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Polymesh was built specifically to support security tokens.
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.
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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.
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.
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.
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.
Tokenization provides a way to trade traditionally illiquid assets, makes hyper-fractional asset ownership possible, and opens assets up to global investor pools.
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.
Programmable contracts and shared ledgers can create fractionalized real estate, liquid revenue share agreements, dynamic ETFs, and other previously unmanageable offerings.
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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.
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:
