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It's all about trust

Empowering Security Token Custody with an Institutional-Grade Blockchain

Deliver custody services on Polymesh, the purpose-built blockchain digital asset custodians need to drive efficiency and create an engaging customer experience.

How Polymesh is different from general purpose blockchains

Confidential and compliant

With confidential assets enabled by MERCAT, Polymesh makes it possible to maintain trade and position confidentiality without sacrificing compliance automation or auditing.

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Scalable and predictable

Unlike public infrastructure, Polymesh can handle complex logic at scale without hitting gas limits or incurring unmanageable costs or processing time.

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Streamlined and efficient

By building financial primitives into the core of the chain, Polymesh bypasses much of the complexity that hinders security token adoption. 

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Permissioned and validated

As a permissioned chain, transactions are conducted between (and validated by) known identities who meet specific criteria.

We have run an operator node as a custodian and have found the integration into our standard blockchain environment straightforward. The institutional focus of the blockchain is apparent from the enterprise features included with the provided build documentation. We look forward to ongoing involvement with this promising approach to resolving institutional challenges with security tokens on public blockchains.
James Byrne,
Chief Technology Officer
Digivault

How Polymath technology benefits security token custody

compliance and ease
Compliance and convenience

Identity Verification

Anonymity is a key principle of many blockchains, but this ethos makes it very difficult to meet compliance requirements around identity verification and to fulfill Know-Your-Customer (KYC) obligations.

Polymesh streamlines this process by creating a single identity on the chain for each real-world individual or organization and then attaching attestations to their identity as needed.

This modular two-stage approach to identity verification allows for efficient onboarding as well as specific checks.

  • Stage 1 - Verification
    Firstly, every user validates their identity through a basic customer due diligence (CDD) process that verifies their name, date of birth, and place of residence in real-time. Once complete, any accounts a user creates, or assets they hold or transfer will be securely and confidentially connected to this identity.
  • Stage 2 - Attestation ↓
    The second layer, which is managed by the issuer or their agent, controls access to the specific asset through attestations attached to the identity as needed. Attestations can be thought of as on-chain evidence verifying an attribute of a user’s identity (i.e. residency, accreditation, or KYC status) and are used to automate compliance rules around ownership and transfer.

Polymesh builds identity into the core of the chain, which brings about a number of key advantages.

  • Sybil resistance 
    Each individual or entity can only have a single identity, which prevents an attacker from creating many pseudonymous digital identities to gain undue influence over the chain.
  • Simplified compliance ↓
    Unlike on public blockchains, tokenholders on Polymesh can’t subvert rules by holding assets under multiple digital identities.
  • Known participants ↓
    Transactions need to be determined by known, trusted, regulated entities. As a permissioned chain, transactions on Polymesh are validated by verified capital market participants that meet specific criteria.
Efficiency and standardization

Asset onboarding

Most digital securities are programmed using smart contracts, which means that each new token needs to be individually integrated into the custody environment.

Standards like ERC 1400 make this process much more efficient because they standardize the token configuration and eliminate the need for technical due diligence, but there is still room to make the process faster and more automated.

  • Learn More
    Polymesh is built on the foundation established by ERC 1400, but in contrast to  general-purpose blockchains like Ethereum, assets on Polymesh are created at the protocol layer, which means that instead of creating a smart contract for each asset, the issuer creates the token natively on Polymesh. As a result, custodians, exchanges, and other market participants can integrate once with the Polymesh blockchain and then quickly onboard new assets, rather than integrating each asset individually.
* Coming soon
Automation and accuracy

Asset servicing

Polymesh automates the corporate actions lifecycle so that custodians can increase efficiency and decrease errors and overhead.

The issuer inputs a few details to create a corporate action—from there, the engine will determine entitlements, schedule the communications*, distribute capital (if required), and update records. With all stakeholders working from the same instructions and looking at the same record, the process can move from one stage to the next without manual intervention, ‘broken telephone’ errors are significantly reduced, and issuers and investors get faster access to decision-critical position updates.

Types of corporate actions managed on Polymesh:


  • Benefits
    Events (predictable and non-predictable) that result in an increase to the position holder’s securities or cash position, without altering the underlying security.
  • Re-organizations ↓
    Events that reshape or restructure the position holder’s underlying securities position, possibly also combining a cash element.
  • Issuer Notices ↓
    Events used for the dissemination of information from the issuer to position holders, but that result in no change to either the securities or cash position of the position holder. This includes voting events.
Innovation and expediency

Transaction settlement

Three years ago, Accenture conducting a study finding that blockchain technology stood to reduce settlement costs by 50%. 

As it stands today, there is still a gap between what is possible and what is practical—and Polymesh narrows the gap in three key ways: 

  • Reduce delivery failures without pre-funding ↓
    The DTCC ranks delivery failure as one of the main three reasons why settlements fail. In order to reduce this risk, the Polymesh Settlement Engine immediately commits the assets once a settlement instruction is affirmed so that they cannot be spent in other transactions The settlement engine is also at the protocol layer, meaning assets do not need to be sent away in advance of the transaction. The settlement engine facilitates asset transfer on an atomic basis without requiring a smart contract to hold custody of both assets for the transfer to occur.
  • Provide settlement finality ↓
    General purpose blockchains like Ethereum depend on probabilistic finality and never entirely finalize transactions. Polymesh provides settlement finality through the GRANDPA finality gadget, through an industry-led governance model, forkless upgrade process, and comprehensive compliance validation framework. 
  • Prevent airdrops and unwanted transfers ↓
    Polymesh’s approach to asset transfers eliminates ongoing regulatory concerns over airdrops (tokens appearing in user wallets unprompted) and the associated AML and taxation implications. Because users are required to affirm settlement instructions before tokens appear in wallets, custodians can be confident they aren’t holding unaccounted for assets.
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Intentionality and extensibility

Safekeeping

Security is always top of mind when it comes to custody, but regulated assets present additional complexities, especially when issued or acquired by institutions rather than individuals.

Polymesh is purpose-built for institutional management of security tokens, and numerous mechanisms have been built into its core to help minimize external threats and maintain internal divisions of responsibility.

  • Portfolios ↓
    Built for enterprise, Polymesh lets issuers and investors organize assets into portfolios however they see fit and assign granular permissions. This structure allows large organizations to segregate duties and ensure each individual or organization can only access specific assets or perform specific actions, without compromising on compliance by using multiple accounts. Portfolios can also be used to efficiently grant custodial access to multiple assets.
  • Multi-signature ↓
    Usually, transactions are ‘signed’ by a single account. Multi-sig based accounts can be more secure because they require a combination of multiple keys to sign a transaction for it to be considered valid by the blockchain —acting as a failsafe against a single point of failure and spreading responsibility between multiple parties. When layered on top of a general-purpose chain through smart contracts, this functionality adds significant complexity, cost and processing time. Polymesh bypasses this issue by natively supporting multi-sig based accounts in its base layer.
  • Layer 2 friendly ↓
    Polymesh offers an extensible and modular framework that brings best-of-breed security token management capabilities and offers open integration with other proprietary solutions. Polymesh can connect seamlessly with bespoke safekeeping solutions to protect assets under custody from multiple angles.
Engagement and governance

Network Participation

It’s important to have a seat at the table—and Polymesh’s network participation model ensures that custodians and their clients are able to engage in decision making and share in rewards.

  • Node Operation ↓
    Custodians (and other regulated financial entities) can earn rewards for the proper writing of blocks, and benefit from a purpose-built blockchain without creating one from scratch.
  • Governance Council ↓
    Polymesh brings together a council of key stakeholders to review Polymesh Improvement Proposals (PIP) submitted by committees or token holders, find consensus, and chart a path forward for its future development. The ability to direct the evolution of mission-critical software presents a major leg up over a traditional ‘vendor’ relationship.
  • Staking ↓
    Institutions are becoming increasingly interested in staking and the rewards it can offer. Polymesh allows users to stake on operators, and both are rewarded or fined by the network based on blocks being added to the chain and fulfillment of their role.

With traditional proof-of-work blockchains, rewards for securing the chain and the ability to participate in the direction of the chain are out of reach for most token holders. Polymesh’s proof-of-stake consensus mechanism and on-chain governance process opens these systems to an entirely new audience.

A philosophy of expertise

At Polymath, it’s our approach that sets us apart when providing the best solutions for our white labelers, issuers, and service providers. By bringing together leaders in capital markets, blockchain, and scalable software, we’ve focused our expertise on building the technology and infrastructure to act as the backbone of the security token industry.

But when it comes to security tokens, we know that’s not enough. That’s why we’ve scoured the financial services industry to create an ecosystem of service providers—KYC/AML, legal firms, broker-dealers, custody agents, and advisory service providers that add years of proficiency in their respective fields. Working shoulder-to-shoulder with our service providers, we’re able to bring all of our respective knowledge to the table to take issuers from security token creation to issuance and beyond.

Join the Polymath
Ecosystem

About Polymesh

Polymesh is an institutional-grade blockchain built specifically for regulated securities. It streamlines antiquated processes and opens the door to new financial instruments by solving regulatory challenges with public infrastructure around identity, compliance, confidentiality, and governance.

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Identity

Securities issuance and transfer require a known identity, but most chains are built for pseudonymity. Polymesh uses a customer due diligence process to ensure all actors on the chain are verified.

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Governance

Contentious forks in the chain present significant legal and tax challenges for tokens backed by real assets. Polymesh uses an industry-led governance model to prevent hard forks and guide the evolution of the chain.

Compliance

Solutions built on top of general purpose blockchains struggle with processing the complex logic needed to comply with regulations. Polymesh builds compliance into the chain, enabling faster processing and lower protocol fees that can scale as demand and complexity of regulation grows.

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Confidentiality

Most market participants need their position and trades to remain confidential, but anyone can see holdings on general purpose blockchains. Polymesh has engineered a secure asset management protocol that enables confidential asset issuance and transfers.

Polymesh for Custody Roadmap

Polymath is continuing to build out its solutions for custodians. Take a look at the roadmap below to see what’s in the pipeline. Please note that dates and features are all subject to change.

February 2021

Corporate Actions

 ↓ 

Corporate actions represent a significant administrative cost and source of potential errors. This release will allow custodians to further automate corporate action management.

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March 2021

Governing Council access

 ↓ 

This UI gives Governance Council members a simple interface to interact with the chain and with each other to gather information and make decisions.

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June 2021

External agent

 ↓ 

External agent functionality allows issuers and investors to assign custodians (and other agents) to manage or service assets in specific capacities.

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September 2021

Layer 2 Solutions

 ↓ 

With the launch of Layer 2 Solutions, users will be able to create their own proprietary extensions and combine them seamlessly with the broader Polymesh infrastructure.

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 September 2021 

Confidentiality

 ↓ 

With this release, Polymesh will be able to offer the trade and position confidentiality that capital market operations require.

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September 2021

Foreign transfer requirements

 ↓ 

This feature allows users to automate compliance checks for foreign transfer requirements and to process cross-border transactions more efficiently.

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December 2021

Legacy integrations

 ↓ 

These integrations allow Polymesh to communicate with legacy messaging and information systems like SWIFT and FIX.

Ready to use Polymath?

Bring easy creation, issuance, and management of security tokens to your clients.