Commodities are among the world's oldest asset classes, but one of the least accessible. 

From gold and oil to agricultural products, investing in commodities has always been tough and a head-scratcher for most investors. Even the bits and pieces of exposure available comes through futures contracts or ETFs or other instruments that require specialized brokerage infrastructure. 

Today, tokenization promises to make all of this easier by representing real-life commodities digitally and allowing 24/7 ownership, trading, and more.

In this guide, we'll explain what tokenized commodities are, how they work, the major categories emerging today, and how investors can access them across chains.

What Are Tokenized Commodities?

Tokenized commodities are blockchain-based assets that represent ownership of or exposure to a real-world commodity. 

Instead of accessing commodities through futures contracts, ETFs, or specialized brokerage accounts, investors can buy and hold digital tokens that are backed by and redeemable for a physical commodity held in custody.

One token represents a defined amount of a real asset, typically one troy ounce of gold, one barrel of oil, or a specific agricultural futures contract. 

The token trades onchain 24/7 and the underlying asset sits with an audited custodian.

Because the token tracks the value of the commodity, there’s a chance to confuse it with commodity derivatives. 

How are tokenized commodities different from commodity derivatives?

Here’s the core difference: A futures contract is a bet on a future price. A tokenized commodity token is a direct claim on the underlying asset. 

When you hold PAXG (Paxos Gold), Paxos holds the corresponding gold at an LBMA-accredited vault on your behalf, and the token entitles you to redeem it.

As of early 2026, the tokenized commodity market has reached $7.3 billion in total market capitalization, up 4.8x from roughly $1.5 billion twelve months prior, making it the fastest-growing segment within the broader why tokenize RWAs movement.

How commodity tokenization works

The mechanics can vary a little between issuers, but the core sequence is majorly the same:

1. An issuer acquires the physical commodity and deposits it with an audited custodian.

2. The custodian verifies receipt, and the issuer mints an equivalent number of tokens on a target blockchain. 

3. One troy ounce of gold acquired equals one PAXG token created. 

The peg is maintained through periodic attestations, where independent auditors verify that tokens in circulation match physical holdings.

There are a few more crucial moving pieces to make these commodity tokenization possible:

1. Oracles

Because the token needs to reflect real-world spot prices, issuers integrate price oracles that pull data from established providers (London Metal Exchange, CME, ICE) and make it available onchain. 

This is what lets DeFi protocols accept commodity tokens as collateral with accurate pricing rather than stale or self-reported values.

2. Custodians

Physical commodities sit with specialized custodians. For gold, that typically means LBMA-accredited vaults and for oil, there are licensed storage facilities. 

The custody arrangement is the critical risk factor in any tokenized commodity product. An attested custodian with regular audits is meaningfully safer than an opaque arrangement. 

Paxos publishes monthly attestation reports from independent firms; not everyone does.

3. Redemption

A token holder wishing to redeem sends tokens back to the issuer. The issuer burns the tokens, verifies delivery, and arranges physical delivery or cash settlement. Most retail token holders never redeem, they trade the token itself, but the redemption mechanism is what anchors the peg to something real.

The above covers the majority of tokenized commodities’ working. But, comparing token frameworks across different commodity issuers reveals significant variation in custody structures, audit frequency, and redemption minimums, all factors worth evaluating before selecting a product.

Types of tokenized commodities

The market breaks into three main categories, with precious metals accounting for the overwhelming majority of current activity. 

Each category produces digital commodity tokens with different custody structures, liquidity profiles, and redemption mechanics.

1. Precious metals

Tokenized gold dominates the commodity tokenization landscape. Two products account for more than 90% of market cap:

Tokenized gold volume reached $178 billion in 2025, ranking second globally among all gold investment instruments by traded volume, behind only GLD (the largest gold ETF). That figure puts tokenized gold in the institutional-grade category, not the niche-experiment one.

Silver tokenization is emerging: HashKey Chain supported Hong Kong's first regulated silver-backed RWA token in early 2026, signaling that the asset class is broadening beyond gold.

2. Energy: tokenized oil

Tokenizing oil is structurally more complex than gold because oil is a perishable commodity stored in physical infrastructure with significant delivery logistics. 

Current products approach this through fund structures rather than direct commodity backing.

The most prominent live product is Ondo USO, a tokenized fund tracking the United States Oil Fund (USO). 

Rather than backing each token with physical barrels, the fund holds USO ETF shares and issues tokens representing proportional ownership. This makes it accessible to retail investors without the complications of physical oil delivery, but it means the token is a fund-share token, not a direct commodity claim in the way PAXG is.

Tokenizing oil directly at scale remains a challenge the industry is working through. 

The barriers include commodity storage verification, location-specific delivery obligations, and the fact that crude oil specifications vary by grade and origin. 

Most current energy tokenization products use fund wrappers or futures-backed structures as a pragmatic intermediate step.

3. Agriculture

Agricultural commodity tokenization is the least mature category. 

Projects have experimented with tokenized coffee, wheat, and soybean futures, primarily targeting farmers in emerging markets who want access to capital markets without commodity brokerage accounts. The challenge is that agricultural commodities are perishable, geographically dispersed, and subject to complex delivery and grading standards. 

A few pilots have run in Latin America and Africa, using blockchain to issue receipts against warehouse-certified grain stocks. 

None have achieved the scale of precious metals, but the model works at the warehouse level.

Tokenized commodities vs commodity-backed crypto

The distinction trips people up because both involve commodities on a blockchain, but the economic logic is completely different.

The simplest way to think about it is that tokenized commodities are designed to represent the asset itself. Commodity-backed crypto uses commodities as supporting infrastructure for another token.

How to access tokenized commodities across chains

Most tokenized commodity assets are issued on a single blockchain, usually Ethereum. That works fine if you already hold assets on Ethereum. The problem is that most users don't.

For example, if an investor holds USDC on Arbitrum and wants to buy PAXG on Ethereum, the process often looks like this:

1. Bridge USDC from Arbitrum to Ethereum

2. Acquire ETH for gas

3. Swap USDC for PAXG

4. Manage multiple transactions and approvals

Each step introduces friction, gas costs, and execution risk. 

For institutional flows, that complexity is a real barrier. For DeFi users who want tokenized gold as collateral, the friction is even higher.

Cross-chain infrastructure solves this in the best way possible. How?

1. Automated routing and execution

LI.FI routes across 60+ blockchains, connecting 27+ bridges and 31+ DEXs, so moving from any source chain to a destination chain where a commodity token lives is a single routing call.

2. Compliance-aware transaction

Commodity tokens increasingly come with KYC/AML obligations at the issuer level. Institutional buyers often need routing that respects those constraints, not just raw cross-chain connectivity.

LI.FI for RWAs adds compliance-aware routing that configures paths around KYC/AML requirements, so cross-chain distribution doesn't come at the cost of regulatory controls.

3. Large-scale settlement

For the settlement layer, LI.FI's Stablecoin API handles stablecoin-to-commodity-token conversion with 0.1% slippage tolerance, useful when an institution is deploying treasury stablecoins into commodity token positions at scale.

LI.FI also supports the Chainlink CCT standard, which means any commodity token issued using Chainlink's cross-chain token framework is automatically available across LI.FI's routing network on day one.

For institutional commodity platforms and RWA issuers building cross-chain commodity token distribution, contact our team to scope integration requirements.

Frequently asked questions

What commodities can be tokenized?

Any commodity with established custodial infrastructure and price feed data can be tokenized.

• Precious metals (gold, silver, platinum) are the most mature, with gold accounting for more than $6 billion in tokenized market cap as of Q1 2026. 

• Energy commodities (oil, natural gas) are currently tokenized primarily through fund wrappers rather than direct commodity backing. 

• Agricultural commodities (coffee, wheat, soybeans) exist in early-stage projects, mostly in emerging markets.

How do you buy tokenized commodities?

The most direct route for Ethereum-based tokens is purchasing PAXG or XAUT through a DEX like Uniswap or a centralized exchange that lists them.

For investors on other chains, cross-chain infrastructure routes the purchase in one step, eliminating the need to manually bridge to Ethereum first. 

Institutional buyers typically access tokenized commodities directly through the issuer (Paxos for PAXG, Tether for XAUT), subject to KYC requirements. 

You can also check tokenized T-bills and other tokenized RWA products for comparison with commodity tokens.

Are tokenized commodities regulated?

Regulation varies by jurisdiction and product structure. 

Paxos (PAXG issuer) is regulated by the New York Department of Financial Services. Tether (XAUT) operates under a different regulatory model. Products structured as fund shares (like Ondo USO) may fall under securities regulations in the investor's jurisdiction. 

The regulatory landscape is evolving rapidly, with the EU's MiCA framework and various SEC guidance shaping how commodity tokens are classified.

How does tokenized gold compare to physical gold?

Physical gold requires storage, insurance, and significant operational friction when buying or selling. Tokenized gold (PAXG, XAUT) offers 24/7 trading, fractional ownership (you can hold $5 worth of gold, not just full ounces), instant settlement, and composability with DeFi protocols.

The tradeoff is counterparty risk: you rely on the issuer and custodian to maintain 1:1 backing.

Physical gold has no counterparty, which is why some investors prefer it for large holdings despite the operational friction.