Tokenized commodities are poised to evolve from a market largely dominated by gold into a much broader financial system. According to executives at prominent blockchain firms Paxos Labs, Theo, and Energy Substantiation, the sector is expanding into complex areas such as metal leasing, energy trading, and borrowing against physical inventory.
Placing commodities on blockchain networks aims to achieve far more than simply making physical assets easier to purchase. Industry leaders emphasize that this technological shift can effectively bridge the gap between investors seeking stable exposure and yield, and businesses that urgently require inventory financing. By doing so, tokenization opens up lucrative markets that have historically been restricted to large financial institutions and major global trading houses.
Despite the ambitious outlook, the starting point for this emerging sector remains modest. According to data from CoinGecko, the total market capitalization of tokenized commodities reached $5.55 billion at the end of March 2026. This represents a significant increase from the $1.43 billion recorded at the beginning of 2025. However, gold-backed tokens issued by companies like Paxos and Tether accounted for nearly 90% of that total growth, underscoring the heavy reliance the market has traditionally placed on precious metals.
Tokenized commodities are fundamentally blockchain-based digital tokens that represent either direct ownership of or financial exposure to physical assets, ranging from gold and silver to crude oil. As the technology matures, innovators are finding new ways to make these static assets productive, transforming them from passive digital certificates into active financial instruments.
Gold lending
Paxos Labs is actively betting that institutional lending will unlock the next major stage of growth for the tokenized asset sector.
The company’s PAXGy token is backed by PAX Gold, with its underlying reserves strategically deployed to institutional borrowers. Under this structure, each token is designed to become redeemable for progressively more PAXG as the underlying lending rates are systematically paid back in ounce terms. This mechanism allows token holders to potentially increase their total gold holdings over time while continuously retaining exposure to the market price of the precious metal.
Bhau Kotecha, co-founder of Paxos Labs, emphasized that the core value proposition of this model is accessibility. In an interview with CoinDesk, Kotecha explained that gold lending has historically required a scale of capital and established industry relationships that are simply unavailable to many everyday investors, family offices, and smaller institutions.
Kotecha noted that there is robust and growing demand from individuals, family offices, and institutional players alike. Furthermore, he highlighted that allowing users to borrow against PAXGy could serve as the next logical step for the ecosystem. At the same time, industry observers note that lending returns are not entirely guaranteed, and potential borrower defaults could theoretically erode the underlying value of the token.
Silver offers another promising route into this sophisticated financing market. Theo’s thSLVR product is designed to pass income generated from institutional silver leases directly to token holders while simultaneously maintaining their exposure to the fluctuations of the metal’s price.
Iggy Ioppe, Chief Investment Officer at Theo, sees future growth coming primarily from existing commodity owners and active market users. These include institutions seeking productive collateral, industrial refiners looking for efficient ways to finance inventory, and corporate treasuries searching for assets that can settle transactions with unprecedented speed.
Ioppe described silver as the natural second step after gold, pointing to its strong industrial demand and an already established global leasing market. Nevertheless, he acknowledged that greater market volatility and a tighter supply of readily available physical metal can complicate the execution of such products.
Looking ahead, Ioppe forecasts that the tokenized commodities market could expand to a worth of tens of billions of dollars within the next five years. Over a ten-year horizon, he projects the market could surpass $100 billion. Within 15 years, Ioppe expects tokenization to integrate seamlessly into ordinary, day-to-day commodity settlement and financing operations.
The oil test
While precious metals have paved the way, oil presents a significantly larger logistical challenge. Yet, in the view of Energy Substantiation, it also represents a substantial commercial opportunity.
The company recently expanded its WTIC token from the Ethereum network to Solana. According to the company’s official announcement, each token represents one barrel of West Texas Intermediate crude oil that is fully backed by verified physical inventory stored securely in the real world.
JP Thieriot, co-founder and CEO of Energy Substantiation, revealed that tokens for natural gas and Brent crude are currently under active development. He anticipates strong future demand driven by energy buyers seeking to hedge their operational costs, investors looking for commodity exposure, and suppliers who require immediate working capital. Thieriot has gone so far as to predict that oil tokens could eventually account for a quarter of the entire physical oil market within the span of a decade.
Despite the optimism, industry executives hold differing views on how quickly the energy sector can successfully follow metals into tokenization. Ioppe argued that the complex storage and transport requirements of oil make income-generating energy tokens considerably harder to build and maintain than gold or silver products. Conversely, Thieriot emphasized that establishing verifiable inventory, workable custody arrangements, and reliable settlement procedures are absolute prerequisites for commodities that are continuously in physical motion.
Ultimately, the broader expansion of tokenized commodities will depend heavily on establishing secure connections between digital tokens and reliable physical markets, while providing owners with a compelling, practical reason to utilize them in their daily operations.
