Maintain trade and position confidentiality

Most market participants need their position and trades to remain confidential, but anyone can see holdings on general-purpose blockchains. Polymesh has engineered a secure asset management protocol that enables confidential asset issuance and transfers.

Confidentiality on Polymesh 

Polymesh builds identity into the core of the chain, bringing a number of key advantages.

Transfer Amount Confidentiality

Transfer amounts and account balances can be kept confidential through the use of zero knowledge proofs that prove the transfer’s validity and resulting balances.

Asset Confidentiality

In addition to the price and quantity of an asset, the asset type transferred can also be kept confidential, enabling users to maintain private portfolios.

Auditability

Users can provide audit rights to the trusted parties to view transaction details without removing the privacy of those transactions or disclosing any other user secrets such as the cryptographic private keys or asset spending key.

The challenge with confidentiality on blockchain 

Another essential feature of capital markets is confidentiality. One shall neither know who holds a security, nor how much of a security is held by someone. Institutions protect private and financial client information as part of privacy requirements. In a general-purpose blockchain, anyone can observe the holdings of any public address. As pseudonymity rules, token holders don't have complete anonymity and could be uncovered. Adding a second-layer solution for confidentiality can maintain privacy of transactions, but the token issuer would not be able to satisfy compliance and ownership reporting demands.

The Polymesh solution

With Polymesh, the amount a token holder holds and transfers is encrypted and private through zero-knowledge proof. With its confidential transactions, the permissioned blockchain lets issuers configure the security token as confidential. Polymesh's focus on the confidentiality of assets, trades, and positions is central for its identity model and assists with obfuscating a user's positions.

How Polymesh manages confidentiality 

Because Polymesh is intended for securities, it makes it possible to transfer and hold assets confidentially while still automating compliance checks and cap table updates. This is done through MERCAT, which stands for Mediated, Encrypted, SeCure Asset Transfers. MERCAT represents a new protocol for securely managing assets in a confidential and auditable way by using a hybrid design approach that combines zero-knowledge proofs with restrictions enforced by trusted mediators, such as the asset issuer or exchanges.

With MERCAT, issuers on Polymesh are given the option to make transactions with their security token confidential during configuration.
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