Dedicated to enhancing the security token sector, Polymesh is a layer 1 blockchain that operates as a public permissioned network. By employing its utility token, POLYX, Polymesh effectively incentivizes and penalizes participants in the blockchain ecosystem, thereby bolstering overall security. Moreover, POLYX serves as a catalyst for governance and staking activities within the ecosystem.
Basics
Tokenized securities have emerged as tradable financial instruments, imbued with tangible value in the real world. This groundbreaking development has paved the way for unprecedented growth within the securities market, which boasts a staggering valuation of hundreds of trillions. By embracing tokenization, the market stands to benefit from enhanced efficiency, transparency, and an array of other advantages.
In this transformative landscape, security tokens play a pivotal role. These tokens represent the tokenized form of securities and are issued on specialized blockchains like Polymesh. Positioned as an institutional-grade blockchain, Polymesh stands out for its tailored design, specifically catering to regulated assets such as security tokens.
Polymesh
Designed specifically for security tokens, Polymesh represents a layer 1 public permissioned blockchain that revolutionizes the concept of digital contracts for fractionalized assets possessing real-world value.
The network operates on a public permissioned basis, ensuring accessibility for all viewers. However, to actively engage in the blockchain, participants are required to undergo a thorough identity verification process. This comprehensive verification applies to a broad spectrum of actors within the chain, encompassing issuers, investors, stakers, and node operators.
Of notable significance, node operators must hold permissioned status and obtain licenses as financial entities. This stringent requirement serves to bolster network security, as these identified entities assume greater reputational risks than anonymous actors.
In a unique blend of features, Polymesh empowers market participants to benefit from the advantages of both private and permissionless networks. This distinctive approach offers an amalgamation of trust in the network's integrity while upholding an unwavering commitment to transparency.
How Does It Work?
Within the layer 1 blockchain ecosystem, node operators and stakers collaborate harmoniously to fortify the network's security and validate blocks.
A prime motivation for node operators to diligently validate blocks stems from the enticing reward system involving Polymesh's utility token, POLYX. By successfully validating blocks, node operators garner POLYX tokens as a form of recognition. Concurrently, stakers play a pivotal role by staking their POLYX on node operators, heightening their probability of selection for the validator pool within a 24-hour timeframe. Subsequently, after node operators collect a commission capped at 10%, stakers receive POLYX tokens as their share.
The security of Polymesh is anchored in the implementation of a Nominated Proof-of-Stake (NPoS) consensus model, a framework developed by Polkadot. This innovative model establishes the network's roles, rules, and incentives, thereby engendering enhanced security measures. By imposing substantial costs and complexity on malicious behavior, the NPoS model effectively deters such actions. Consequently, node operators and stakers find themselves subject to rewards or fines in POLYX, contingent upon their performance within the network.
Fee Structure
In the realm of public permissionless blockchains, the fee market is a dynamic landscape characterized by rapid fluctuations within seconds. When users vie for blockspace to execute code or store data on the blockchain, the resultant demand surge invariably leads to escalated fees.
Contrasting this trend, Polymesh has implemented a mechanism that ensures transaction costs remain stable and affordable. By pegging fees to the on-chain weight (measured in bytes) and complexity of each transaction, Polymesh maintains consistency. The rate of fees can be adjusted under the authority of Polymesh Governance, a democratic system comprising the Polymesh Governing Council and POLYX holders.
In the Polymesh ecosystem, the Polymesh Governing Council assumes the responsibility of determining and imposing protocol fees for specific native functionalities. One example of such a fee is the reservation of a token ticker. The payment of fees follows a 4:1 split ratio, with the Network Treasury and node operators sharing the burden. The Network Treasury, overseen by Polymesh Governance, utilizes these funds primarily for network enhancement and security purposes.
Why Is Polymesh Unique?
In the domain of security tokens, Polymesh stands out as a distinctive layer 1 blockchain, setting itself apart from the majority of projects that operate as layer 2 endeavors on established blockchains such as Ethereum or Solana. Polymesh, on the other hand, is an autonomous layer 1 blockchain.
Through its robust infrastructure, Polymesh envisions an enhanced security token industry, aiming to tackle various obstacles related to governance, identity, compliance, confidentiality, and settlement. By addressing these challenges head-on, Polymesh seeks to revolutionize the sector and establish itself as a catalyst for positive change.
Governance
Polymesh capitalizes on the Substrate framework, utilizing seamless upgrades to adopt a forkless architecture, ensuring a single version of the chain persists. With an on-chain governance model, a council comprising essential stakeholders possesses the capability to swiftly address any concerns or challenges.
Identity
Diverging from the norm of open participation in public blockchains, Polymesh implements a mandatory identity verification process that generates an on-chain identity for each individual or entity engaged in the network. Consequently, on-chain interactions can be effortlessly traced back to identifiable real-world entities.
Compliance
At the core layer of the blockchain, Polymesh incorporates the intrinsic ability to create and manage security tokens. Optional features such as compliance and rules can be automated and enforced at the token level through the utilization of smart contracts.
Confidentiality
Polymesh introduces the MERCAT protocol (Mediated, Encrypted, Reversible, SeCure Asset Transfers), which facilitates the issuance and transfer of confidential assets. Users can securely uphold trade privacy while Polymesh simultaneously maintains compliance and transparency.
Settlement
Polymesh's on-chain settlement engine, along with two-way transaction affirmation and near-instant deterministic finality, enables instantaneous settlement for both on- and off-chain assets. This streamlined process ensures efficient and prompt completion of transactions.
POLYX
POLYX serves as the native token of the Polymesh ecosystem. It falls under the category of a utility token in compliance with Swiss law, following the guidance of FINMA, the Swiss financial regulator. The utilization of POLYX encompasses several key functions, such as governance, chain security through staking, and the creation and management of security tokens.
Governance
Polymesh Governance serves as the facilitator of governance activities within the network. Any verified holder of POLYX can actively contribute to shaping the future of Polymesh through two primary means: by submitting a Polymesh Improvement Proposal (PIP) or by casting votes using POLYX. When submitting a PIP, the user is required to bond POLYX to it using Polymesh Governance. Once a proposal gains approval, it undergoes a voting process by the Governing Council, ultimately leading to its implementation.
Staking
Verified POLYX holders are eligible to participate in staking by bonding their POLYX tokens to a selected node operator. This act increases the operator's chances of receiving rewards within the network. By engaging in staking, POLYX holders actively contribute to the overall security and stability of the Polymesh blockchain.
The Polymesh Ecosystem
Within the vibrant Polymesh ecosystem, various entities have joined as active participants, including established cryptocurrency exchanges, experienced players in tokenization like Polymath, and companies with substantial portfolios of security tokens such as RedSwan. To foster continued growth and advancement, the Polymesh Association has devised two programs:
- The Grants Program: This program aims to encourage individuals and businesses involved in building open-source functionalities on Polymesh. By providing grants, the Association incentivizes developers to contribute to the expansion and enhancement of the ecosystem.
- The Ecosystem Development Fund: Businesses that possess closed-source technologies and integrate them with Polymesh are eligible to benefit from the Ecosystem Development Fund. This fund serves as a support for their integration efforts, fostering collaboration and innovation within the ecosystem.
To facilitate seamless integration and provide comprehensive resources, Polymesh offers a wealth of information for developers. This includes access to the Polymesh SDK library, which assists in the development process. Additionally, dedicated support channels are available to ensure a robust and engaged community.
Conclusion
The Polymesh team is actively engaged in various endeavors to enhance the security token space. In addition to their primary focus, they are diligently working on multiple fronts, such as bolstering stablecoin infrastructure, integrating NFTs, ensuring confidentiality through the MERCAT protocol, and streamlining user onboarding processes.