Commodity Tokens
Web3 / cryptocurrency types
Commodity tokens are digital representations of physical assets like precious metals, energy resources, or agricultural products, issued on blockchain networks to tokenize tangible goods. These tokens typically maintain a fixed peg to underlying commodity prices, with each token backed by a specified quantity of the physical commodity held in secure vaults. Commodity tokenization enables fractional ownership, improved liquidity, and transparent trading of traditionally illiquid assets on blockchain networks. The underlying commodities may be stored by custodians and regularly audited to maintain trust and ensure redemption rights, though custody arrangements vary significantly between different commodity token implementations. Example: Paxos Gold (PAXG) represents physical gold stored in Brink's vaults, with each token redeemable for one fine troy ounce of London Good Delivery gold. Users can trade PAXG on blockchain networks while maintaining direct claims on allocated physical gold. Why it matters for cryptocurrency: Commodity tokens bridge traditional commodities and blockchain, enabling 24/7 trading and fractional ownership while potentially reducing storage and insurance costs. They provide cryptocurrency investors with inflation hedges and tangible asset exposure, while bringing commodity markets into decentralized finance infrastructure.
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