Tokenization of commodities and precious metals is one of the key applications of RWA. By converting commodities (such as oil and agricultural products) and precious metals (such as gold and silver) into digital tokens, assets that previously required storage, transportation, and complex settlement in traditional markets can now circulate freely on the blockchain.
Core Logic
Physical Backing
Each token corresponds to a specific quantity of a physical commodity or precious metal, typically stored and endorsed by custodians (such as warehouses or vaults).
What users purchase is not a “virtual asset” but a digital representation of a real-world asset share.Value Mapping
The price of tokens is directly pegged to the market price of the underlying asset, for example:1 Gold Token = the value of 1 gram or 1 ounce of physical gold.
1 Oil Token = the value of 1 barrel of crude oil.
Trading Method
Investors can trade tokenized commodities or metals on exchanges just like Bitcoin or Ethereum, without the need for physical delivery.
Advantages
Lower Entry Barriers: Tokenization enables fractional investment (e.g., holding tokens representing 0.1g of gold), making commodities more accessible.
High Liquidity: Tokens can be traded, staked, or used as collateral at any time, increasing asset liquidity.
Seamless Cross-Border Trading: Blockchain enables global trading of gold or oil tokens without being restricted by traditional financial systems.
Transparency and Traceability: All issuance, circulation, and redemption records are publicly verifiable on-chain, reducing fraud risks.
Real-World Examples
PAX Gold (PAXG): Each token is backed by 1 ounce of physical gold stored in London vaults. Holders can trade or redeem gold under certain conditions.
Tether Gold (XAUT): Launched by Tether, with each token representing 1 ounce of London Good Delivery gold.
Oil Tokenization Attempts: For instance, Venezuela’s “Petro” was backed by national oil reserves.
👉 In summary, tokenizing commodities and precious metals not only lowers barriers for ordinary investors but also broadens trading scenarios, integrating traditional commodity markets more closely with the crypto-financial ecosystem.