Tokenized commodities look beyond gold as lending and oil open new markets

Tokenized commodities could grow from a market heavily dominated by gold into a much broader, more sophisticated financial system dedicated to financing metals, trading energy, and borrowing against physical assets, according to leading executives at Paxos Labs, Theo, and Energy Substantiation.

Putting physical commodities onto blockchain networks should ultimately do far more than simply make them easier to buy and sell, industry leaders say. Instead, it could effectively connect yield-seeking investors with businesses that desperately need flexible inventory financing, thereby opening up lucrative markets that have traditionally been reserved exclusively for large, institutional players.

Despite ambitious long-term horizons, 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, marking a significant surge from the $1.43 billion recorded at the beginning of 2025. However, this growth has been heavily concentrated, with gold-backed tokens issued by firms like Paxos and Tether accounting for nearly 90% of the entire market expansion.

For the uninitiated, tokenized commodities are blockchain-based digital assets that represent verified ownership of, or direct financial exposure to, physical raw materials such as gold, silver, and oil. While these products have largely served as static digital representations of safe-haven assets up to this point, market innovators are now striving to transform them into active financial instruments that generate yield and facilitate global trade.

Gold lending

Paxos Labs is betting heavily that the introduction of native lending mechanisms will unlock the next major stage of evolution for tokenized precious metals.

The firm’s PAXGy token is backed by PAX Gold, with underlying reserves deployed dynamically to vetted institutional borrowers. Each token is purposefully designed to become redeemable for an increasing amount of PAXG as underlying lending rates are paid back in physical ounce terms over time. This structure allows token holders to potentially increase their total gold holdings while simultaneously retaining direct exposure to the metal’s spot price movements on the open market.

The core value proposition behind this model is democratized access, according to co-founder Bhau Kotecha. In an interview with CoinDesk, Kotecha explained that gold lending has historically required a scale and network of exclusive institutional relationships that remain entirely unavailable to ordinary investors and smaller corporate entities.

Kotecha notes that strong demand is currently materializing across a diverse spectrum of participants, including individual retail investors, family offices, and traditional institutional funds. Furthermore, allowing users to borrow directly against their holdings of PAXGy is viewed as a logical next step for the product ecosystem. At the same time, industry observers caution that lending returns are never guaranteed, and any unforeseen borrower defaults could potentially erode the intrinsic value of the token.

Silver offers another highly viable route into this expanding inventory financing market. Theo’s innovative thSLVR product functions by passing regular income derived from institutional silver leases directly to token holders, all while maintaining their underlying exposure to the metal’s market price fluctuations.

Iggy Ioppe, Chief Investment Officer at Theo, sees future market growth coming directly from existing commodity owners and active users. This includes institutions looking for productive collateral, industrial refiners seeking efficient ways to finance raw inventory, and corporate treasuries searching for assets that can settle instantly across borders.

Describing silver as "the natural second" step after gold, Ioppe highlighted the metal’s robust industrial demand and well-established global leasing market. At the same time, he acknowledged that greater market volatility and a tighter supply of immediately available physical metal can introduce certain operational complexities into the equation.

Looking further ahead, Ioppe forecasts that the broader tokenized commodities market could blossom into a multi-billion-dollar industry worth tens of billions within five years, eventually exceeding $100 billion within a decade. Looking out over a 15-year horizon, he anticipates that tokenization will become fully integrated into ordinary, everyday commodity settlement and financing operations globally.

The oil test

While precious metals have paved the way, oil presents a significantly larger logistical challenge—and, in the view of Energy Substantiation, a correspondingly massive market opportunity.

Demonstrating this ambition, the company officially expanded its WTIC token from the Ethereum network to Solana. According to the company’s official announcements, each token represents precisely one barrel of West Texas Intermediate crude oil, backed securely by verified physical inventory held in storage.

JP Thieriot, co-founder and CEO of Energy Substantiation, revealed that natural gas and Brent crude tokens are already actively under development. He anticipates robust future demand originating from energy buyers seeking to hedge their operational costs, investors searching for alternative commodity exposure, and suppliers requiring reliable working capital. Ultimately, Thieriot predicts that oil tokens could capture up to a quarter of the total physical oil market within the next decade.

Despite the optimism, industry executives hold differing views on how quickly the energy sector can successfully replicate the trajectory of precious metals. Ioppe has argued that the complex storage, pipeline transport, and logistical realities of the energy sector make income-generating energy tokens considerably harder to build and maintain. Conversely, Thieriot emphasizes that establishing verifiable inventory, workable custody frameworks, and seamless settlement mechanisms are absolute prerequisites for commodities that are continuously in physical motion.

Ultimately, the future expansion of tokenized commodities will depend heavily on successfully bridging the gap between digital tokens and reliable physical markets, while providing asset owners with a compelling, frictionless reason to utilize blockchain rails for everyday commerce.