Polymath and its network is creating a highly compliant and standardized framework for issuing security tokens. Launched on Ethereum in 2018, the Polymath ecosystem uses the ERC-20 POLY token for token issuance. However, the launch of the purpose-built Polymesh blockchain from Polymath will also see the introduction of the native POLYX token. The POLYX token will replace the POLY token and play an essential role in protocol governance. Also, the POLYX token will become the primary medium of exchange throughout the Polymath network, including Polymath Token Studio.
Furthermore, by establishing a specific blockchain for issuing security tokens, institutions and enterprises will benefit from standardization, built-in compliance features, reduced fees, and less friction. Moreover, Polymath is bridging the gap between the traditional financial sector and the blockchain industry by tokenizing real-world assets such as equity, corporate debt, and real estate.
In this article, we'll dive deep into the Polymath ecosystem. We’ll explore the POLY and POLYX tokens and the new Polymesh blockchain. Also, we’ll discuss Polymath Token Studio and the ERC-1400 token standard. Plus, we’ll take a look at security tokens and how they stand to benefit traditional investors, institutions, and enterprises.
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What is Polymath?
Polymath's network is pioneering tokenized financial securities. Polymath is unlocking trillions of dollars in asset value by creating programmable automation solutions for standardized token issuance. Originally developed on the Ethereum blockchain, Polymath is introducing the purpose-made Polymesh blockchain to facilitate enterprise adoption of security tokens using a compliant framework that meets the specific needs of securities regulators.
Polymath is responsible for issuing more than 150 different tokens on Ethereum. Now, with the Polymesh blockchain unlocking the true potential of security tokens, the platform aims to protect user confidentiality and ensure identity validation in a way that is not possible on Ethereum alone.
With the introduction of the Polymesh blockchain comes a token migration from the ERC-20 POLY token to the native POLYX token. The POLYX token will be an essential part of the nominated proof-of-stake (NPoS) consensus mechanism. Also, it provides holders with voting rights. Moreover, Polymath aims to bring transparency, confidentiality, and compliance to security tokens while paving the way for institutional adoption via regulatory frameworks. As such, all Polymath network validators will be “known, regulated entities”.
Security Tokens
Security tokens can be considered digital, liquid, fractional contracts for an asset. Fractional ownership on the blockchain provides transparency for investors while helping to bridge the traditional financial sector with the world of decentralized finance (DeFi). Moreover, security tokens can act as liquid contracts for any asset class. This includes tokenized equity rights, corporate stock, art, and real estate.
Additionally, security token issuance can play a crucial role in securing funding during a startup or a security token offering (STO). In turn, security tokens provide market access, deep liquidity, and democratization 24/7 without the need for intermediaries.
The POLY Token
The POLY token is an ERC-20 standard utility token that supports the Polymath network. Polymath raised almost $59 million during an initial coin offering (ICO) in January of 2018. Following the launch on Ethereum in the same month, the POLY token has been the primary unit of account for security token issuance throughout the Polymath network. The POLY token is transacted via token issuance, the creation of smart contracts, and legal validation.
The creation of security tokens on Ethereum uses the Polymath Ethereum ST-20 token standard. The ST-20 token standard has built-in regulatory requirements for financial securities to simplify compliance. However, to make the process of security token issuance even more streamlined and frictionless, Polymath introduced the Polymesh blockchain. Also, the network will see a migration of the POLY token to the native POLYX token. At the time of writing, POLY is trading around $0.54 and has a market cap of $491 million, according to CoinGecko.
The POLYX Token
The POLYX token will be the native cryptocurrency underpinning the NPoS consensus mechanism of the Polymesh blockchain. Whereas the POLY token has a limited supply of one billion tokens, the POLYX token will not have a capped supply. Instead, the supply of POLYX tokens will initially be overseen by the Polymesh governing council. Plus, the POLYX token will provide holders with voting rights for governance proposals. This will enable the Polymath community to have a say in the future direction of the protocol and the distribution of grants and subsidies.
The POLYX token will be essential for protocol fees and token issuance via Polymath Token Studio. Accordingly, network validators will receive block rewards in the form of POLYX tokens. Moreover, the introduction of the native POLYX token will reduce fees for minting security tokens. Plus, it will facilitate the deployment of native decentralized applications (dApps) on the Polymesh blockchain.
The POLYX token will support the Polymesh blockchain in a similar way to gas fees in the Ethereum ecosystem. As such, transaction fees and operational costs will require the native token. Moreover, as the Polymesh mainnet launches, the Polymath governing council will oversee a POLY to POLYX token bridge for at least a year after the launch. This will enable POLY token holders to swap their tokens to the native POLYX token at a 1:1 ratio.
Exploring the Polymath Network
Most general purpose-built blockchains use smart contracts for security token issuance. However, Polymath is introducing a purpose-built blockchain network to alleviate these blockchains' scalability and performance issues. Furthermore, built into the foundations of the Polymesh blockchain are financial primitives created specifically for security token issuance and management.
Not only does Polymesh reduce the costs associated with creating security tokens, but it paves the way for the creation and deployment of native dApps. Moreover, at the heart of the Polymath network is Polymath Token Studio. Here, users can issue bespoke, transparent, compliant security tokens using the ERC-1400 standard.
Furthermore, unlike most public blockchains, the Polymath network uses identities to mediate on-chain actions instead of public keys. Every identity in the network possesses a sole administration key. This key can be used to add or remove "signing keys" from each identity. Plus, signing keys deliver “granular roles and permissions for identities and associated functionality” throughout the Polymath network. Polymath is a member of the "Decentralized Identity Foundation" (DIF) and various standardization bodies. Accordingly, the platform strives for regulatory compliance.
Moreover, Polymath makes it straightforward for security token issuers to take advantage of the public blockchain infrastructure for corporate governance. Token holders can vote on the actions of a corporate issuer privately, while incentives exist to minimize vote manipulation.
The Polymesh Blockchain
Despite paving the way for programmable security tokens via smart contracts, Ethereum lacks some vital attributes that institutions require. For example, Ethereum alone cannot ensure regulatory compliance in a way that provides institutional confidence. Accordingly, Polymath is introducing the Polymesh blockchain to facilitate seamless token issuance, management, and liquidity.
Polymesh is a purpose-specific blockchain created for privacy, compliance, and community governance. Along with the introduction of the native POLYX utility token, the Polymesh blockchain aims to make compliant security token issuance more accessible than ever. This is achieved using the NPoS consensus mechanism.
Nominated Proof-of-Stake (NPoS)
The nominated proof-of-stake (NPoS) consensus mechanism is a variation of proof-of-stake (PoS). It facilitates the selection of validators for participation in consensus and is used in "substrate-based" blockchains, including Kusama and Polkadot. Nominators can select validators they trust by staking POLYX tokens with them and earning a passive income via block rewards. Moreover, by locking up tokens in this way, network participants are incentivized to act honestly as their stake could be slashed if they act dishonestly.
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The ERC-1400 Standard
Early iterations of security tokens would often implement a new token standard for each new token. However, this results in a lack of consistency, creating friction between stakeholders and custodians. Moreover, unnecessary operational requirements made token issuance complex and challenging for enterprises to adopt and manage.
The ERC-1400 standard is a standardized framework that enables developers, regulators, and token issuers to support new and existing asset classes with greater confidence and regulatory clarity. Developed by Polymath’s Adam Dossa and Pablo Ruiz in 2018, the ERC-1400 standard enables token issuers to create easy-to-manage security tokens using pre-existing templates. This token standard caters specifically to the creation of security tokens by applying jurisdictional laws and compliance practices while remaining transparent and secure.
Polymath Token Studio
Polymath Token Studio is a self-service security token issuance and management application. The service offers a simple and intuitive way for anyone to mint their own security tokens with customizable parameters using the ERC-1400 token standard. Polymath automates all corporate actions and custom parameters. Plus, users can make changes to their security tokens without the need to create new ones. Furthermore, users can configure their own ticker symbols and plug directly into a diverse ecosystem of service providers to create a bespoke “end-to-end journey”.
Smart Extensions
Smart extensions are at the heart of the Polymesh security token network. Using smart extensions, token issuers can program custom rules into security tokens while executing them in a regulatory compliant and standardized manner. Not only does this make compliance straightforward, but it does so without compromising on functionality. Furthermore, third parties can use smart extensions to impose restrictions on Polymesh’s financial primitives to create “open finance protocols” and other services.
Governance
Holders of the POLYX token who hold a valid Polymesh identity can vote on governance proposals. Moreover, the governing council is the primary governing body of the Polymesh blockchain. However, the governing council also oversees a series of sub-committees. This includes the technical committee for overseeing network upgrades and the economic committee, which takes care of POLYX token emissions and fees.
Also, the advisory committee is responsible for "ad-hoc" programs and incentives, while the corporate governance and nominating committee will implement a code of conduct and ethics policies. Additionally, the Polymath governance process will feature forkless upgrades to minimize disruption to the network and potential asset duplications.
Exploring Polymath, the POLY and POLYX Tokens - Summary
Financial securities on the blockchain create an environment where representative asset ownership is immutable and transparent. By tokenizing assets such as real estate, equity, and corporate debt, the Polymath network introduces a wealth of automated operations and increased liquidity. Also, users benefit from an efficient regulatory architecture to assist the institutional adoption of blockchain and security tokens.
Following the ERC-20 POLY token launch on Ethereum, the Polymath network is migrating to the purpose-built Polymesh blockchain. With this migration comes the introduction of the native POLYX token. Accordingly, the Polymath network is striving to achieve higher levels of decentralization with accessible governance practices while also placing a greater emphasis on identity and confidentiality than is possible on Ethereum.
Moreover, Polymath is streamlining the process of creating transparent, compliant, highly-customizable, and liquid security tokens for global enterprises. If you want to learn how global enterprises such as Coca-Cola, IBM, and Microsoft are implementing blockchain technology, make sure to check out the Blockchain for Enterprise course at Moralis Academy! Also, don’t forget to follow us on Twitter @MoralisAcademy! We’d love to hear your thoughts about Polymath, the POLY token, and the POLYX token!
