7.4 Integration with Lending Protocols

To facilitate immediate capital access without requiring Parax-native liquidity provisioning, the protocol supports direct integration with external lending ecosystems such as Aave, Compound, and newer RWA-focused platforms. This is achieved through standardized collateral wrappers and oracle feeds that export Parax asset metadata, valuation attestations, and custody proofs to partner protocols.

Collateral wrappers conform to the ERC-4626 vault standard, abstracting the complexities of verification tiering, fractionalization, and custody logic from the external protocol’s perspective. These wrappers expose essential functions for collateral registration, appraisal fetching, and redemption events, enabling lending protocols to interface with Parax assets without bespoke implementation.

Oracle feeds are maintained by a decentralized attestation network, which aggregates verification, custody, and pricing data from the Parax registry. These feeds are streamed into price oracles such as Chainlink, enabling consistent valuation inputs across integrated DeFi platforms. For assets with low on-chain liquidity, appraisals are updated via signed attestations from approved valuators or custody partners, with fallback to TWAP (time-weighted average price) where applicable.

To incentivize adoption and maintain solvency, Parax implements overcollateralization requirements and insurance vaults seeded by protocol fees. These vaults act as first-loss buffers in adverse events and are governed by the Parax DAO, enabling dynamic risk parameter tuning in response to market evolution.

Through these integrations, Parax extends the reach of tokenized physical assets into the broader DeFi capital stack, enabling permissionless borrowing, lending, and liquidity sourcing against historically dormant collateral.