2.1 Tokenization Flow

The tokenization process on Parax begins with the submission of a physical asset for listing, followed by a multi-tiered verification and custody mechanism based on the asset’s declared valuation. Assets exceeding designated valuation thresholds are routed through institutional vaulting partners (e.g., Brinks, Loomis), while mid-tier assets undergo combined AI and human validator scrutiny. Low-value assets are assessed through AI-based image authentication and community validation rounds.

Once verification is complete, a non-fungible token (NFT) representing the physical asset is minted under the ERC-721 standard. This token functions as a digital twin, uniquely mapping to the physical item’s attributes, custody location, and historical metadata. The NFT is then optionally fractionalized into fungible ERC-20 tokens, enabling divisible exposure, liquidity provisioning, and secondary trading.

This flow establishes a canonical chain of custody and authenticity prior to the asset’s interaction with broader financial primitives, such as lending, trading, or collateralization.