By Zeus
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Core idea: Tokenized commodities split into two buckets: price exposure vs backed and redeemable.
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Tokenized commodities sounds complex, but the idea is simple. You take something real, like gold or silver, and represent it as a token on a blockchain. That token is meant to give you exposure to the commodity in digital form.
Where people get confused is assuming all of these tokens mean the same thing. They don't.
Do you get price exposure only, or can you redeem the real thing?
This clicked for me when a mate in Trinidad asked if I knew any good places to buy silver. I said there are tokenized versions and it is easy.
They replied: They need to be able to hold and redeem the actual silver. Otherwise it cannot be trusted.
That one line sums up the entire debate.
Some tokenized commodities are purely price based. They go up and down with the price of gold, silver, or oil. But they do not promise access to the physical asset.
From a user point of view, this feels like a commodity ETF. You can trade it. You can use it onchain. But you are not buying a specific bar of metal in a vault.
Other tokenized commodities are fully backed and redeemable. Each token represents a fixed amount of real metal stored in a vault. There are rules explaining how the token can be redeemed into physical metal or a cash equivalent.
This is much closer to traditional bullion ownership. Just with blockchain-based ownership records instead of paper certificates.
For large traders, warehouses, and commodity hubs, tokens can improve settlement, tracking ownership, and managing collateral. In these cases, the goal is reducing friction in markets that still run on paperwork and slow settlement.
Can this token be redeemed into the real thing, or am I just betting on the price?
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Key takeaways