Polymath Community Reddit AMA
In case you missed it, on Friday June 27th, 2018, I went live on Reddit to answer the community’s questions about Polymath. I’ve complied the top questions and responses from the AMA for community reference.
Why Ethereum? Have you ever considered any other platforms? (u/poldaffy)
Ethereum is currently the most robust blockchain in terms of DApp development, and it currently has the most widely used standard for creating tokens (ERC20). The overwhelming majority of blockchain tokens are created using the ERC20 standard, which coincides with the most options for storage, transferability, and additional applications for interacting with these tokens (things like Metamask). This is why we made security tokens ERC20 compatible; to take advantage of the already built tools surrounding Ethereum and ERC20 tokens. Additionally, security token issuers are more likely to raise funds if they have a pool of investors who understand how to use their security token.
With that being said, we intend to be blockchain agnostic in the future. Our goal is to be plugged into many chains utilizing interoperability solutions like Cosmos and Aion. This could make scaling easier, along with protecting against the (hopefully unlikely) doomsday scenario where the Ethereum blockchain dies.
How is value driven to the token? I see Matador has been doing a lot of work, are they taking payment in POLY?
If no to above, when will companies begin transacting? What companies and volume can we expect? (u/savantness)
Matador is a completely separate entity from Polymath.
Matador is one of the advisors available on the platform for issuers to consult. So, if you want help with fundraising, the structure of your token, capital markets advice, etc., you can seek to become a client of Matador or any of the other advisory firms.
The relationship between an issuer and a delegate on the Polymath platform can be paid in POLY or any other funds, since they could theoretically always discuss these things offline. We cannot force these interactions to occur in POLY, but it is easy to do so in POLY.
We are looking to go live on Ethereum mainnet very, very soon, where any company can begin to issue security tokens.
Follow up Question: So hypothetically I’m ABC Corp and I want to issue 100mm $USD of bonds. I issue it through the Polymath platform with an advisor like Matador. My transaction fee (say 1%) is funded in POLY which creates demand for the token.
If the velocity of POLY is low like the USD or BTC it will go up in value. Ok all good there, except theoretically Matador could never accept Poly so that could cause problems. As an issuer I have no incentive to use POLY besides the ease of use, but as long as the transaction is pegged to USD I probably won’t care if I’m ABC Corp what I pay in.
What are the advantages to ABC Corp issuing on this platform? How is this different from an investment bank besides potential lower fees? Also is there demand for these notes, who would buy these bonds? (u/savantness)
Matador accepts POLY. What makes you think they never could? They do, today.
Today, the biggest advantages for ABC Corp to use the Polymath platform are having securities that are tokens rather than a piece of paper. Especially scenarios where a company wants to issue private securities and remain a private company, but wants to have *some* liquidity.
^ We haven’t begun thinking about bonds yet, and for the most part, we’ve seen much more interest from funds issuing shares, and companies looking to issue stock.
If you have a private company, it is very hard to trade private shares. Transfer agents and lawyers are involved at every step. Conversely, with Polymath’s ST-20 protocol, the tokens can only be traded among authorized investors in situations that maintain regulatory compliance, so these manual checks become less necessary. Your private company shares therefore become more attractive than legacy, paper shares due to the potential increased liquidity for investors, lower trade fees, and ease of use. Your private company may now be able to raise more money, have a more active investor pool, and investors are more willing to purchase your securities.
You can think of Matador like an investment bank — with expertise in the area of raising capital in the blockchain space.
To reiterate, the benefit for ABC Corp is that their securities are more liquid and easier to trade. And ABC Corp may still want to engage services of seasoned capital markets experts.
What do you see as the best assets to be built upon ST20 (Security Token Standard)? (u/DuffmanTP)
The best assets to be built using the ST20 standard (today) appear to be illiquid assets where unlocking liquidity can increase the price of that asset due to a liquidity multiple.
Real estate, and shares in private equity, or private companies are very attractive here.
You can take a building or house that is worth x, tokenize it using Polymath, and now that building or house could be worth 1.5x due to the fact that investors can more easily buy and sell fractional ownership of the underlying asset. This is generally referred to as a liquidity premium. — https://www.investopedia.com/terms/l/liquiditypremium.asp
Shares in private equity and private companies are also highly illiquid and tough to sell. There are many manual processes that have to occur to sell these instruments, and if we can replace these with tokens that can be automated with built-in regulatory compliance checks, we can have these securities be more valuable than their relatively less liquid, legacy counterparts.
How much are you involved with the SEC to get ST20 tokens approved from companies? (u/DuffmanTP)
We regularly engage with regulators, as well as counsel, throughout the process of building our platform.
The world of financial securities is HIGHLY regulated, so we do our absolute best to ensure we are working on the right side of the law. The interesting thing to note is that financial securities laws are very clearly well-defined, and many of the laws have been around for hundreds of years.
So, while we are changing the medium of what it means to be a security (a blockchain token instead of a piece of paper), the rules and regulations we need to ensure we code into these tokens is very well understood, and it is easy to see where the lines are in terms of what is legal and what is not.
I’m looking to launch a fully compliant Security Token Offering in Canada, but have some issues regarding OSC approval.
Can Polymath help launch this STO in Canada and get the gears rolling (adjust whitepaper and liaise with regulators to become compliant)?
What is the benefit to using Polymath for someone like myself? (u/savemejebus321)
Check out CORL — www.corl.io — They are intending to do a public offering in the US and Canada, and are using Polymath for their tech.
Polymath does not explicitly help companies get their regulatory and legal work in order. However, the Polymath platform can introduce you to teams and people to help you with those areas. Polymath also handles the technical components of a regulatory compliant Security Token Offering.
Try out the platform on Ethereum testnet today to get a better idea of how the platform can help someone like yourself and feel free to ask any questions! https://tokenstudio.polymath.network/
Will the security token standard (ST20) proposal and discussions delay Polymath going live on Ethereum (as you say going live is happening very soon)? I read about the recent conference on it and the takeaways the team got. (u/jhall2017)
Nope!
This will not delay us. The intention of the Security Token Roundtable was to gather the top minds in the industry to further iterate on the ST20 standard and get it ready to propose as an ERC.
The next Polymath AMA will be on Friday, August 3rd with Polymath’s VP of Engineering, Pablo Ruiz (u/pabloruiz55). Start posting questions now to have Pablo answer them Friday!
Link to the Reddit AMA: Click Here.
About Polymath
Polymath Network (Polymath) is a decentralized platform that makes it easy to create security tokens. The Polymath ST-20 standard embeds regulatory requirements into the tokens themselves, restricting trading to verified participants only. The platform simplifies the complex technical challenges of creating a security token and aims to bring the multi-trillion dollar financial securities market to the blockchain.
