8. Risk and Governance

The architecture of Parax necessitates a comprehensive framework for identifying, mitigating, and governing protocol-level and systemic risks inherent to the tokenization and liquidity of real-world assets. While on-chain assets benefit from transparent and deterministic behavior, the introduction of off-chain components: custodians, appraisers, physical assets: requires deliberate engineering of trust models, slippage mechanisms, and adjudication systems. Parax addresses these challenges through a layered governance model, embedded dispute protocols, dynamic parameterization, and integrated compliance frameworks that maintain resilience and adaptability across jurisdictions and market conditions.