Coin Review - Polymath

What is it?

Polymath is building a platform to allow businesses a simple and regulation-friendly way to create, issue and trade tokenised securities on a blockchain (e.g. private company shares, real estate, stock, bonds, and collectables). By doing so, businesses will save time and money currently spent on regulation, lawyers, brokers, administrators, banks and other associated third parties.

What problem is it solving?

Polymath aims to flip current security issuance and trading on its head. It aims to do so by involving key regulators and lawyers at the beginning of the token creation process. By doing so it will standardise security issuance by developing a regulatory compliant ‘template’ for businesses to issue all new security tokens. The new token standard being defined by Polymath are called ‘ST20’ tokens. 
ST20 tokens will have a pre-defined set of rules from day one based on 29 fields that are asked during token creation. These fields determine things like how many are issued, what regulatory jurisdiction they are domiciled in (thus adhering to local laws), who can buy and sell tokens (e.g. publicly traded or wholesale investors only). A test form is already being tested and can be seen here. Once created, token issuers will need to hire legal delegates to review details and approve token issuance.
Investors on the Polymath platform will have all their KYC verification attached to their profile which will allow them to trade security tokens available to them (but not ones unavailable to their geographic location or investor status (i.e. retail or wholesale). 
 What are POLY Tokens?
POLY tokens are the native token of the Polymath platform. The primary function of Polymath is to allow for the tokenisation of securities, the POLY token is the payment token required by users of the platform to execute functions:

  • Issuers– Post a bounty in POLY tokens to “encourage legal delegates and developers to bid on providing services.” 

  • Developers– Earn POLY for creating the smart contracts that dictate how the tokens operate (e.g. defining when dividends are paid and to which classes of investors)

  • KYC Providers– Earn POLY for verifying investors.

  • Investors– Pay KYC providers in POLY to get access to token sales. In instances can pay for securities in POLY.

  • Legal Delegates– earn POLY for services provided to issue regulatory compliant tokens.

Why do we like it?

  • Polymath recently announced that they will issue US$210m worth of securities on their platform before the end of 2018. These include 7Pass (investment fund), Corl (growth capital), Minthealth (health platform), IPwe (patient registry) and Blockestate (real estate).

  • Polymath will enable real securities with real value behind them to issue tokens on a blockchain, reducing costs and increasing liquidity. This is a radical change from the ICO market.

  • A strong list of partnerships that will help Polymath grow its ecosystem (SelfKey, an identification / KYC technology, CrowdfundX, AI-powered digital marketing, Prime Trust, an SEC qualified custodian).

  • First mover advantage in a multi-trillion dollar market

Why do we not like it?

  • It is yet to be determined if outsourcing KYC validation, legal compliance and token issuance will succeed and attract the required level of expertise.

  • Assumes Legal delegates can code legally compliant security tokens.

  • High levels of competition from well-connected market players: Coinbase, T-Zero, Primary Ledger.

  • It seems the primary value of the POLY token is in the issuing of tokens, not in the secondary market once tokens are trading.

Disclaimer: Magnet Capital does not accept any liability for any financial decisions made on the basis of the information provided. The above opinion does not constitute financial advice and should not be taken as such. Magnet Capital urges you to obtain professional advice before considering any investment decisions

Egor Sidelska