be reduced with this technology in a “green” manner.
CASCATA CLEAN WATER AND ENERGY TECHNOLOGY
(The Company doubles down)
A related technology is Cascata™which utilizes a variation of the geothermic fuel cell technology to provide above ground purified water and clean energy. This technology was successfully proven, and a portion of the offering will be used to build and market the first commercial unit.
Although this was to be a separate offering, the overall clean energy theme and creating more value for the XScrip™ Token/ Common Share investor was determined to be deciding factors in its inclusion in the offering.
Although the Cascata technology has multiple commercial applications, including remote construction locations, environmental remediation, and emergency disaster, Cascata was originally envisioned for humanitarian purposes. Because of its mobile and scalable design, a 1.5-megawatt unit, about the size of a shipping container, can supply per day over 15,000 gallons of drinkable water and supply electricity for over 1,500 homes, assuming US standards, at an efficiency rate of over 80% versus 65% for natural gas and turbines. Seawater, river water and polluted water can all be treated through the Cascata technology.
When Cascata’s management was designing the unit, there was significant discussion about the positive impact on a developing nation. The Company’s discussion has shifted from does it work, to what are the practical problems with storing the drinkable water and installing electrical lines to homes that have never had such a luxury before. [4]
SUMMARY
The ability to create synergy between multiple assets in a single Equity Security Token/Common Share offering is pioneering in the investment world. With the commercialization of the fuel cell technologies and associated production of hydrocarbons, XScrip™ Tokens and concurrent Common Share offering provides a new and novel opportunity for investment. [5]
About the author: Gary Sumihiro is the founder of Sumihiro Investments, LLC and global strategic advisor and board member of a number of companies, including Blockchain Holdings, Inc.
Contact: SumihiroInvestments@gmail.com
[1] The XScrip™ Token will be an ERC20 compatible token available for accredited and foreign investors and is SEC compliant through a Reg. D 506 (c) and Reg. S registration.
[2] For purposes of this article, the reader should understand that if one assumes there is a clear demarcation between utility and security and equity tokens, they are wrong. There is no bright-line and there is no uniform definition. The regulations governing tokens in general and the definitions are constantly evolving – which make cryptocurrency exciting and have limitless potential.
[3] Information about IEP Technology Inc. can be found at: https://www.iepm.com/
[4] Information about Cascata Energy can be found at: https://www.cascataenergy.com/
[5] Information about the XScrip™ Token and the Company can be found at: https://www.bhi.holdings/