Module 3: Collateral Yield Optimization

Operator & jurisdiction: BASIS is operated by BASIS DIGITAL INFRASTRUCTURE LTD, a Seychelles-incorporated entity (LEI: 254900IX2F2KCWNSSS64).

Currency convention: Portfolio values may be displayed in USDT as an internal accounting unit for USD-equivalent reference. USDT is not a depositable or withdrawable asset on BASIS. PAXG deposits and withdrawals are handled in native token form. See Risk Disclosure.

The PAXG Collateral Yield module converts tokenized gold from a passive holding into an active source of return by using PAXG as collateral in decentralized lending venues. This allows BASIS to preserve gold exposure while allocating borrowed capital into controlled structural alpha capture strategies.

The objective is not directional trading on gold. The objective is capital efficiency under strict risk constraints, deterministic execution rules, and continuous collateral monitoring.

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1. Core Mechanism

In traditional markets, physical gold does not generate native cash flow. Tokenized gold changes this because PAXG can be posted as onchain collateral.

The strategy follows a constrained sequence:

1. Supply PAXG as collateral to an approved lending venue.

2. Borrow against that collateral at conservative loan-to-value levels.

3. Route borrowed capital into BASIS execution systems designed for structural alpha capture.

4. Retain the spread between realized strategy return and borrowing cost, subject to risk limits and market conditions.

PAXG is fully supported on BASIS.

• Deposit asset: PAXG

• Receipt asset: stPAXG

• Swap path: PAXG ↔ stPAXG only, at 1:1

• Deposit method: Web3 wallet connection required

Example workflow

Step	Action	Illustrative Amount
1	Post collateral	10 PAXG
2	Borrow against collateral	USD-equivalent value at conservative LTV
3	Deploy borrowed capital	BASIS market-neutral execution stack
4	Realize spread	Strategy return minus financing cost

The user retains exposure to the underlying gold price through PAXG while the collateral is used in a controlled capital efficiency framework.

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2. Conservative LTV Policy

Loan-to-value management is the primary control variable in this module. Higher LTV increases deployable capital, but it also reduces liquidation distance.

LTV Level	Risk Profile	BASIS Policy
30–40%	Conservative	Preferred safety-first range
40–50%	Moderate	Maximum operating range under monitored conditions
50–60%	Aggressive	Not used in standard operation
>60%	Prohibited	Never used

BASIS maintains conservative collateral discipline and continuously evaluates:

• collateral ratio

• liquidation distance

• oracle integrity

• borrowing cost drift

• venue-specific stress conditions

If thresholds are approached, the system can reduce exposure by partial repayment, capital rebalancing, or full strategy exit.

Collateralized strategies are governed by state machine risk controls. If risk conditions move outside acceptable bounds, capital preservation takes priority over return generation.

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3. Venue Selection Standards

Only venues that meet BASIS operational and risk requirements are eligible.

Criterion	Requirement
PAXG support	Native collateral support for PAXG
Security review	Strong independent audit history with no unresolved critical findings
Production history	Established mainnet operating record
Liquidity depth	Sufficient onchain liquidity and borrow capacity
Oracle design	Robust multi-source pricing architecture
Liquidation model	Transparent and predictable liquidation mechanics
Operational resilience	Reliable uptime and incident response history

Venue approval is based on both protocol-level review and execution-layer compatibility with BASIS routing systems.

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4. Risk Controls

Risk	Description	Mitigation
Gold price decline	A drop in gold price can compress collateral coverage	Conservative LTV, continuous monitoring, automated de-risking
Borrow rate expansion	Financing cost can rise and compress strategy spread	Dynamic threshold checks and rapid exit logic
Smart contract failure	Vulnerability or protocol malfunction in a lending venue	Strict venue filtering and exposure caps
Oracle failure	Distorted pricing can affect collateral health calculations	Oracle quality requirements and venue selection standards
Liquidity stress	Reduced market depth can impair adjustments	Capacity limits and staged execution logic

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5. BASIS Infrastructure Context

This module is supported by the same operating philosophy used across BASIS systems:

• deterministic execution

• math-constrained capital allocation

• state machine risk controls

• proprietary routing infrastructure

• structural alpha capture over discretionary prediction

BHLE infrastructure characteristics include:

• sub-50μs latency

• 100K+ OPS throughput

• proprietary routing architecture built for execution precision

These controls are designed to reduce slippage, improve response time under stress, and preserve predictable system behavior.

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6. User Asset Flow on BASIS

For PAXG users, the asset path is standardized.

Deposit

1. Open Dashboard → Assets

2. Select PAXG

3. Connect a supported Web3 wallet

4. Confirm the PAXG deposit transaction

5. Receive balance credit in the Funding Wallet

Swap

Stake

Unstake

Wallet model on BASIS:

• Funding Wallet: native tokens only for deposit and withdrawal

• Staking Wallet: stTokens only for staking and reward accrual

For PAXG:

• Deposit/withdraw asset: PAXG

• Stake/earn asset: stPAXG

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7. Fees and Operational Parameters

Item	Value
Deposit fee	0%
Withdrawal fee	0.05%
Swap fee	0.01%
Deposit asset	PAXG
Withdraw asset	PAXG
Swap ratio	PAXG ↔ stPAXG at 1:1
Withdrawal time	1–6 minutes

Booster schedule

Lock Period	Booster
14D	+10%
30D	+20%
90D	+50%
180D	+100% (2×)

Fixed pools can only be unstaked after the lock-up period ends. Early exit is not available.

Unstaking is processed as a full-position action only. Partial unstake is not supported.

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8. Status

The PAXG Collateral Yield module is live and active within the BASIS asset framework, subject to venue eligibility, risk limits, and collateral conditions.

Availability may vary based on:

• venue capacity

• collateral health thresholds

• borrowing cost environment

• execution suitability under current market structure

For operational questions, contact [email protected]. For research or methodology inquiries, contact [email protected].