ICOs are attractive. They have the potential to 100x or more.
But they’re also incredibly risky.
Not just for the investors, but for the broader finance and investment community, too.
First off, a bunch of them are downright scams.
A ton also violate security laws in the U.S. That means even if they’re a short-term success, they’re a long-term risk.
And they’re threatening to bring more scrutiny over all the cryptocurrencies.
Polymath is the antidote. It’s a platform that helps companies issue securities tokens that allows for security to be baked into the process.
In other words, people are incentivized to bring new blockchain financial products to the market.
That should provide increased liquidity to the marketplace, on top of making regulators happy.
Plus, only verified buyers can purchase or trade these security-based coins.
So there’s greater marketplace visibility, resembling more traditional securities markets like the NYSE — without all the additional paperwork (still).
But is that a good thing or a bad thing?
Here’s my take on whether Polymath can become the next 50X coin (or not).
I stumbled upon security-baked coins after researching Ethereum’s ‘smart contracts.’
These create a kind of escrow, so funds moving back and forth are more secure but also more fluid. Automatic transfers and payments can take seconds, for example, instead of days like traditional banking systems.
Right now, you also have scammy coins bringing heat to the ICO market.
Increasing attention is good because it brings in more money. But it’s bad when regulators start seriously addressing some of law violations that many are probably already guilty of.
Just a few days ago, the International Monetary Fund chief Christine Lagarde says it’s only a matter of time before cryptocurrencies come under government regulation.
So diving deeper into both smart contracts and the potential threat of increased regulation led me to find out more about security tokens that actually encourage transparency.
That’s where Polymath kept coming up.
Polymath wants to do for Security Token projects what Ethereum did for ICOs and digital tokens.
Since then, I’ve been pouring over the technical details behind whether Polymath is nothing more than a hedge on the ICO market, or if it’s the next big 50x coin platform.
Security tokens, in comparison, are more like traditional financial assets that are often regulated.
Currently, the app market is twice the size of security tokens. However, Polymath expects that to flip over the next decade, with security tokens being 20 times bigger than app tokens.
They’re betting that asset-backed securities will eventually be perform better due to:
The key difference here is that Polymath’s use of smart contracts invites “bottom up” restrictions, as they put it.
What does that mean?
Most financial markets are overseen and enforced by a central agency. Think about how the SEC governs all stock and bond markets.
They create legislation that gets forced down, so all companies and investors involved have to follow along. Or, they risk getting barred from the process.
Shady ICOs are inviting the potential for this exact same regulation model right now.
Polymath is looking to flip that upside down, however.
Instead of a central body dictating from afar, Polymath wants attorneys or government officials to be involved in the process from the very beginning, when a new security token is being issued.
Done right, this could help side-step the need for an SEC-like agency to get involved. And it could ultimately lead to a more legitimate blockchain market that can reach the mass market, faster.
New security tokens would already be regulatory-compliant from their issue date.
There are also a few checks and balances that are baked into the process.
A Security Token Offering would require all coins to adhere to the same ‘template.’ That way, new issues could simply adopt a standard, working framework.
Each template would have its own history and legitimacy that could be, so investors can get transparent information about each before investing.
In addition, Polymath will also add transparency to buyers, too.
That would do two things.
First, it would help police any bad actors. But second, it could also help add investment rules for individual Security Tokens.
Think of how the SEC uses a Accredited Investor classification to restrict certain asset classes.
In theory, Accredited Investors are more sophisticated and have less to lose on potential high-risk, high-return investments.
The same model could be applied to the STO market, except, no SEC!
Interestingly, this model also rewards not just developers but also lawyers who help co-create this new ecosystem.
Polymath will reward them with tokens to help improve the network, while both issuers and investors will pay fees to keep it running smoothly. So in theory, it should be a self-sustaining platform.
The Issuer can create a ST and add their own issuance details. They’ll use a smart contract and a “Create-A-Security-Token Wizard” to get up and running within just a few minutes.
You can see it on their site right now. Just click “Create” and you’ll be able to punch in company details
After taking some of your company’s basic data, you’ll be able to specify the type of investors you’re looking for, from their location:
To whether they need to be accredited or not:
Then, it gets reviewed.
“Polymath Legal Delegates” can double-check regulatory compliant issues and then propose which templates would work best in each scenario.
Investors can request access to new Security Tokens, instantly receive KYC requirements, and go ahead with the ST offering module.
So it brings together Protocol, Legal, Application, and Exchange layers to not only increase transparency or compliance, but also liquidity.
There are a few reasons why this is all important.
It’s only a matter of time before traditional asset-backed securities end up on blockchain technology. The security and efficiency Pros far outweigh the potential Cons.
Polymath is thinking bigger, then. They’re looking at how to involve private equity, VC money, or even derivatives to the platform with this all-in-one, Holy Grail of liquidity, decentralization, security, and legal compliance.
And liquidity might just be the key, here.
A massive downside to most blockchain securities is the fact that most exchanges are terrified of giving away too much information behind tokens that would only invite regulation.
Polymath is betting big on Security Tokens because they think a more regulatory-friendly framework can get around the primary risk that holds increase liquidity back.
They’re trying to provide an ‘off the shelf’ toolset for regulation from the initial offering. That would increase legitimacy, but also make it easier to both issue and invest in seconds.
The self-sustaining model should help organically grow a decentralized, active community.
And as a result, Polymath would all of a sudden become not just the first ST exchange, but the biggest and baddest, too.
Sounds good, right?
Of course. But there are a few issues.
Here’s what I believe is currently holding it back from reaching its potential.
To their credit, the SEC does raise one big risk with ICOs. International trading complicates many problems, which an opaque, anonymous market only amplifies.
It’s like comments on YouTube. Funny to scan every now and then. But brutal because there’s little-to-no ramifications. And not so funny when we’re talking about your money.
Which is why the SEC has largely taken a “be careful, but you’re on your own for now” approach for now.
Gibraltar, on the other hand, just announced new regulations coming to ICOs in their overseas British territories.
Their big problem? They want investors to know exactly what they’re getting into before buying. They want “adequate, accurate and balanced information” to help protect the little guy.
And the explosion of ICOs going from only $100 million in 2016 to $3.7 billion in 2017 was apparently the flag.
That type of interest has understandably made its way to traditional financial markets as a new vehicles for bonds, etc. Security Tokens help provide some of the information Gibraltar is seeking with its KYC/AML/Accreditation baked into the process.
Currently, one POLY (unit of the Polymath Network) is up around 30% on major exchanges at $1.03, which equates to around 0.00011114 BTC or 0.00113439 ETH (up against by around 20%).
Not bad for a coin that literally didn’t exist 90 days ago.
A couple other positive signs:
Polymath just announced a partnership with tZero, an Overstock subsidiary.
And despite being a brand new cryptocurrency, the Polymath Network subreddit already has 1,645 active members.
One reason for the interest is that it’s led by Trevor Koverko, technology entrepreneur and cryptocurrency investor. Koverko was instrumental in bringing Bitcoin, Ethereum, and Shapeshift to the market.
To me, it’s the perfect hedge against ICOs.
Again, let’s go back to traditional markets.
Generally speaking, prices of bonds and stocks have an inverse correlation.
A lot of it has to do with investor appetite. Stock prices offer greater potential for appreciation during the good times. But during the bad, guaranteed interest payments look a little more enticing (not to mention, less stressful).
That doesn’t mean one is always better than the other, necessarily. Or that you should be over-allocated in one direction or the other.
All it means is that you can generally expect prices and trading to go in different directions.
POLY’s are up almost 20% against Bitcoins right now. Which also just happens to coincide with Bitcoin values being halved in just a short time.
A regulated, transparent Security Token is the perfect hedge against volatile, anonymous ICOs that will continue to be put under more and more pressure over the next few years.
It makes perfect, logical sense that there is a shift towards securities tokens as these are regulated offerings with mandatory.
Sound interesting? Let’s check out how you can
You can also get a wallet software directly from the Polymath Network.
You might also want a hardware wallet, like [ENTER DESKTOP WALLET AFFILIATE], or a mobile one, like [ENTER DESKTOP WALLET AFFILIATE, to increase your own security.
Again, you’ll need to have both identify and accreditation status verified by a KYC provider before buying. However, identity isn’t recorded in a transaction due to the smart contracts — only your Ethereum address and provider.
The smart contract will contain details on providers and issuers, and your information when the transaction is being completed. This validation process can provide for audits after the fact.
And the smart contract will control any of your own investing restrictions or trading with other investors who’ve also been validated.
Let’s take a step back for a second and make things real simple.
The blockchain is real. More and more traditional securities will want to get involved.
Not to mention, the massive opportunity ICOs have provided new companies to raise capital.
BUT, let’s be honest:
ICOs are also going to be regulated to shit (pardon my French).
Unfortunately, it’s just a matter of time before someone — likely, the SEC — to step in and take over.
Many new ICOs are already violating current security laws. So they’re asking for it.
The Polymath Network’s Security Token does present a silver lining, though.
>> Led by one Trevor Koverko, of the OG’s of the crypto world
>> Developers and attorneys are rewarded for evolving the platform, increasing decentralization
>> A bottom-up approach is provided for regulators to apply conditions from when a security is issued
>> Template histories and credibility can be tracked over time to continually improve the system
>> Investors are also verified and can be accredited prior to purchasing
>> Security Tokens can act as a hedge against ICOs
>> Global liquidity should increase as a result of greater adoption from the above issues
My price prediction? $50 per POLY by end of 2019.
But of course, this is all open to debate.
The Polymath network is brand-spanking new. We’re just in the very early stages on this thing.
It’s going to take some time before it gets off the ground.
So what’s your take?