Trading firms aim to maximize the price differential between the price they pay for (untransformed) commodities and the revenue they earn by selling (transformed) commodities. Minimizing the overall cost of acquiring commodities is therefore a priority. They work with producers to secure long-term, costeffective supply. Processing quality is equally important. Trading firms need to be careful where they source these. Some oilfields, especially in conflict areas, do not conform to international health and safety standards. In a world that is moving towards increased transparency, suppliers that source from oilfields with poor social, environmental and production performance run a significant reputational risk. Firms will also provide technical or financial resources to help producers modernize and extend production. These are often linked to long-term purchase arrangements, known as offtake agreements, where the trader agrees in advance to buy a minimum percentage of the oilfields output over several years. Commodity pre-payments are a useful substitute for the loans that emerging economies find increasingly hard to get from international banks. For commodity traders making the pre-payment there is a risk that the commodity to be delivered will fall in value. A trading system with redemption rights to oil traders. Imagine a group of companies that want to trade oil with one another. Normally they'd exchange paperwork and keep their own lists of trades. If they could move to a blockchain-based system for trading their oil, they could potentially reduce paperwork and have more robust record-keeping. There are many consortiums sprouting up that aim to replace paper trading systems with blockchain trading systems. They generally don't aim to tokenize real-world assets directly, but rather to use a blockchain system to enable trading of real-world assets. This is a hybrid of the old paper record approach and the new blockchain approach. The tokens only have value within the 1 Upstream Integration 2 Joint Ventures 3 Pre-Payment & Offtake Agreement 4 Technical Support 10 context of a contractual system involving all of the past and future participants. An example of this form of tokenization is the IBM-Natixis-Trafigura oil trading project. Imagine an oil company owning land that has proven reserves of 100 million barrels of oil equivalent (BOE). The oil barrels even though not yet produced could be tokenized by having ownership held by a company that has a standing offer to the public to redeem tokens for either a single barrel of oil or, if the redeemed tokens are less than a certain threshold, a fraction of the assessed value of the barrel of oil. Physical delivery of the oil barrels could be made at a certain location or shipped to a specified address. In this way, buyers could obtain an easy-to-transfer token and third-party markets could transact in fractions of the oil barrel price. This could potentially be a source of financing for the oil company and a way for the broader public to participate in the oil market.