Tokenized commodities are poised to transition from a market dominated almost entirely by gold into a much broader financial system capable of supporting metals financing, energy trading, and borrowing against diverse physical assets. According to leading executives across the decentralized finance and traditional commodity sectors—including representatives from Paxos Labs, Theo, and Energy Substantiation—the next phase of blockchain-based real-world asset (RWA) tokenization will focus heavily on utility rather than mere speculation.
Rather than simply making physical commodities easier to purchase and hold digitally, putting these assets on-chain could fundamentally transform how capital flows through global supply chains. Industry leaders argue that tokenization can directly connect yield-seeking investors with businesses and corporations desperately in need of inventory financing, thereby democratizing access to institutional-grade markets that have historically remained closed to smaller participants.
Despite ambitious long-term projections, the sector is starting from a relatively modest foundation. According to data compiled by CoinGecko, the total market capitalization of tokenized commodities climbed to $5.55 billion by the end of March 2026, marking a significant increase from the $1.43 billion recorded at the beginning of 2025. However, this growth has been heavily concentrated, with gold-backed tokens issued by industry heavyweights Paxos and Tether accounting for nearly 90% of the entire market valuation.
Tokenized commodities are digital, blockchain-based tokens that represent direct ownership of, or proportional financial exposure to, underlying physical assets such as precious metals and crude oil. While these instruments have successfully proven that investors are willing to hold digital representations of safe-haven assets, market participants emphasize that unlocking deeper financial utility is the critical next step for sustainable industry expansion.
Gold Lending
Paxos Labs is betting heavily that the introduction of lending mechanisms will unlock the next major growth wave for precious metal tokens.
The firm’s PAXGy token is backed by PAX Gold, with its underlying reserves dynamically deployed to vetted institutional borrowers. Each token is strategically designed to become redeemable for an increasing amount of PAXG over time as underlying lending rates are systematically paid back in ounce terms. This structure allows token holders to potentially compound their physical gold holdings while retaining uninterrupted exposure to the metal’s spot price fluctuations.
“The big proposition is access,” said Bhau Kotecha, co-founder, during an interview with CoinDesk. He noted that traditional gold lending and yield-generation strategies have historically required a scale of capital and institutional relationships that are completely unavailable to retail investors and smaller market participants.
Kotecha highlighted that demand is already manifesting across a diverse spectrum of market participants, ranging from individual retail investors and family offices to large institutional funds. Furthermore, he noted that allowing individuals to borrow against their holdings of PAXGy represents a logical and powerful next step for the product ecosystem. Nevertheless, industry observers caution that lending returns are never guaranteed, and unforeseen borrower defaults could theoretically erode the underlying value of the token.
Silver offers an alternative parallel route into this burgeoning financing market, bringing similar yield-generating dynamics to a different precious metal. Theo’s flagship thSLVR product is engineered to pass income generated from institutional silver leases directly to token holders, all while maintaining their price exposure to the underlying metal.
Iggy Ioppe, Chief Investment Officer at Theo, believes that the primary drivers of future growth will stem from existing commodity owners and end-users. These include institutions searching for productive, yield-generating collateral, industrial refiners looking to efficiently finance their inventories, and corporate treasuries demanding assets that can settle transactions with unprecedented speed.
Ioppe described silver as the “natural second” choice after gold, pointing to robust structural industrial demand and an already well-established global leasing market. At the same time, he acknowledged that greater market volatility and a fundamentally tighter supply of physically available metal present unique complications that do not impact gold to the same degree.
Looking further down the road, Ioppe remains exceptionally bullish on the asset class as a whole. He forecasts that the broader tokenized commodities market will expand into a multi-tens-of-billions-dollar industry within the next five years, eventually surpassing $100 billion within a decade. Looking out 15 years, he anticipates that tokenization will no longer be viewed as an alternative technology, but will instead become deeply embedded as a standard mechanism for ordinary commodity settlement and financing.
The Oil Test
While precious metals have paved the way for tokenized real-world assets, the energy sector presents a significantly more complex logistical challenge—and, in the view of firms like Energy Substantiation, a vastly larger commercial opportunity.
Demonstrating this push into energy markets, Energy Substantiation expanded its WTIC token from the Ethereum network to Solana on October 2. According to the company’s official announcements, each token represents precisely one barrel of West Texas Intermediate (WTI) crude oil, backed directly by verified physical inventory held in storage.
JP Thieriot, co-founder and CEO of the company, revealed that development efforts are already underway for additional products, including tokens tied to natural gas and Brent crude. Thieriot anticipates robust future demand originating from multiple distinct angles: energy buyers utilizing the tokens to hedge input costs, speculative investors seeking macro exposure to energy prices, and upstream suppliers requiring agile working capital solutions. He boldly predicts that oil tokens could eventually capture up to a quarter of the broader oil market within the next ten years.
Despite these optimistic projections, industry executives remain somewhat divided on the timeline required for energy tokens to replicate the adoption seen in metals. Ioppe argued that the complex realities of physical storage, pipeline transport, and logistical handling make income-generating energy tokens inherently more difficult to construct and maintain. In contrast, Thieriot emphasized that establishing airtight verification of physical inventory, workable custody arrangements, and seamless settlement mechanisms are the non-negotiable prerequisites for commodities that are continuously in motion.
Ultimately, the future expansion of tokenized commodities will depend heavily on the industry’s ability to seamlessly bridge digital tokens with reliable, transparent physical markets, while providing asset owners with a compelling, frictionless utility that justifies moving away from legacy financial infrastructure.
