Why security tokens?

Polymesh was built specifically to support security tokens.

What is a security token?

Similar to traditional securities, a security token is a financial instrument that represents ownership interest in an asset– only it’s been created digitally (tokenized) to unlock the power of the blockchain.

Traditional assets
Publicly–traded equity
Bonds
Debt
Traditional illiquid assets
Private placements
Real estate
Fine art
Intellectual property
Synthetic asset baskets
Other tangible and intangible assets

Security tokens bring
numerous benefits

With tokenization, many of the traditionally laborious and manual processes involved in bringing securities to public and private markets may be transferred to the blockchain and automated. This benefits issuers and investors in a wide variety of ways.

Efficiency

Legacy middlemen can be removed, resulting in more efficient fundraising and trading, reduced settlement times, and lower costs. Processes like dividend issuance, voting capabilities, and liquidation preferences are also improved.

Automation

Security tokens lead to better compliance and can automate payments such as dividends. For example, jurisdictional regulations can be enforced by programming and customising compliance rules into each token’s configuration.

Transparency

Blockchain can maintain a perfect digital record of ownership and of transactions. This protects investors, reduces disputes around record keeping, and mitigates foul play attempts such as the back-dating of documents.

Improved liquidity

Tokenization provides a way to trade traditionally illiquid assets, makes hyper-fractional asset ownership possible, and opens assets up to global investor pools.

Market access

Investors can diversify their portfolio as they gain access to previously unavailable or traditionally illiquid assets. Plus, with no weekends, holidays, or bank closures, issuers and investors can decide themselves when they want to trade.

Innovation

Programmable contracts and shared ledgers can create fractionalized real estate, liquid revenue share agreements, dynamic ETFs, and other previously unmanageable offerings.

Blockchain technology increases efficiency while reducing room for error, ultimately bringing significant reductions in cost.

A blockchain built for security tokens

As with traditional securities, security tokens are subject to regulation and need to conform to strict compliance requirements.
Built specifically for security tokens, Polymesh builds regulatory requirements around governance, identity, confidentiality, compliance, and settlement into the chain’s core.

Discover the key pillars

Security token standards

By creating assets at the protocol layer, Polymesh eliminates the need for additional standards. Market participants can integrate once with the Polymesh blockchain and then quickly onboard new assets without having to set up each one individually.

Polymesh was inspired by ERC-1400 but layers in additional capabilities around governance, identity, compliance, confidentiality, and settlement.

Take a look at the chart below to see how Polymesh compares to existing security token standards:

Feature
ERC-20
T-REX
ERC-1400
(ST-20)
Polymesh
Immutable cap table
With deterministic finality
Open–source codebase
Controller access (token recovery process)
Agent base
Compliance
Very limited
More flexible, ID based
Issue / redemption
Mint and burn
More flexible, ID based
Share class management
Mint and burn
On-chain transfer validation
Permission management w/ multiple agents
Stakeholder identity management
Batch functions
Only a few
Only a few
All
STOs
Published external audits
Partially fungible tokens
Off–chain authorization
Basic in v1, adv in v2
Document management
Checkpoints
Sub-accounts
Portfolios
Error codes
Settlement
Corporate actions
Identity-driven permissions access
Custody
Portfolio based
Security identifiers
Aggregated entity balances
PUIS
Relayer support
Confidential assets
Coming in v2