The oil industry has spent more than a century pushing into new frontiers. Its engineers pulled crude from beneath deserts, oceans and frozen tundra. Its traders built markets that turned oil into the world’s most actively traded commodity.
Now a small crypto startup is trying to persuade the industry to experiment with a different kind of frontier: putting a barrel of oil on a blockchain.
The company, Energy Substantiation, wants oil suppliers to help support a digital token tied to physical crude. For decades, ownership of real-world barrels has largely been the preserve of producers, traders and large institutions. Energy Substantiation is seeking to open up the market to anyone with a crypto wallet and a small outlay.
“It is remarkable to me that people can own dollars and people can own gold, but they’ve never been able to own oil,” JP Thieriot, who is spearheading the idea as Energy Substantiation’s co-founder, said in an interview.
His startup is borrowing from a familiar playbook. Stablecoins digitized claims on dollars, growing from a fringe experiment into a system that settles trillions of dollars a year. Energy Substantiation is betting something similar can be done with oil — a far messier asset than the currency behind stablecoins.
Its WTIC token is designed to represent one barrel of West Texas Intermediate crude. Unlike oil ETFs or crypto perpetuals, the product is being pitched as a token backed by physical oil rather than futures or other derivative contracts. Investors can also trade it around the clock. Today, benchmark WTI and Brent crude futures trade primarily on CME Group Inc. and Intercontinental Exchange Inc., with markets closed on weekends. That has become a growing source of frustration for investors as developments in the Iran conflict occur before trading resumes, driving recent interest in products that lean on crypto’s always-on infrastructure to facilitate 24/7 oil trading.
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But even if speculators are ready for it, an oil-backed token may be a tough sell to an industry built around physical assets. Thieriot recalls one early investor meeting where the idea was dismissed as an uneasy mashup of Texas business culture and crypto: “Bubba meets Bitcoin — it’s never going to work.”
For now, the vision remains far larger than the market. The on-chain value of WTIC currently stands at about $80,000, though the token is expected to debut on LMAX and receive an additional $1 million in liquidity down the road. Thieriot said the startup is working with about a dozen commodities firms and oil suppliers, including one major trading house, and is in talks with other exchanges and market makers.
How it works
WTIC is designed to track the price of West Texas Intermediate crude. Suppliers feed oil into the system through a reverse Dutch auction, which entails offering barrels at a discount to the day’s market price. The company says the tradeoff lets producers monetize operational inventories, including pipeline line fill and tank bottoms, that would otherwise generate little revenue. Investors can then buy and sell the tokens on blockchain networks, while new ones are created through a daily minting process.
Holders can redeem WTIC at the daily spot closing price, though the company does not expect many investors to take physical delivery of crude. Energy Substantiation says the structure allows the underlying oil to be treated as a spot commodity rather than a derivative, which the company says would subject it to lighter regulation.
“Launching a token is easy. The challenge is building a liquid market,” said Javier Molina, a crypto analyst at eToro. “Success will depend on if they can attract energy participants and not just crypto players.”
There is clearly demand for round-the-clock oil exposure, though much of it is already being met. On Hyperliquid, tokenized WTI and Brent perpetual futures have become the two most actively traded commodity products on the platform, with activity surging in the grip of the Middle East conflict. CME surprised industry participants — including its own regulator — with plans to offer 24-hour, seven-days-a-week trading in new, smaller crude oil futures by late August.
On top of pulling liquidity away from products that already exist, Energy Substantiation will have to ensure that blockchain ownership is legally enforceable in the offline world, said Christian Catalini, founder of the MIT Cryptoeconomics Lab. “For the market to be truly efficient, the bridge between online and offline record should have minimum counterparty risk. Otherwise you’re not trading the actual underlying asset, you’re essentially trading an IOU.”
In the making
Thieriot first pursued the idea more than a decade ago after helping build one of crypto’s earliest digital-dollar businesses. But unlike dollars or gold, crude posed major obstacles: storage is expensive, barrels differ in quality and oil moves constantly through a sprawling physical network.
The breakthrough came when Thieriot teamed up with financier and mathematician Donald Putnam, who developed a framework for converting different crude grades into a common energy unit measured in British thermal units. The model attempts to solve one of the industry’s oldest problems: treating unlike barrels as a single tradable asset.
The system also relies on inventory that typically sits inside the machinery of the oil business itself. Pipeline line fill, tank bottoms and other operational inventories are often carried on company balance sheets but generate little direct revenue. Energy Substantiation’s model attempts to monetize those dormant barrels while using them to back digital tokens.
“It’s the best beta you can get in the market,” said Eric Melvin, chief executive officer of Mobius Risk Group and a member of EnSub’s advisory board, referring to a measure of how closely an asset’s price tracks the broader market.
The idea remained largely theoretical until institutional acceptance of crypto, a friendlier regulatory environment and war in the Middle East pushed oil back to the center of investor attention just as Energy Substantiation prepared to launch.
“We dramatically underestimated retail in oil,” Thieriot said. In moments of geopolitical stress, the commodity “really does become a ticker for global instability,” he added.
Still, WTIC depends on producers maintaining sufficient inventories to back the tokens, something that is no longer a given as war-driven supply shortages undercut reserves. Energy Substantiation says operational inventories are unlikely to fall to levels that would threaten the energy complex, even during periods of market stress.
The company’s pitch has also drawn scrutiny in other ways. Texas Railroad Commissioner Wayne Christian, a sitting member of the agency that regulates the state’s oil and gas production, is a part of Energy Substantiation’s advisory board and personally emailed prospective investors ahead of the token’s launch, the Texas Tribune reported in April. Christian referred questions from Bloomberg to Energy Substantiation, whose spokesperson said he was invited to serve because of his “extensive knowledge of the energy sector” and does not direct the company’s day-to-day operations or business decisions.
The startup plans to introduce tokens backed by Brent crude and Henry Hub natural gas later this year. Whether those products succeed may matter less than what they represent. Stablecoins transformed dollars into internet-native assets. Projects like WTIC are attempting something similar with commodities, testing whether claims on physical resources can move as freely as digital money.
“At the end of the day, blockchain makes it all possible,” Thieriot said.