7.1 Peer-to-Peer OTC

The Parax protocol includes native support for decentralized, over-the-counter (OTC) transactions, enabling asset owners and buyers to negotiate and settle trades without reliance on centralized intermediaries. This is facilitated through non-custodial smart contracts that escrow the ERC-721 token or its fractionalized ERC-20 derivatives pending mutually agreed settlement conditions.

Parties may initiate OTC orders by submitting cryptographically signed off-chain orders referencing asset IDs, offered terms, and expiration timestamps. These orders can then be executed trustlessly on-chain through an atomic swap mechanism that validates the signatures, verifies asset availability, and enforces settlement criteria. All OTC transactions are routed through a transaction clearing contract that logs the exchange and updates asset state in the Parax registry.

OTC functionality is particularly relevant for high-value Tier I assets, where participants may prefer bespoke negotiation over open-market discovery. Additionally, OTC transfers support regulatory flexibility, enabling counterparties to append jurisdiction-specific legal terms or compliance attestations to the transaction metadata. By integrating programmable OTC channels into the protocol layer, Parax ensures that capital flow can adapt to both retail and institutional use cases with minimal friction.