Polymesh was built specifically to support security tokens.
Similar to traditional securities, security tokens are financial instruments that represent ownership interest in an asset– only they've been created digitally (tokenized) to unlock the power of the blockchain.
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 customizing compliance rules into each security token’s configuration.
Blockchain can maintain a perfect digital record of ownership and of transactions. This protects security token investors, reduces disputes around record keeping, and mitigates foul play attempts such as the back-dating of documents.
Security tokens can dramatically improve liquidity. 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, security token 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 or unimaginable offerings. We're only at the tip of the iceberg when it comes to the possibilities digital assets can bring.
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 digital assets at the protocol layer, Polymesh eliminates the need for additional security token standards as well as complicated and costly integrations. 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 the ERC-1400 security token standard but layers in additional capabilities around governance, identity, compliance, confidentiality, and settlement. The advanced features for security tokens supported by Polymesh enrich the capabilities of ERC-1400 while going beyond the limits of the Ethereum blockchain.
Take a look at the chart below to see how Polymesh compares to existing security token standards:
With Polymesh, you don’t need to know the ins-and-outs of blockchain or code to interact with the technology.
Developers familiar with basic programming languages can issue security tokens by using the Polymesh SDK to plug right into the blockchain. Security token issuers who want an easy, completely no-code approach can use a tokenization platform such as Token Studio.