Blockchain has revolutionized how financial systems work. It has paved the path to completely new financial paradigms like DeFi where users can engage in without a trusted central authority.
But it is important to note that most of the world’s economy is still very centralized. This is especially true for financial systems like the stock market which is the backbone of any economy.
In this video, we are going to look at polymath – a security token issuance platform built on Ethereum, hoping to bring trillions of dollars of financial securities onto the blockchain.
Understanding Security Tokens
Security Tokens are tokenized securities treated just like existing financial securities from a legal and regulatory point of view. They can be anything representing ownership interest in assets ranging from company equity, debt notes, or derivatives or even valuable metals.
Polymath’s goal is to establish a platform for the tokenization of securities, so that standard securities can be purchased, stored, and traded on the blockchain.
Essentially Polymath intends to be the Ethereum of Security Tokens.
Key Advantages of Using Polymath
For companies, the benefits of using Polymath are varied: – Easy issuance of security tokens
– Regulatory compliances: all tokens issued through Polymath are compliant with existing SEC regulations; investors only invest after passing KYC/AML.
– Investors: not only is it easy to create a token, but it also opens up access to a whole new audience of potential investors.
– Cutting out the middleman: raising funds through a traditional IPO or issuing new shares always involves Investment banks and very long due diligence/preparation periods. These processes tend to be very expensive.
With Polymath, companies can directly sell to their investors at a fraction of the cost within less time.
– Interoperability: all tokens issued through Polymath operate as ST-20 tokens, the standard developed for security tokens by Polymath. Therefore, all tokens on the platform can easily interact with each other.
How Does Polymath Work? Platform Architecture
The polymath network consists of 4 layers:
– Protocol layer: the underlying blockchain hosting the smart contracts
– Application layer: where the tokens are created
– Legal: where network governance happens, legal templates are created and used by accredited lawyers
– Exchange: the platform for trading security tokens.
How Does Polymath Work? User Roles
The system consists of 5 main participants, each of which provides a vital piece of the process, and is incentivized to do so along the way.
– Investors — Individual consumers or organizations wanting to trade or purchase security tokens.
– Issuers — Those who wish to sell security tokens.
– Legal Delegates — Delegates place bids, with on-chain restrictions put forward in proposals. They can also act as representatives’ off-chain to assist issuers through meeting the compliance requirements.
– KYC (Know Your Customer) Providers — KYC providers validate the real identities of the participants and carry out the due diligence required to accredited investors. By receiving accreditations in their relevant jurisdictions investors can improve their standing and have some restrictions removed.
– Developers — These software engineers create and review initial offering contracts in return for security tokens.
The Poly token
POLY is the native token for polymath. It is used to fuel the Polymath Token Studio on Ethereum and is used by issuers creating and managing security tokens on the platform.
The max supply of POLY is 1 billion. 925,000,000 will be circulating by January 31, 2022. The team has locked up the final 75m until January 2024.
It is an ERC-20 token but once Polymath’s native platform launches, ERC20 POLY holders may optionally upgrade their POLY on a 1:1 basis for POLYX.
Currently POLY has a market capitalization of $411 million
Key projects and Partnerships
Polymath has several key partnerships in place to help them to level up the chain’s security and compliance. Polymath partnered with KYC-AML regulatory technology provider Netki for identity verifications
Development on Polymath
As a developer you can build applications for several use cases such as:
- Creating a security token asset
- Distribute securities using the polymath network
- Execute corporate actions linked to securities such as paying out dividends
- Handle regulatory settlement and custody
- Integrate with KYC and customer due diligence services offered by polymath network They also have an official wallet and a public testent
Financial Securities is an industry where Blockchain solutions fit really very well.
Polymath provides a framework for investors to find and autonomously assist with issuers to perform legally compliant securities trades and has the potential of reforming financial securities.