Tokenized commodities are poised to evolve from a market historically dominated by passive gold holdings into a much broader financial system. Industry executives at Paxos Labs, Theo, and Energy Substantiation believe the sector is shifting toward active inventory financing, energy trading, and borrowing against physical assets.
Putting physical commodities onto blockchain networks aims to achieve far more than simply making them easier to buy and sell for retail traders. According to leaders across the space, the technology can effectively bridge the gap between global investors seeking yield and businesses that desperately require flexible inventory financing. By doing so, tokenization could soon open up multi-trillion-dollar commodity markets that have traditionally been walled off and reserved exclusively for large, well-connected financial institutions and multinational trading houses.
Despite the grand ambitions, the starting point for this emerging sector remains relatively modest, though it has experienced rapid expansion. According to data from CoinGecko, the total market capitalization of tokenized commodities reached $5.55 billion by the end of March 2026. This represents a significant jump from the $1.43 billion recorded at the beginning of 2025. However, a closer look at the composition of that market reveals that gold-backed tokens issued by companies like Paxos and Tether accounted for nearly 90% of that total growth, highlighting the heavy reliance on the precious metal thus far.
For the uninitiated, tokenized commodities are digital, blockchain-based tokens that represent direct ownership of, or legal exposure to, physical raw materials stored in secure vaults or logistics networks, including precious metals, industrial metals, and crude oil.
Gold lending
Paxos Labs is aggressively betting that institutional-grade lending will unlock the next major stage of development for the tokenized asset class.
The firm’s PAXGy token is backed by PAX Gold, with the underlying reserves actively deployed to institutional borrowers in the commodities space. Each token is uniquely structured to become redeemable for progressively more PAXG as underlying lending rates are paid back to the protocol in ounce terms over time. This mechanism allows token holders to potentially increase their physical gold holdings while still retaining exposure to the spot price of the precious metal.
The core value proposition of this model is accessibility, according to Paxos co-founder Bhau Kotecha. In an interview, Kotecha explained that gold lending has historically required massive scale, deep capital reserves, and entrenched banking relationships that are simply unavailable to the vast majority of investors.
Kotecha notes that strong demand is currently originating from a diverse mix of individual retail participants, family offices, and institutional funds alike. Furthermore, enabling users to take out cash or stablecoin loans against their holdings of PAXGy is viewed as a logical next step for the product ecosystem. Nevertheless, industry observers caution that lending returns are never guaranteed, and the risk of borrower defaults could theoretically erode the underlying value of the token.
Silver offers an alternative route into this burgeoning financing market, demonstrating that the mechanics pioneered by gold can be successfully applied elsewhere. Theo’s thSLVR product is designed to pass income generated from institutional silver leases directly to token holders, all while maintaining their direct exposure to the underlying metal’s market price.
Iggy Ioppe, the chief investment officer at Theo, sees future growth stemming primarily from existing commodity owners and active market participants. This includes institutional investors seeking productive collateral, industrial refiners looking for efficient ways to finance their physical inventory, and corporate treasuries searching for liquid assets that can settle transactions rapidly.
Ioppe describes silver as the natural second step after gold, pointing to its robust industrial demand and an already well-established global leasing market. At the same time, he acknowledges that greater price volatility and a tighter overall supply of readily available physical metal can complicate the operational execution.
Looking further ahead, Ioppe is exceptionally bullish on the long-term trajectory of the industry. He forecasts that the broader tokenized commodities market could expand to a valuation worth tens of billions of dollars within the next five years, eventually surpassing $100 billion within a decade. Looking out over a 15-year horizon, he anticipates that tokenization will no longer be viewed as a niche alternative, but will instead become a standard operational part of ordinary commodity settlement and financing workflows.
The oil test
While precious metals have provided a comfortable foundation for tokenization, oil presents a significantly larger logistical challenge and, in the view of firms like Energy Substantiation, a substantially larger market opportunity.
Energy Substantiation, also known as EnSub, recently expanded its WTIC token from the Ethereum network to Solana. According to the company’s official announcements, each token represents exactly one barrel of West Texas Intermediate crude oil, backed directly by verified physical inventory held in storage.
JP Thieriot, the co-founder and CEO of EnSub, revealed that tokens tied to natural gas and Brent crude are already actively under development. Thieriot anticipates robust future demand originating from energy buyers seeking to hedge their operating costs, investors looking for macroeconomic commodity exposure, and independent suppliers in dire need of flexible working capital. He boldly predicts that oil tokens could eventually capture up to a quarter of the total physical oil market within the next decade.
Despite the optimistic outlook, industry executives differ significantly on just how quickly the energy sector can successfully follow in the footsteps of precious metals. Ioppe argued that the sheer complexity of physical storage, pipeline transport, and logistical delivery makes income-generating energy tokens considerably harder to build and maintain securely.
Conversely, Thieriot emphasized that establishing verifiable inventory, workable custody arrangements, and reliable settlement mechanisms are absolute prerequisites for managing commodities that are continuously in physical motion. Ultimately, the broader expansion of the tokenized commodity market will depend heavily on successfully bridging the gap between digital tokens and reliable physical markets, while giving asset owners a compelling, practical reason to adopt them in their daily operations.
