8.1 Verification Risk and Dispute Resolution

The veracity of tokenized real-world assets within Parax is contingent on the integrity of the verification pipeline. Although Parax implements tiered validation mechanisms that incorporate AI, expert attestation, and custodial certification, residual risk remains in the form of false positives, misrepresentation, or evolving fraud vectors.

To address these risks, the protocol incorporates a dispute resolution layer governed by the Parax DAO. Disputes may be initiated by any holder of the associated token or by third-party validators with sufficient stake, referencing the asset ID and the alleged discrepancy. Upon dispute initiation, the asset in question is temporarily restricted from transfer or collateralization and is escalated to a multi-tier adjudication process.

Tier I disputes are routed to a curated council of domain experts and appraisers who perform a revalidation of the asset's underlying metadata and custody history. For Tier II and III assets, resolution may include reappraisal, rescoring by AI models with updated training sets, or submission to quorum-based community arbitration. The adjudication outcome is encoded on-chain and may result in metadata amendment, token freeze, or full burn with restitution from a dedicated slashing vault.

To prevent adversarial dispute spam, initiators must lock a predefined bond that is slashed upon malicious or repeated invalid challenges. This ensures that the dispute process remains credible, economically rational, and insulated from griefing vectors while preserving asset quality across the system.