Polymath Network

What is Polymath (POLY)?

Polymath is a company that provides blockchain-based technology services to enterprise customers who wish to digitize real-world assets in a regulatory-compliant manner.

Cryptocurrencies are often compared to the “Wild West” of investment assets, largely because of inherent risks and the absence, to date, of firm regulation. So-called sophisticated investors particularly enjoy these unregulated markets given the lack of disclosure requirements, but various regulators have begun making inroads.

One of the main vectors of regulation revolves around the concept of a “security.” In the US, arguably the world’s biggest financial market, securities are regulated by the US Securities and Exchange Commission.

The lengthy legal proceedings between the SEC and Ripple are an example of what happens when regulators believe that a given cryptocurrency is an unregistered security.

Many newer blockchain projects have therefore had to design their coins and tokens in such a way that they cannot be considered securities. However, several older ones have reimbursed investors.

Polymath takes a different approach, helping customers set up digital assets, manage investors, and raise funds on the blockchain so that it fulfills regulatory requirements.

What is a Security?

A “financial security” refers to a fungible, negotiable financial instrument with monetary value. It often represents ownership or rights to ownership in an enterprise and is often used to raise capital in public and private markets. Debt, as well as debt-equity hybrids, are also considered securities and regulated by the SEC in the US.

If this sounds familiar, it’s because many blockchain projects have carried out fundraising rounds or have tokens that entitle holders to part of the project. As a result, many ICOs and other fundraising activities tend to exclude US retail investors so as not to run afoul of the SEC.

Naturally, that doesn’t stop “sophisticated investors” from participating in these fundraisers via their holding companies headquartered in tax havens outside the US.

To establish whether something is considered a security, it is subjected to the Howey Test. Established in 1946 via a US Supreme Court decision on SEC v. W.J. Howey Co., it states that an investment can be regulated as a security if:

There is an investment of money.

The investment is made into a “common enterprise.”

The investors expect to make a profit from their investment.

Any expected profits or returns are due to the actions of a third party or promoter.

These guidelines are so broad that US courts have enforced securities provisions on assets such as whiskey, beavers, and even chinchillas. However, regulation via litigation does have its limits, and the SEC appears to find Ripple a stubborn opponent in the docks as the case rumbles on.

Who are the Founders of Polymath?

Polymath is a Canadian company, but it was founded in Barbados in 2017 by Trevor Koverko and Chris Housser.

Koverko was an ice hockey player of some fame and even had a stint with the New York Rangers. Before transitioning into cryptocurrency, he worked at several fintech companies. Meanwhile, Housser was an instructor in the Canadian Army before shifting into financial and employment law.

Polymath’s ICO in January 2018 raised a staggering $59 million, and its first five security offerings went live later that year. In November, Polymath introduced a fiat-pegged offering, allowing security tokens to be quoted in US dollars.

The company is currently led by CEO Vincent Kadar, a fintech professional with 25 years of start-up and scale-up experience in financial software and services. He was previously the CEO of Telepin Software Systems Inc. and was the CTO and co-founder of Airwide Solutions, which was acquired by Mavenir.

How Does Polymath Work?

Polymath is a platform that companies use to issue security tokens to investors on the blockchain. Since these tokens are intended to be securities, the platform can be used to register the sale with the SEC and file the relevant legal documents.

Meanwhile, investors need to complete a battery of legal compliance checks, including accreditation, identity verification (KYC), and money laundering controls (AML), before using the platform.

Part of Polymath’s advantage is that it is simple and easy to use, and issuers need technological expertise or blockchain know-how. The platform even contains a “wizard” application that can create a bespoke security token within minutes.

Investors looking to buy tokens via the platform must get whitelisted for each security token offering. Once whitelisted for an offering, they can place funds in an escrow powered by smart contracts. These contracts release tokens and funds once both the issuer and investor have met all the required conditions.

What Makes Polymath Unique?

Polymath isn’t just a platform that makes securities easier to issue; it’s built on some very innovative technology.

In May 2018, Polymath launched its ST20 security tokens, which correspond to ERC-20 fungible tokens, and the Polymath Token Studio dApp (decentralized application). In July, they held a Security Token Roundtable event in Barbados focusing on standardization.

The first version of the ST20 token standard went live on the Ethereum mainnet in August, and Polymath published the initial draft for the ERC-1400 token standard for industry feedback.

This standard puts together specific requirements for a token’s code to meet. Then, if a token meets these standards, organizations can integrate it without costly and time-consuming technical due diligence. By July 2019, version 3.0 of the ST20 token standard brought it into full compliance with ERC-1400.

Just a few months prior, in May, Polymath announced the Polymesh Blockchain initiative. In collaboration with Ethereum co-founder and Cardano chief Charles Hoskinson, Polymath began the discovery process toward creating the world’s first blockchain built specifically for security tokens.

The whitepaper for Polymesh was out in the first quarter of 2020, and just over a year later, the incentivized testnet for Polymesh was live. The launch of the mainnet launch came shortly thereafter, just before the close of 2021.

What is Polymesh?

As mentioned, Polymesh is a blockchain purpose-built for security tokens that is also permissioned. It solves regulatory challenges around identity, compliance, confidentiality, and governance through design principles built into the base layer of the chain.

By using a permissioned blockchain, Polymath can use a customer due diligence process to ensure all actors on the chain are verified. All transactions on Polymesh are authored by permissioned entities.

This design also prevents forks in the chain, avoiding the significant legal and tax challenges that contentious forks tend to create. It’s also confidential, eliminating the transparency of public blockchains, which most financial market participants view as a major negative.

How is the Polymath Network Secured?

The Polymath blockchain, called Polymesh, is a proof-of-stake chain built on Parity’s Substrate framework. Node operators, called simply "operators," are permissioned capital market participants who meet specific criteria.

Stakers can economically back the operators of their choice with POLYX tokens, and both are rewarded or fined based on the operator’s performance. Stakers also must be identity-verified through a customer due diligence process before contributing to the network.

What is the Use of POLY?

The POLY token fuels the Polymath Token Studio on Ethereum and is used for governance and consensus on the Polymesh-permissioned blockchain. POLY on Ethereum can be switched 1:1 for POLYX on Polymesh.

How Much POLY is In Circulation?

POLY has a circulating supply of over 924 million tokens out of a total supply of 1 billion. 75 million POLY tokens are vested until January 2024 by the Polymath team.

How Do You Buy POLY?

You can buy POLY tokens on a variety of cryptocurrency exchanges. Since it’s an Ethereum-based token, you can also use decentralized exchanges like Uniswap to buy POLY tokens.

How Do You Store POLY?

POLY tokens can be stored in any Ethereum-compatible wallet. These can come in the form of hot wallets like Metamask and Trust Wallet or cold wallets such as Ledger and Trezor. You can also just write your seed phrase down on paper and store it away safely.

Polymath Energy Consumption

Polymath can’t be held accountable for significant energy consumption since its Polymesh blockchain uses a proof-of-stake consensus mechanism with limited hardware requirements.

However, that can’t be said for the operators who might adopt Polymath technology one day. The capital markets and financial services industries are known to squander resources at scale, both energy and otherwise, and tend to represent the pinnacle of human excess.

Is POLY a Good Investment?

POLY is an attractive investment, but perhaps not for blockchain purists. Polymath is a project focused on enterprises and the capital markets, which goes wholly against the genesis of cryptocurrency itself.

However, the financial industry is clearly in dire need of innovation. While many of its inner workings are convoluted by intent, blockchain technology solves various problems, including the archaic inefficiency of the settlement.

In that sense, the POLY or POLYX token could find itself in high demand if adoption grows and more market participants decide to become stakers or operators of Polymesh.

Transparency advocates will be sorely disappointed by this most opaque of industries’ adoption of blockchain via a solution like Polymesh. It’s also well known that the real titans of the financial world are developing and even running their own in-house chains. For the rest, though, there’s Polymesh.