Settlement

Purpose-built to provide instant settlement.

Polymesh provides a simplified approach to transfers and deterministic finality, making instant settlement possible on the blockchain.

Watch an explainer on Polymesh settlement

The challenge with transaction finality on blockchain

Why is it a challenge?

Probabilistic finality mechanisms, cumbersome compliance automation, and the unknown identity of block authors prevent general-purpose blockchains from serving as a golden record of asset ownership. To contain a true representation of ownership, the blockchain must provide deterministic finality.

The Polymesh solution

By creating assets at the protocol layer, Polymesh provides a simplified approach to transfers and deterministic finality.

Polymesh reduces delivery failure without requiring prefunding and can provide deterministic finality through the GRANDPA finality gadget, as well as stringent identity verification requirements, a comprehensive compliance validation framework, and a forkless upgrade process.

Ultimately, transaction finality or settlement is possible on Polymesh because of the way governance, identity, and compliance are woven together into the chain’s core.

Settlement on Polymesh

By creating assets at the protocol layer, Polymesh is able to provide a simplified approach to transfers that provides instant settlement without prefunding, prevents unwanted airdrops through trade affirmation, and can offer the deterministic finality necessary for the blockchain to serve as a golden record for asset ownership.

What makes finality possible on Polymesh?

Governance

Polymesh relies on its Governing Council to set criteria and permission node operators. Beyond that, forkless upgrades provide critical assurance that the transaction won’t be reverted having followed the wrong fork.







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Identity

In addition to requiring known identities for the buyer and seller, Polymesh ensures every node operator is known and permissioned. This is critical for finality as otherwise the question of whether a transaction happened may yield two different responses– a mathematical one, which says a transaction in the block was verified and broadcasted, and a legal one that might say something else.

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Compliance

Delivery failure and prefunding aren't problems on Polymesh. Once a buyer and seller affirm a transfer, the assets are committed– they can’t be spent in other transactions, but the holder doesn’t need to relinquish control in advance. Compliance rules are then automatically checked and the transfer is either wholly completed (and instantly settled atomically) or wholly rejected (with the assets immediately returned).

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Say goodbye to unwanted airdrops and transfers

Polymesh’s asset transfer approach eliminates ongoing regulatory concerns over airdrops and any associated AML and tax implications.

Users are required to affirm settlement instructions before tokens appear in wallets, ensuring assets are accounted for and transfers happen smoothly.

Execute transactions atomically

Instructions are atomic and execute completely or not at all. Both parties need to affirm the entire instruction is agreeable and properly represents their agreement. Instructions contain other details such as when to actually execute, but because the actual execution is atomic, it’s not possible for one part of the instruction to be executed but not the other. Once an instruction has a signed receipt for off-chain action, that receipt is permanently marked as used.

Reduce delivery failures without pre–funding

The Polymesh Settlement Engine reduces delivery failure risk by immediately committing assets once a settlement instruction is affirmed to prevent them being spent in other transactions.

The Settlement Engine runs at the protocol layer, facilitating asset transfers on an atomic basis without requiring a smart contract to hold custody of both assets for the transfer to occur.

Polymesh unique identity system

On Polymesh, there’s no prohibition against operating multiple Polymesh accounts with distinct DIDs. That said, there are regulatory compliance obligations falling on investors depending on their jurisdiction. Suffice to say, it’s generally not permissible to use multiple accounts to obfuscate reportable holdings of a regulated security.

Polymesh provides a mechanism called the Polymesh Unique Identity System (PUIS) to self-report linkage between multiple accounts as a means of detection.

How does custody on Polymesh work?

A beneficiary account can designate another account as their custodian in one or more of their portfolios. Once the custodian accepts the responsibility, they can act on behalf of the beneficiary for matters related to settlement. Within this, it’s assumed that the beneficiary and custodian entered into a legally binding contract for which Polymesh’s custodial relationship is the on-chain expression.

Who owns the securities?

It’s important to note that within this setup, the custodian doesn’t own the securities on-chain; the beneficiary still owns them, and the relationship can always be revoked. It’s therefore incumbent on the beneficiary to partition their portfolios and assets and designate their custodian(s) so as to reflect the desired mix of responsibilities.