Summary
LlamaRisk supports onboarding PAXGy to the Aave V4 Global Dollar Hub as collateral in two placements: on the existing Gold Spoke against USDG, at a 70% collateral factor and a 7.50% maximum liquidation bonus and on a new Gold Correlated Spoke against PAXG, at 85% and 4%, each with a 480 PAXGy add cap. PAXGy is a non-upgradeable vault share over PAXG whose exchange rate an operator writes about once a day from a gold-lending book targeting about 80% of assets.
The on-chain setup is sound. Every contract sits behind a 24-hour timelock, and the token carries a dedicated audit and a bug bounty. The main risk lies off-chain, in the lending book and in redemption. Paxos Labs targets about 80% of the vault for lending to four borrowers, the largest taking nearly two thirds of capacity, and values those loans from statements it produces itself, with no independent check. It states that pledged loans are fully collateralised and that no loan runs longer than 30 days, but the insurance does not cover a default, so any uncovered loss falls on all holders through a lower exchange rate. Redemption is open only to whitelisted institutions, so most retail holders would exit through the market. A loss first pauses the accountant, which holds the exchange rate at its last value, and reaches the price only through a timelocked markdown at least 24 hours later.
LlamaRisk recommends the listing at these parameters, alongside making PAXG borrowable under a rate model that matches PAXGy’s 3% yield at 60% utilisation, so leverage looping is profitable below that point and unwinds above it. This makes rehypothecation at the current size of the PAXG reserve limited. The support is conditional on the liquidity Paxos Labs has committed on Ethereum being live at the time of listing, $2 million in a Uniswap pool against PAXG and $1 million in the PAXG/USDC pool.
The full assessment can be found in its corresponding thread.
Aave V4 Specific Parameters
We recommend adding PAXGy to the Aave V4 Global Dollar Hub in two placements, with no credit line extended from another hub. On the existing Gold Spoke, PAXGy is a collateral-only reserve borrowing USDG. It is a gold-denominated asset of the type that spoke already carries, so it takes the spoke’s liquidation configuration unchanged and its own collateral factor, bonus, and caps, and its USDG borrowing draws on the spoke’s existing USDG Draw Cap. On a new Gold Correlated Spoke, PAXGy is collateral and PAXG is borrowable under a rate model of its own, while PAXG keeps its Gold Spoke configuration unchanged.
Dynamic Liquidation Bonus Configuration
Gold Correlated Spoke liquidation parameters:
| Parameter | Value |
|---|---|
| targetHealthFactor | 1.05 |
| healthFactorForMaxBonus | 0.99 |
| liquidationBonusFactor | 1.00 |
The currently existing Gold Spoke keeps its configuration.
Spoke Parameters
Gold Spoke
| Hub | Spoke | Reserve | Collateral Factor | Max Liquidation Bonus | Borrowable | Collateral Risk | Liquidation Fee | riskPremiumThreshold | receiveShares |
|---|---|---|---|---|---|---|---|---|---|
| Global Dollar Hub | Gold Spoke | PAXGy | 70.00% | 7.50% | FALSE | 0 | 10.00% | 0 | TRUE |
Gold Correlated Spoke
| Hub | Spoke | Reserve | Collateral Factor | Max Liquidation Bonus | Borrowable | Collateral Risk | Liquidation Fee | riskPremiumThreshold | receiveShares |
|---|---|---|---|---|---|---|---|---|---|
| Global Dollar Hub | Gold Correlated Spoke | PAXGy | 85.00% | 4.00% | FALSE | 0 | 10.00% | 0 | TRUE |
| Global Dollar Hub | Gold Correlated Spoke | PAXG | 0.00% | - | TRUE | - | - | 0 | TRUE |
Add and Draw Caps
Gold Spoke
| Hub | Spoke | Reserve | Add Cap | Draw Cap |
|---|---|---|---|---|
| Global Dollar Hub | Gold Spoke | PAXGy | 480 | 0 |
Gold Correlated Spoke
| Hub | Spoke | Reserve | Add Cap | Draw Cap |
|---|---|---|---|---|
| Global Dollar Hub | Gold Correlated Spoke | PAXGy | 480 | 0 |
| Global Dollar Hub | Gold Correlated Spoke | PAXG | 0 | 400 |
PAXG Tokenization Spoke
| Hub | Spoke | Reserve | Add Cap | Draw Cap |
|---|---|---|---|---|
| Global Dollar Hub | PAXG Tokenization Spoke | PAXG | 400 | 0 |
The Global Dollar Hub already has a PAXG Tokenization Spoke, deployed with both caps at 0. Tokenization Spokes serve as the standard entry point for integrators, vaults, aggregators, and other strategies routing liquidity into Aave V4 markets. They are supply-only, so the Draw Cap remains at 0.
Caps are stated in units of the reserve asset. Each 480 PAXGy Add Cap is about $2.0 million at the October 1, 2026 exchange rate and gold price, and the 400 PAXG Draw Cap and the 400 PAXG Tokenization Spoke Add Cap are each about $1.7 million.
Interest Rate Model
| Hub | Spoke | Reserve | Base | Slope 1 | Slope 2 | Uoptimal | Liquidity Fee |
|---|---|---|---|---|---|---|---|
| Global Dollar Hub | Gold Correlated Spoke | PAXG | 0.00% | 3.00% | 20.00% | 60.00% | 50.00% |
The rate at 60% utilisation matches PAXGy’s 3% target yield, so a loop earns more than PAXGy alone below that point and unwinds above it. The model applies to all PAXG on the hub, including the PAXG supplied as collateral on the Gold Spoke.
Oracle
We recommend pricing PAXGy through a CAPO adapter that multiplies the exchange rate published by the vault’s accountant, read through its getRate() getter, by the Chainlink XAU/USD aggregator, denominated in USD at 8 decimals, with the ratio capped at 6.00% yearly growth over a 7-day snapshot delay.
CAPO Configuration
| Parameter | Value |
|---|---|
maxYearlyRatioGrowthPercent |
6.00% |
MINIMUM_SNAPSHOT_DELAY |
7 days |
snapshotRatio |
1001317899581791979 |
snapshotTimestamp |
1791136619 |
A Chainlink PAXG/USD feed exists and prices the token the vault actually redeems into, but it publishes about 4.7 rounds a day at a 0.5% deviation threshold, against 11.1 rounds a day at 0.3% on the gold feed, making the gold reference the faster and tighter instrument on both axes that govern liquidation timing. Aave already prices gold-backed collateral against it, PAXG on the Global Dollar Hub included, so for a position that borrows PAXG against PAXGy the collateral-to-debt ratio equals the accountant’s rate, which is what redemption pays in PAXG. The adapter reads the accountant directly. A Chainlink PAXGy/Gold exchange-rate feed carries the same rate one daily publication behind the accountant itself.
The composition accepts the gap between gold and the wrapper the market holds. Across 664 daily observations from December 7, 2024 to October 1, 2026 the underlying PAXG priced within 1% of gold spot on 96.5% of days, at a worst discount of 1.47%.
A write below the standing rate on the PAXGy vault accountant pauses the accountant instead of publishing, and getRate() keeps returning the last stored rate. The adapter therefore keeps pricing PAXGy, and liquidations continue while the accountant is paused. A markdown can reach the price only after the timelock lowers the accountant’s floor, an operation scheduled on-chain at least 24 hours before it executes, and until then the price holds at the last rate written. We recommend that a pause of the accountant be met with a freeze of PAXGy and a collateral factor of 0 on both spokes, so that no new borrowing is taken against that rate. The getRateSafe() getter reverts while the accountant is paused, so reading it would halt liquidations on every PAXGy position until the timelock lifts the pause. A single pause-holder key or an out-of-bounds update can set off that pause. The accountant’s own limiter allows 0.04% per hour, which places no meaningful bound on annual growth, leaving the adapter’s ceiling as the only annual constraint on the ratio. The rate has grown by about 0.88 basis points a day, 3.25% a year, in daily writes with weekly steps of up to 4 basis points, and the 6.00% ceiling allows 11.5 basis points over 7 days against a largest 7-day rise to date of about 9.7.
Changelog
2026-10-26: Switched the CAPO adapter’s accountant read from
getRateSafe()togetRate()following Paxos feedback on aave-price-feeds#179, so an accountant pause holds the last stored rate instead of reverting the oracle and halting liquidations.2026-10-29: Added a 400 PAXG Add Cap on the Global Dollar Hub’s PAXG Tokenization Spoke, with its Draw Cap at 0.
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.