While most tokens are easily tradable on exchanges, security tokens follow different rules due to numerous legal implications. The information stored in the smart contract will also determine the amount of money you can invest in securities and where you can trade them. After submitting the necessary documents, the KYC provider can send information to a Polymath smart contract specifying details on your ability to buy securities. Next, you’d send the required number of POLY tokens to escrow until your KYC process is completed. You can search and choose a KYC provider on the Polymath network.
If you’d like to purchase a token on Polymath’s platform, you first need to have your identity and accreditation status confirmed by a KYC (know your customer) provider. Then, the smart contract enforces investor requirements such as jurisdiction of investors, type of offering, hold time before tokens can be resold etc. After the necessary documents are sent and the smart contract completed, the legal delegate will set the address of your initial offering contract. Part of the process entails delegates working with developers to build a smart contract specifically for your token.
Once you choose a legal delegate, you send POLY for their fee to a smart contract and begin working together on the Polymath platform by securely sending necessary documents and working through the compliance process. You’ll receive several bids from legal delegates, lawyers, but it’s up to you to perform due diligence and compare their fees. Percentage of Company Equity Distributed With Tokens:Īfter creating your new token, it’s still non-transferrable until a legal delegate confirms “ that the steps have been completed for the token to be issued.”.Polymath asks for the following information to instantly create your ST20 standard security token. The Polymath Stack Launching a Security Token The token platform involves three layers: an application layer, a legal layer, and the protocol layer to ensure your token is compliant and stays compliant. These layers aim to reduce the legal complexity and ambiguity surrounding securities while also minimizing fees and improving the liquidity of assets. If you missed the airdrop, then you’ll need to trade for POLY on an exchange. Subsequently, airdrop participants received 240 million tokens.Īt this point, the Polymath team retains the rest for future use. You could have signed up for the Polymath airdrop before January 10th, 2018. Overall, there are one billion POLY tokens that will ever exist. How Does Polymath Work? Token Supply and Sustainability Securities are then “bought and sold on secondary markets such as stock exchanges with fees ranging from 0.25% to 3%.” Polymath thus believes there is value in helping people legally registering their token while simultaneously providing a decentralized exchange with lower fees. Unfortunately, this is an increasingly expensive and complicated process. Government regulations “require investors to receive financial and other material information concerning securities being offered for public sale.” The goal is to “prohibit deceit, misrepresentations, and other fraud in the sale of securities.” It seems like a noble goal given the frequency of ICO scams and at least 46% of 2017 ICOs already failing.įor public offerings, companies must register their securities with the government. Consequently, Polymath believes financial securities would function better on a blockchain and wants to replace the term shareholder with token holder. Polymath’s new standard for blockchain security tokens aims to embed the necessary regulatory requirements into smart contracts and comply entirely with government security regulations. As a result, security tokens, like any securities, are subject to government regulation. Security tokens, however, provide equity or a claim to dividends from a company. Utility tokens, such as Waltonchain, give you access to a token’s network and are far more common than security tokens. In 2017, ICOs raised over $1.2 billion in funding by selling either utility or security tokens. Due to the continuing government crackdown on initial coin offerings, Polymath hopes to instead provide legal Security Token Offerings. All transactions on the Polymath platform take place using the native POLY token. In order to launch a legally compliant token, the Polymath platform brings together issuers, legal delegates, smart contract developers, KYC verification, and a decentralized exchange. Therefore, token issuers don’t need to worry about the legal implications of their security falling into the wrong hands.
Only a “ list of authorized investors and their Ethereum wallet addresses” can hold ST20 tokens. It makes a new token standard, the ST20, and enforces government compliance. Polymath simplifies the legal process of creating and selling security tokens.
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