What Is a Crypto Commodity and How Does It Work?

A transferable or fungible asset that represents a commodity, utility, or contract in the real or virtual world through exclusive tokens on a blockchain network is referred to as a crypto-commodity.

Cryptocurrency Commodities: An Overview
Understanding the concept of crypto-commodities requires a quick look at the evolution of cryptocurrency platforms.

The Bitcoin network grew in popularity as a result of its decentralized character and ease of payment processing. Blockchain networks might be used for more than just online payments, according to technology experts. Ethereum, a unique smart contract-based crypto-commodity system, was born out of this.

Despite the fact that Ethereum is a conventional blockchain network with its own virtual currency token (ETH), it has far more features than the bitcoin network. Anyone can develop their own digital tokens on Ethereum, which are easily traded and have their own valuations separate from ETH.

These digitized tokens can be used to represent any type of virtual or real-world asset, including in-game items, reward points, and real-world commodities.

For example, an app developer may pay for platform hosting with one type of token, a user could pay for blockchain-based online media content with another sort of token, and another token could be used for online betting.

A crypto-commodity ecosystem can be defined as any blockchain-based platform that allows the depiction of a tradable and fungible asset through the usage of unique tokens. Smart contracts and decentralized apps regulate the rules for owning and trading with these assets using programmable code.

NEO, Cardano, and QTUM are three more blockchain-based platforms that offer crypto-commodity trade.

Cryptocurrency Commodities Examples
Tokens used to access online services are most commonly referred to as crypto-commodities. For example, the Brave browser includes its own built-in cryptocurrency, which is used to pay for adverts and content creation. Many cryptocurrency exchanges have their own digital tokens, which are used to pay trading fees and other charges of utilizing the platform.

Virtual tokens can also be used to represent real-world commodities. The Digix Gold Token (DGX) is a digitally tradeable version of gold, in which each token represents one gram of the precious metal, backed by gold bars in a secure vault. However, unlike conventional gold, the tokens are weightless, easily divisible, and nearly hard to steal. There have also been efforts to tokenize crude oil, power, and even bananas.

Cryptocurrencies Traded as Commodities

The phrase “crypto-commodity” can also apply to cryptocurrencies that are legally regulated and traded as commodities, as opposed to securities. Both bitcoin and ether, the cryptocurrency of the Ethereum network, are widely considered to be commodities by officials at the Commodity Futures Trading Commission and the Securities and Exchanges Commission.

This distinction is critical since securities sales are heavily regulated by the US government and other national governments. Bitcoin and Ether can be freely exchanged on traditional asset markets as well as cryptocurrency exchanges because they are not considered securities. The Cboe Options Exchange and the Chicago Mercantile Exchange have both developed cryptocurrency-based products that can be traded alongside more traditional commodities like gold and maize.

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Written by Trevanna Gordon

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