Frequently asked questions about security tokens and Polymesh.
Looking for questions about the Polymesh wallet, addresses, or keys? You'll find everything you need to know here.
Security tokens are digital representations of securities (e.g. debt, equity, real estate) on a blockchain. Like traditional securities, security tokens are subject to regulation and need to conform to strict compliance standards.
By leveraging blockchain technology, security tokens allow for many traditionally cumbersome and highly manual processes to be automated, while the blockchain provides a golden source of truth that all parties can rely on.
There are two ways that security tokens can be created. The first is through asset tokenization, which is when a traditional financial asset that exists off-chain is represented on-chain, making it a ‘tokenized security’. An example of this would be tokenizing an existing share certificate.
The traditional securities lifecycle is highly inefficient. This limits scale, cuts into profit, and constrains product offerings for banks, broker-dealers, asset managers, issuers and investors alike.
Blockchain can bring numerous benefits, including increased efficiency, reduced compliance cost, improved liquidity, and increased transparency.
Bringing real-world assets (traditional financial assets) on-chain and into the DeFi ecosystem also results in unique collateral and investment opportunities, market efficiencies, and access to liquidity that can’t be found in traditional markets.
Overall, blockchain brings trust, liquidity, transparency, security, efficiency, and innovation that makes the tokenization of real-world assets and other financial instruments a plus for every participant involved.
The future of finance lies with asset tokenization. As a blockchain purpose-built for regulated assets, Polymesh enables enterprises and institutions to tokenize real-world assets and stay relevant in the emerging global tokenization market, projected to reach $5 trillion USD by 2025.
Unlike other blockchain networks that are more generalized in nature, Polymesh is purpose-built specifically for the issuance, management, and trading of regulated assets. As such, Polymesh incorporates a number of features and functionalities tailored to the specific needs of regulated markets and gathered around 5 key pillars: governance, identity, compliance, confidentiality, and settlement.
For example, participants can leverage Polymesh’s sophisticated compliance engine to automate and enforce complex compliance processes, such as investor eligibility tracking and the enforcement of transfer restrictions. Polymesh also features a unique identity system that allows issuers to verify the identities of investors while maintaining their privacy and complying with data protection laws. Finally, Polymesh’s consensus mechanism can provide high transaction throughput while ensuring that only authorized participants can validate transactions.
Polymesh is an institutional-grade permissioned blockchain purpose-built for regulated assets. It streamlines antiquated processes and opens the door to new financial instruments by solving regulatory challenges around governance, identity, compliance, confidentiality, and settlement.
When it comes to creating and managing security tokens, Polymesh’s specificity gives it (and the applications built on top of it) a distinct advantage.
There are 5 key pillars woven into the chain’s core that meet the requirements of regulated markets:
Polymesh node operators run a program that verifies the mathematics associated with transactions, orders transactions, and publishes blocks.
Permissioned node operators are one of the aspects that make Polymesh unique. Regulated entities conducting transactions involving regulated assets need to interact with other known, regulated entities, but most blockchains permit pseudonymous entities to produce blocks. This means that on other blockchains, regulated entities may provide fees to unknown and/or sanctioned entities running into KYC/AML and terrorist financing risks. On Polymesh, only permissioned, licensed financial entities that meet specific criteria can produce blocks and receive the associated transaction fees.
Polymesh is a proof-of-stake chain built using Substrate. To secure the chain, node operators and stakers work together with stakers economically backing node operators of their choice. Both stakers and node operators are then either rewarded or fined based on the node operator’s performance.
None! In contrast to most blockchains that create assets using smart contracts, assets on Polymesh are created at the protocol layer. Instead of needing to create a smart contract for each asset (and then integrating that asset into their environment individually), issuers create tokens natively on Polymesh.
As a result, no additional standard is needed to ensure tokens are created consistently. Market participants can integrate once with the Polymesh blockchain and then quickly onboard new assets without having to set up each one individually and worry about smart contract risks.
Polymesh was inspired by ERC-1400 (co-authored by Adam Dossa, Polymesh Association’s Head of Blockchain). ERC-1400 is the most widely used standard for security tokens on Ethereum, and layers in additional capabilities around governance, identity, compliance, confidentiality, and settlement.
Visit polymesh.network/security-tokens to see how Polymesh compares to ERC-1400 and other early token standards.
With public permissioned blockchains, anyone is free to view or participate in the network, but access to the network is controlled by a permission layer. For example, on Polymesh, any on-chain participation first requires a verified identity.
Public permissioned blockchains are highly valuable for enterprise or institutional settings where participants require a high degree of transparency and auditability but also need to comply with regulatory requirements and ensure data privacy.
POLYX is the native token of Polymesh and is used for transactions, staking, and governance.
POLYX is a utility token under Swiss laws, based on guidance from the Swiss financial regulator FINMA.
In the crypto world, “utility tokens” refer to on-chain tokens that give value to token holders in the form of utility within a blockchain network or ecosystem. “Utility” varies case-by-case, but at a high level most forms of utility come in the form of providing access to the network, service features, or active contribution to the system (e.g. governance rights).
As a utility token, POLYX enables token holders to actively participate in the Polymesh protocol by granting them access to various on-chain functionality and activities such as transactions, staking, and governance.
In the future as the Polymesh ecosystem evolves, there will likely be many more utility tokens on Polymesh such as payment tokens for decentralized applications or governance tokens for on-chain protocols or DAOs.
There are lots of ways to get engaged with Polymesh! Here are a few key ways:
Watch AMAs, conference videos, demos, and more on Polymesh’s Youtube channel. Remember to subscribe!
For technical help and support, we encourage you to visit the Polymesh Community Portal where you can browse the blockchain knowledge base or submit a ticket for direct assistance.
You can also ask general questions in the Polymesh Discord or join the developer-support channel for any developer-related inquiries.
Finally, you can contact our team by filling out this form. Please note that for technical assistance (e.g. identity verification; troubleshooting) you will receive a faster response by submitting a ticket in the Polymesh Community Portal.
The Polymesh Association a not-for-profit entity based in Switzerland for the purpose of promoting and developing technologies and applications in the field of blockchain. A dominant but not exclusive focus is on the research, development, promotion, support, deployment, and maintenance of the Polymesh protocol, technologies, and ecosystem.
Polymesh is open-source, meaning anyone is able to contribute to its development, view the codebase, and even create their own Polymesh.
Polymesh’s intellectual property is housed by the Polymesh Association, which was established in October 2021 for the purpose of promoting and developing Polymesh.
The Polymesh Association consists of 16 full-time contributors with experience in finance, technology, and law, among other fields. Most of the core team have experience at Polymath building the first security token platform and spearheading ERC-1400.
The Polymesh Association is a not-for-profit entity with the purpose of promoting and developing the Polymesh blockchain and ecosystem. The Polymesh Association runs operator nodes on Polymesh that receive POLYX from staking and intends to use the proceeds to finance the development of Polymesh.
The Polymesh blockchain is a decentralized, open-source protocol that exists independently of the Polymesh Association and would be available for entities to use even in the unlikely event that the Polymesh Association discontinued operations.
The Grants Program awards grants to community developers for building and extending Polymesh features.
Find more information about the Grants Program and how to apply on Github.
The Ecosystem Development Fund (EDF) incentivizes and supports companies looking to build, integrate, and utilize Polymesh’s industry-leading infrastructure.
Find more information about the Polymesh EDF and how to apply at polymesh.network/ecosystem-development-fund.
The Polymesh Association wants to see the projects on Polymesh succeed and is committed to supporting the ecosystem via:
Note that the scope of our grants initiatives consists of funding and feedback on delivered milestones. While the Polymesh Association may not provide direct hands-on support, we will do our best to direct you to the correct resources (either internally or via a third-party).
Grant sizes vary depending on the program and your project outline/requirements.
For the Grants Program, there are three different grant levels depending on your project’s current stage. Grants will be capped at US$10,000, US$30,000, or US$50,000 equivalents in POLYX depending on your grant level.
For the EDF, you will be required to outline project milestones, estimated timelines, and approximate grant dollar amounts required. There is no cap for grant size except the constraint of the EDF’s overall size.
For both the grants program and EDF, applications are required to complete an initial proposal with information about the project. This will be reviewed by the Polymesh Association and next steps communicated accordingly.
For information about the grants program application process, visit Github.
For information about the EDF application process, read the EDF outline and policies.
Become verified with a customer due diligence provider and use the chain to create, issue, and manage security tokens, as well as participate in on-chain processes like governance and staking.