Polymath 101 – A platform to tokenise securities
Since 2013, when Initial Coin Offerings made success, the blockchain ecosystem has raised over $3 billion USD massively pushing the traditional finance to the last ladder. However, this booming token fundraising is yet to be backed up by a security market. There is no doubt that every single category of traditional finance works better on the blockchain protocol. If brought into the blockchain, traditional finances such as LP shares, equity, and even share units have the potential to be turned into programmable tokens with more liquidity, accessibility, and security.
But, there is no platform that can bridge this gap between financial security and blockchain.
Polymath aims to launch a system that will allow the facilitation of primary issuance and secondary trading of blockchain security tokens.
Let’s break it down into simpler words.
Polymath is a blockchain-based platform working towards linking the traditional financial securities with the blockchain technology. The Polymath platform will open up the blockchain to legally-obedient security offerings together with services that will lower the related transaction cost over time.
Polymath envisions a future where shareholders are replaced by token holders in the face of the global economy. They claim that by the implementation of this, every business will have immediate access to the crypto capital.
With its native token, POLY, the platform is introducing the concept of Security Token Offerings (STOs) instead of ICOs.
What is Polymath really doing?
Polymath is aimed at making STOs dominate ICOs by convincing all kinds of financial products to upgrade to tokens.
- Polymath is building the world’s first decentralised protocol that will enable the trading of security tokens. This protocol will empower corporations to launch their own security tokens by simplifying the legal and technical challenges for them.
Through the polymath platform, individuals and institutions will be able to validate their identity and accreditation status and participate in a different STOs.
What does the Polymath system look like?
As mentioned in their whitepaper, the team defines Polymath as a system that can be modelled as tools for a set of participants, assets, marketplaces, and processes.
Who will be the participants?
The system will be a ground of investors (individuals or institutions interested in investing in or trading security tokens, issuers (the people who will sell the security tokens), legal delegates (who will place bids and also act as representatives outside of the blockchain to guide issuers through the whole process), KYC providers (who will authenticate the real identities of all participants and accredit them), and developers (the software engineers who will create and review the contracts for the initial offering of the security tokens.
The Polymath smart contracts are deployed on Ethereum but can be linked to other platforms also.
Which marketplaces will be involved?
KYC Provider Marketplace (responsible for matching individuals with KYC providers who will provide validation and accreditation services within their jurisdiction for a cost.
Legal Delegate Marketplace (aimed at assisting issuers to complete the steps for an issuance. The delegates will bid the cost for representing each new security token.
Developer Marketplace (allows developers will bid for the jobs to double-check an STO Contract for issuers.)
What processes will be happening?
The processes will be aimed at enabling smooth interaction between participants on the platform. Dedicated processes will look over the security planning to be issued to the network, providing a framework for the legal delegates and service providers, and assistance of issuers for improving the auditability, security, and accountability of the securities market.
The Polymath Token (POLY)
The network will create an ERC20 standard native Polymath token by the name of POLY which will power the system. The whitepaper states that the network will only ever build 1 billion POLY tokens.
The POLY token will allow any value that is created in the system to be captured by the system itself. This will set up incentives that will remain in the systems.
- The issuers will post their bids for POLY tokens.
- The developers will earn POLY for creating STO contracts.
- KYC providers will be required to pay a fee in POLY to join the network and will offer their services in the token as well.
- The investors will have to pay a POLY fee to the KYC providers for the validation.
- The legal delegates will earn POLY by proposing bids on token issuance and by being selected to do the job.
The Bottom Line
The Polymath platform appears to have a rather visionary ambition for curtailing the current prevalent barriers for business and financial products to launch security tokens on the blockchain.
After an analysis, everything appears to be good but the network’s refusal to assume any knowledge about the legal delegates urging the issuer to trust a delegate’s claims and credentials can become a problem. But given that third parties will have the freedom to track the number of issuances done by a delegate and the fact that delegates are also required to undergo KYC may serve to be the solution.
The networks aim is to do for security tokens what Ethereum did for ICOs and digital tokens If implemented correctly, the Polymath network can make it easy for companies to launch security-backed tokens leading to the creation of highly-liquid securities token-only marketplace.
Total Supply: 1,000,000,000 POLY
Circulating Supply: 239,999,750 POLY (23.99%)
Market Cap: $125,288,509 USD
Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.