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Maintain trade and position confidentiality
Most market participants need their position and trade to remain confidential, but anyone can see holdings on public blockchains.
Polymesh has a secure asset management protocol that enables confidential asset issuance and transfers.
Capital markets value confidentiality and privacy, particularly when it comes to who holds a security and in what amount. Financial institutions must protect client information to comply with privacy requirements and safeguard their own financial interests. Non-reporting entities, usually with a small pool of shareholders, often do not want any ownership or transfer information to become public.
On most public blockchains, anyone can observe the holdings of any public address, meaning token holders don’t have complete anonymity and can be uncovered. While adding layer-2 solutions for confidentiality can be used to make transactions and balances confidential, the token issuer wouldn’t be able to satisfy compliance and ownership reporting demands. Confidentiality would come at the price of compliance.
On Polymesh, the amount a token holder holds and transfers is encrypted and kept private through zero-knowledge proofs. With its confidential transactions, the permissioned blockchain lets issuers configure the security token as confidential.
This focus on the confidentiality of assets, trades, and positions is central for Polymesh’s identity model and assists with obfuscating a user’s positions.
Intended for securities, Polymesh makes it possible to transfer and hold assets confidentially while still automating compliance checks and cap table updates.
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.
In addition to the price and quality of an asset, the asset type transferred can also be kept confidential, enabling users to maintain private portfolios.
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 cryptographic private keys or asset spending keys.
On Polymesh, it’s possible to transfer and hold assets confidentially while still automating compliance checks and cap table updates through a patent-pending protocol called Mediated, Encrypted, SeCure Asset Transfers (MERCAT).
MERCAT represents a new protocol for securely managing assets in a confidential and auditable way, 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.
