What are branded products?

Tokenized commodity, explained.

Tokenized products, which include energy resources, agricultural products, precious metals and other tangible things, are digital representations of real-world assets.

These assets go through a process called “tokenization” where their ownership is converted into a blockchain-based cryptographic token. Partially owned and accessible, each token usually represents part or all of an asset.

Tokenization provides efficiency, diversification and liquidity, changing the ownership structure of assets. An example of this is the sorting of a $10,000 gold bar into 10,000 tokens, allowing investors to easily trade smaller units without the burden of physical gold storage or delivery.

How do tokenized items work?

Tokenized goods are created through tokenization, tokens issued on a blockchain network, followed by secure storage, decentralized trading facilitated by smart contracts, and finally redemption by issuers or smart contracts.

Step 1: Giving

Tokenized goods are created by dividing the ownership rights of tangible assets into digital tokens, a process called tokenization. In this process, tokens are issued on the blockchain network, through frequent exchanges or with the help of special tokenization platforms.

Step 2: Storage and Protection

Custodial ownership of the asset is of utmost importance in tokenized products. Custodial services or smart contracts ensure secure storage and management of physical assets, ensuring asset integrity and security for owners.

Step 3: Marketing

Once the commodities are tokenized, they become the primary assets of a decentralized exchange (DEX) or peer-to-peer (P2P) transaction. Blockchain technology promotes global liquidity and access by facilitating efficient and transparent transactions. Smart contracts are essential to ensure seamless transactions while maintaining security and trust.

Step 4: Redemption.

Tokens can still change them for the physical benefit of the root. Issuers or smart contracts facilitate this redemption process that maintains transparency while giving investors the freedom to convert their digital assets into tangible products.

Types of tokens

Precious metals, energy resources, agricultural products, and real estate are examples of commodities that can be tokenized using blockchain technology.

Precious metals

Precious metals such as gold, silver and platinum can be tokenized, allowing investors to have fractional ownership without the hassle of physical storage. Tokenized precious metals make these priceless assets more accessible, encouraging hedging and portfolio diversification.

Energy resources

Oil, natural gas, and renewable energy certificates are examples of energy assets that provide investors with exposure to the volatility of the energy market. Tokenization removes logistical barriers to investment opportunities in the global energy sector.

Agricultural products

Agricultural commodities such as soybeans, corn, wheat, and coffee provide exposure to the agricultural sector, diversifying an investor's portfolio. Agricultural products use the efficiency and accessibility of blockchain technology as diversification tools and to prevent price inflation.

real estate

Fractional ownership and financial transactions in the real estate market are made possible by tokenized real estate, which redefines property ownership. With a small initial outlay, investors can gain access to profitable real estate properties by introducing more diverse investment opportunities.

What are commodity-backed cryptocurrencies?

Digital value, called commodity-backed cryptocurrencies, is intended to provide more stability than conventional cryptocurrencies.

They achieve this by tying their value to commodities such as gold, oil or real estate. The physical commodity is owned by a business or organization, which issues markers indicating a specific quantity of the commodity.

The price of the token varies in the same way as the price of the underlying commodity. With the help of these cryptocurrencies, investors can combine the convenience of digital assets with the traditional commodity market. Examples include Tether Gold (XAUT) and Paxos Gold (PAXG), both backed by physical gold, or OilCoin (OIL), backed by oil stocks.

However, be aware that they often result in some degree of centralization and you should always check the security of the real estate and the issuer that supports the encryption.

Benefits of token items

In blockchain ecosystems, tokenized products offer several benefits by using distributed ledger technology and improving traditional commodity transactions.

Dividing commodities into digital tokens improves liquidity by allowing investors to purchase smaller units, which expands the market of available investment options. In addition, trade and transfers are facilitated due to this fractional ownership, which lowers entry barriers and increases market efficiency.

Tokenization records ownership and transaction history on an immutable blockchain, increasing transparency and reducing the risk of fraud. The confidence of market participants increases as every transaction is transparently audited and securely recorded. The possibility of counterfeit products is also reduced by this transparency because each token is uniquely identified and verified on the blockchain.

Real-time settlement is possible with tokenized commodities, eliminating the need for intermediaries and reducing transaction costs and turnaround times. Smart contracts simplify the settlement process by programming businesses to automatically execute when predetermined conditions are met and lower associated risk.

In addition, tokenization makes commodity markets more inclusive and accessible by enabling investors (who were previously unable to participate in traditional markets due to financial or geographic limitations) to trade 24/7 from anywhere in the world. to the Internet.

Challenges related to variable items

Blockchain technology has made tokenized commodities possible, but several issues need to be addressed to achieve their potential in the commodity market.

Because tokenized products are often real assets, they are governed by the same legal frameworks that apply to securities, commodity trading and financial markets. Ensuring compliance with these standards requires navigating complex legal environments and establishing strong governance frameworks to reduce the risk of fraud, market manipulation and regulatory violations.

There are many hurdles, including liquidity and market depth. Although tokenization can improve liquidity by allowing round-the-clock trading and distributing ownership stakes, there are still barriers to building enough market depth to handle large-scale transactions. Liquidity and price discovery in tokenized commodity markets depend on building trust between institutional investors and traditional market players.

Standardization and interoperability are essential for smooth integration with existing financial infrastructure. Efficient transaction distribution and asset transfer are enabled by functionality that enables token standards, smart contracts, and data formats to be compatible across various blockchain platforms and commodity markets.

Additionally, since blockchain technology is decentralized and immutable, cybersecurity concerns have increased in tokenized product markets. Strong cybersecurity processes such as encryption, two-factor authentication (2FA), and continuous monitoring are essential to protect digital assets, private keys, and confidential transaction data from theft, hacking, and exploitation.