Polymath is a platform that seeks to provide a decentralized protocol for issuing and trading security tokens, by creating a security token standard called ST-20.
This is similar to the ERC20 token standard created on the Ethereum blockchain. This standard token template is what facilitated the entire proliferation of the 2017 crypto ICO boom in the first place.
What Polymath does is open up the blockchain to regulatory compliant token securities offerings, with a network of embedded services that are designed to cover the entire issuance process.
The platform brings together investors, issuers, legal delegates, developers and KYC providers under a single umbrella.
Here’s how it works…
A corporation looking to raise capital can use the Polymath platform to create a new ST20 token.
During this process, the issuer specifies all the necessary attributes; the type of security (debt or equity), token functionalities, voting rights, integrated governance, jurisdictions, offering country, KYC (Civic is an integrated KYC partner), and other details.
Legal delegates, who can provide legal review, can offer their services to ensure adequate compliance by the issuing company depending on its ST20 characteristics. Lawyers may recommend changes to the ST20 attributes (perhaps restricting the token to accredited investors only for example).
The initial onboarding for an investor is the KYC process. Given that ST20’s are securities, all investors will need to be KYC’d accordingly.
There are multiple KYC partners available, and once validated, the investors specifics (jurisdiction, accreditation etc.) will be registered.
On the Polymath platform, the investor is then able to purchase securities that are compatible with their profile, not only in the primary market but the secondary market also.
Using smart contracts, ST20’s can be restricted to certain investor classes or jurisdictions.
For example, I’m a U.S. citizen and I own a “U.S. investor only” ST20 security, I am not permitted to sell it to a non-U.S. investor. This inbuilt enforceability means that from a regulatory perspective, only appropriate participants can buy in the secondary market.
The Secondary Market:
Creating a more efficient and transparent security issuance process is just one half of the Polymath objective. The other is thereafter affording investors the opportunity to trade their securities in a regulatory compliant way on an exchange.
And rest assured that is the next step in the evolution of the crypto market…regulated exchanges trading securities tokens.
And for further proof of this, just take a look at a written testimony provided last month by Mike Lempres for the Subcommittee of Capital Markets, Securities and Investment here:
Lempres is the Chief Legal and Risk Officer at Coinbase, the leading U.S. crypto-fiat exchange, with over 20 million customers in 32 countries.
“We currently do not trade ICO’s or any other security tokens. Despite that, we believe that security tokens are inevitable and full of tremendous potential. They can provide a much more efficient and effective method of capital formation. They can help spur innovation, launch new companies, create new jobs, and generate growth in the U.S. economy. Moreover, they can allow broader participation in capital markets by investors and companies. This means they can unlock the ability of entrepreneurs anywhere in the U.S. to raise money on a level playing field. Entrepreneurs won’t need to know funders in Silicon Valley or New York to access vibrant sources of capital. At the same time, there is a need for responsible regulation to ensure investor protection. We welcome that regulation.”
The statement is a plea to regulators to provider clear and consistent guidance when it comes to security tokens. And when the largest and most well-established exchange is highlighting the inevitability of securities tokens, it provides.
This is further evidence to me that this is where we are headed.
Polymath is partnering with tZERO, a subsidiary of listed company Overstock (Exchange; NYSE, Ticker; OSTK ), an online retailer headed by Patrick Byrne, who is one of the biggest proponents of crypto and blockchain (Overstock have long accepted an array of different crypto’s as payment for their products).
tZERO is launching a capital markets exchange for security tokens, and already owns two SEC registered broker-dealers. Incidentally, it is currently in the process of issuing an ERC-20 security token offered to qualified investors that will pay token holders a 10 percent share of the exchanges adjusted gross revenue.
(Again, it’s worthwhile to reiterate that ultimately tokens that don’t offer these kinds of security-like attributes simply won’t be able to compete).
As mentioned earlier, investor restrictions (like jurisdiction for example) can be baked into the ST20 tokens at the protocol level. This essentially creates a self-regulating security. The token cannot be owned by anyone who isn’t allowed by existing regulators to invest.
In addition to this, the document audit trail from ST20 token creation to compliance to issuance to registry is completely auditable and transparent on the Ethereum blockchain.
The network runs on a native ERC20 token called POLY, which is used throughout the platform by all the various participants.
Investors will need to pay POLY to KYC providers for verification, and payment for security tokens may also be denominated in POLY tokens.
KYC providers themselves will need to pay a fee in POLY to join the network, as well as set the fee for KYC payments required by investors. (From the perspective of a platform like Civic, these investors would be valuable KYC’s to conduct as the KYC becomes reusable elsewhere in the blockchain ecosystem).
Developers who work to create security token contracts for issuers are compensated with POLY.
Polymath CEO Trevor Koverko has been in the crypto space a long time, and he clearly understands the magnitude of the opportunity that Polymath is attacking. But I think he also understands the challenges inherent in trying to bring together a number of different complicated elements (legal, regulatory, development) into a single unified platform.
He’s assembled an impressive team, with plenty of seasoned solidity (the Ethereum programming language) developers, along with a network of influential and hands-on advisors that includes Erik Voohees ( CEO of Shapeshift), Patrick Byrne ( CEO of Overstock), and Anthony Di Orio ( Ethereum co-founder, and founder of the Jaxx crypto wallet).
POLY is an ERC20 token (that trades on the Ethereum blockchain). Depending on scalability requirements, there are hints that the token may switch to another platform at some stage, but that’s yet to be determined.
There was no POLY ICO . Rather, there was an airdrop to around 40 ,000 token holders who submitted their Ethereum addresses.
There were a billion tokens created, with no scope for further dilution. Some 230 million were placed with over a hundred early investors (who are subject to various lock ups), with another roughly 10 million airdropped into the community.
There is still a substantial overhang of around 50 percent of all tokens which are held “in reserve” – although there is no indication as to what or when those may be disposed of. Around 15 percent of the tokens are allocated to founders (under vesting schedules).
This is a speculative token, make NO mistake. The process that I’ve been talking about in this post, the shift towards regulated crypto markets, will play out over the course of the year. This is not a token I think that will spike up next month. There’s still a lot of work to be done.
I view this as a binary outcome. If ST20’s become a standardized mechanism for securities tokens, then the price of POLY could very comfortably go 10x to 15x higher from here.
You can store POLY in a MyEtherWallet address or an Exodus account. But note that for Exodus, make sure you have the latest version installed. Then click on Settings at the bottom left hand corner, then Assets, scroll down to the bottom of the page and click on ‘Ethereum Assets’ and select Polymath.
You’ll then be able to see your Polymath wallet alongside the others.
CALL TO ACTION: POLY is setting up with a beautiful . This one has potential to do by next year what EOS did this year. Three Bitcoins today, on POLY, could possibly make you a crypto multi-millionaire by 2025 if the price goes north of $4.00. Buy POLY up to $0.025 and store it on your Exodus or MyEtherWallet. Liquidity is thin for POLY, and you’ll need to open an account with Bittrex, Upbit, or Kucoin in order to start accumulating.
As always, do your own research and manage your risk accordingly!!!
Stay ahead of the masses,