A Canadian company hopes to be a trailblazer in making securities a reality on the blockchain, easing the path to initial coin offerings in a legal and regulatory environment that just isn’t set up for ICOs.
Polymath Inc wants to be a one-stop shop for issuers of tokens that have similar properties as financial securities. Equities, bonds, venture capital and global currency live on outdated platforms that were designed in the analog era, according to Polymath’s website.
In less than two years, companies have raised almost $2 billion in ICOs, with token prices doubling in a week, and often falling just as fast, Bloomberg reported. Companies have been able to make millions with just a white paper and a website. Bitcoin, the No. 1 cryptocurrency, has more than tripled in value in 2017, raising concern of a bubble.
Startup founders, especially those from underrepresented groups historically excluded from venture capital, are abandoning traditional avenues for raising capital. Some, like Atlanta-based Patientory, have raised millions of dollars in two or three days by issuing digital tokens in initial coin offerings.
ICOs are an alternative, unregulated way of fundraising enabled by blockchain technology. Investors buy digital tokens in exchange for their financial contributions, which can then be used to allow access to the finished product, act as a kind of voting power, or for other purposes.
They’re one of the hottest tickets in tech circles, Business Insider reports:
To those in the crypto space, these are the early days of a new technology revolution — while detractors argue we’re in the heart of a giant bubble, and people are going to get hurt. Others argue both might be true.
“This is both one of the most ridiculous bubbles in history and a genuine breakthrough,” Simon Taylor, cofounder of London fintech consultancy 11:FS told Business Insider. “And as a genuine breakthrough, it’s a breakthrough because there are new ways to fund and monetise the building of infrastructure that is shared, and that to me is really exciting.”
There are two categories of tokens.
Polymath is betting that security tokens will dominate the blockchain universe. The app token market is $100 billion in 2017. Polymer predicts an app token market cap of $500 billion by 2027.
Founded in 2012, Polymath is headed by Trevor Koverko, who started in Bitcoin and was an early investor in Ethereum, and a seed investor in Shapeshift.
The platform doesn’t require advanced tech knowledge, the proprietors said. It guides users through every step from creation, to fundraising, to secondary-market trading while complying with ever stricter regulations, according to a beta version seen by Bloomberg:
If a platform like Polymath gains steam, it could magnify the consequences of the booming world of token sales, which has spurred the rise of more than 800 coins. The digital fundraisers have given entrepreneurs greater access to capital and opened the tech-startup scene to a broader investor base, while also providing plenty of opportunities for fraud. The ease at which companies could issue tokens has the potential to raise the already high levels of skepticism surrounding the offerings.
Polymath says it’s the most vital blockchain innovation since Ethereum. It interfaces between financial securities and the blockchain from creation to fundraising to compliance issuance, guiding issuers through the complex tech and legal process of a successful token launch. Polymath powered issuers can issue tokens that function like traditional securities that can pay dividends, structure management fees and interface with global regulatory bodies via embedded smart contracts.
The Polymath platform is set to launch officially on Oct. 1, and hopes to enable financial companies to launch their own asset-based securities easily and inexpensively.
Companies that have begun the listing process with Polymath include SummerHill, Canada’s largest venture capital firm; Skyline Capital, a real estate investment trust; and Dominion Lending Centres, a mortgage broker network.
Polymath said it is targeting the multi-trillion dollar global securities market by “doing to securities tokens what Ethereum did for app tokens.”
Polymath Tokens (POLY) will be used by platform users including issuers and investors to access the network and pay for services, Coin Journal reported.