3.1 Tiered Validation Structure

Parax employs a three-tier verification framework based on declared asset valuation, aligning verification rigor with risk exposure and operational cost.

• Tier I: Assets valued above $100,000 undergo institutional-grade verification involving physical custody in certified vaults operated by insured custodians such as Brinks or Loomis. This process includes serial number validation, detailed photographic documentation, expert appraisals, and issuance of custody certificates, all cryptographically anchored on-chain.

• Tier II: Assets valued between $10,000 and $100,000 are authenticated through a combination of AI-driven image recognition and asynchronous human expert validation. High-resolution imagery and provenance data are analyzed by machine learning models designed for forgery detection and feature recognition, followed by review from credentialed domain experts whose attestations are recorded on-chain.

• Tier III: Assets below $10,000 leverage automated AI validation paired with community-based consensus mechanisms. After initial AI screening, token holders or designated validators participate in a staking-weighted voting process to approve or reject the asset’s authenticity, ensuring cost-effective and scalable verification.

This stratified approach enables Parax to balance security, scalability, and user experience by allocating verification resources proportionally to asset value and associated risk.