CryptoBasic Podcast

Your source for all Cryptocurrency information, made for the novice investor. 

Right now,

Karim:

there's, a lot of serious companies that want to do a nice ceo type launched through the blockchain, but they want to adhere to regulations, so polymath wants to merge these two works.

Karim:

That's. The mystery thanks for tuning in to this edition of the crypto basic podcast i am michael laki in today's topic is going to be polymath. Wanna one for this episode? I'll be joined by our own polymath on the crypto basic team, karim bouquet.

Mike:

Hello, everybody.

Karim:

Thiss episode is part of our wanna one serious, just a reminder that any of our episodes, from the one on one serious communities to in any order and at any time they're independent of each other, please give them a download when you can so let's get started, shall we cream?

Mike:

Yeah, let's, do it, man, why don't we just thought, touch on the vision that polymath is trying to accomplish.

Karim:

Right.

Mike:

So the big summary of it is, as they would describe it, they want to facilitate the primary issuance off security tokens and also restrict the secondary trading of security tokens. So basically, they want to provide a blockchain i seo model that adheres to the regulations of the stock world, so that people that are trying to have similar tone i seo experience. But like a security token experience, they could do throws through the proper regulatory processes. But while adhering, you know, it's, still using block change, still using and using polly on the poly token as a central place, or a standardized form through which to do that, that sounds pretty high end.

Karim:

That sounds like it's going to be tough to accomplish and something that could be very useful for the space in general. So why don't we move over to the history and kind of get started on how this began?

Mike:

Yes so this will be an interesting section for this particular token because as a token the history of the token itself there's not much to cover because we're talking about a very young project right that's kind of something we encounter regularly esso i could say that the white paper was written by a german in trevor cover co and chris houser who are also the ceo the leaders of this project based on the teams but what's interesting is when you read the white paper there's a little bit of real world history that they talk about in their white paper and that is relevant to address here because they're trying to take riel regulations and comply to them so the historical events so that they mentioned the white paper are the following first of all there's the bubble act which came from england the original southsea company basically it was this first stock bubble basically where a company went up crazy and value the valuation one ridiculous the founders of the company he cashed out all their shares then it plummeted eighty three percent and there was all kinds of economic chaos so the first act that would regulate these types of tokens was thie bubble act which required companies to get a royal charter before selling shares and here i think royal charter we could just to take it to interpret like you have to register, you have toe let everybody know what's going on, right you can't just go on sell shares number two in the nineteen twenties we saw a lot of companies especially in the united states that were selling securities with incredible promises they're not providing evidence about what they are actually doing is a business or they're providing fraudulent evidence so there was a method put in place to prevent that and it was called the securities act and the securities and exchange act which essentially made sure all right you have to give investors information it has to be true information there's going to be an entity that's going to regulate that there was the securities act of nineteen thirty three which was the one that required investors received financial information concerning the securities it prohibits deceit misrepresentation and other fried so ah lot of times by the way mike you know we always talk about law enforcement in the united states and everything this is one of those law areas that does tend to get enforced because this is about protecting investors and you know what go with the united states and the you tend to be pretty good on investor protections and in the last one is the securities exchange act of nineteen thirty for which regulates the secondary sale of security so this is after a company has decided to go public and sell their shares to the public this added layers of regulation said okay we're also going to put a limit on who can buy these after the fact so long story short the zara siri's ofthe regulations that have been passed in the riel legacy world that were in response to crashes or abuses or market inefficiencies and now what polymath is saying is basically this i seo boom is exhibiting a lot of the similar characteristics and some of that regulation is going to have to come into place right now there's a lot of serious companies that want to do a nice ceo type launched through the blockchain but they want to adhere to the regulations all of these regulations all this security exchange act and securities act and bubble act so polymath wants to merge these two worlds that's the relevant history yeah, something a great idea i mean, i know a lot of people are very hesitant to break into the space due to the regulations and things like that.

Karim:

So if there is a space for people to go to where they're little more comfortable and a little more confident that the regulations are going to be met, this could be a very interesting project that's certainly what they're hoping for and especially to make sure that they are not going to get in trouble later they're raising money and selling tokens is basically the easy part, but a lot of these businesses have to make sure for that, you know, this is all going to be above water yeah, it's very tricky because some of these other larger market cap coins that potentially may not be in compliance it's going to be so hard for them to charge them for things that are in the past where it was very unregulated for awhile.

Mike:

I'm very curious what five and ten years look like as faras regulatory standards or concerned yeah, i agree i think there might have to be the creation of some new regulatory standards to account for eye ceos and block any general but for the time being i think polly maths is saying here here's the existent legal framework and if you want to operate within that we are a solution that incorporates the blockchain so of the top, your head.

Karim:

Was there anything in the history section that you felt like?

Mike:

I could have also been added?

Karim:

I mean, just because you're history guy, was there anything that came to mind that you also would have liked to have seen on there? No, i mean, i think they covered the major's.

Mike:

I'm sure there's a lot of you know, the last thing they covers. Nineteen. Thirty for and there's, no doubt in my mind that there's been all kinds of relevant first past.

Karim:

Yeah, but i think this is just them given an introduction, a big picture introduction ofthe why their token existence is justified.

Mike:

Basically. And i think that they're trying to provide a little context here that says, hey, look, there's a reason why this regulation was put in there in the first place and it's been around for a long time. And we want to bring that to block chain or, you know, bring an opportunity for people that want to adhere to those regulations to do so.

Karim:

Right? You know, the one thing that i was thinking about earlier, i feel like there's been other sectors that have been given forgiveness on past regulatory complications when it was very unclear, and i guess that's the risk that a lot of these other cos they're taking is they're just hoping that the new regulation comes in and says, hey, this is how we want you to do it going forward. I know this is how they're handling with some of the exchanges with, you know, the new york was the guy that was sending letters out all the exchanges and trying to get them out new york attorney general, yes, like i feel like some of those types of conversations they're going to involve.

Mike:

Listen, we know there wasn't a clear path to do it before, but this is how we want you to do it going forward.

Karim:

This is the risk that polymath is trying to avoid, right and as an interesting side note not that it's super relevant to this episode, but that attorney general actually had to resign recently because of a big scandal involvement involving his treatment of women.

Mike:

So it will be interesting to see if whoever takes on the office is going to continue to pursue that line of questioning or, you know, you never know like, new management, new properties, new rights, right?

Karim:

New people stuff in there.

Mike:

It's.

Karim:

Unfortunately, so, i'm sure. Hopefully we can cover that on the flagship next week. But let's, move on to the features and structure section, and same or polymath focused.

Mike:

Excellent. I like it when you use your hosting powers to keep us in line, mike all right? So a little bit of background and context which i think will be valuable and understanding where polymath will attempt to add valley, right? So the first thing to know is that when a company decides to go public it's usually done through something called an underwriting process and what that does is you have an investment bank that tries to determine the price and they bared the risk of all the profits taken generate from the spread so let's say that mike was saying, hey, i wantto my company crypto basic to go public instead of just going public and see what happens well normally happen is mike will go to an investment bank the investment bank will look at mike's business analyzing and say ok, mike, you're going to try to sell a hundred shares i think that the shares could probably go for a tte least ah, i don't know x y c, but we're going to offer you a dollar a share and then the investment bank is fronting the full hundred dollars for your hundred shares at a dollar a share and then when you go public, if the bidding process actually generates more revenue that's what the investment bank can profit off because they fronted the initial capital and they're making money on the spread so real quick, the investment bank basically low balls you an offer and they try to profit off it going higher and it's up to you to determine if you if the lowball offer it works for you or not.

Karim:

Sure, right, because essentially you're getting an idea and look, you're still going.

Mike:

You still want thes stock to outperform because you're probably not selling all of the stock and whatever the actual cell price goes for is going to affect the value of the stock that you still own, right? But, yes, basically, the investment banks job here is to figure out what they think they could sell for, to figure out a safe margin that they could front end, and hopefully not lose any money on the deal. So sure enough, lowball it, and then you actually go public, right? And then of course, there's also costs that are associate id with the issuance of the tokens, the compliance, the lawyers, all of the things that are associated so just trying to issue a security tokens. It's estimated that in order to be with improper compliance could take ah fia cost of five to ten percent of the total mother you're raising, which is significant, and even on the secondary market, which is mike has now launched the coins, i mean the tokens or the security securities i've bought them, and now i want to sell them to somebody else.

Karim:

Those tend to range between ah quarter of a percent and three percent, which are your transaction fees and etcetera.

Mike:

So the one thing that comes to mind based on that description is what crypto is.

Karim:

Overall. One of the many things that they're trying to do is remove middleman from the equation. And i mentioned to see. Do they provide a solution for the insurance, or do they kind of leave it on your own?

Mike:

So there's not so much the insurance part are you talking about the front correct ending okay, so in this case i would argue that polymath isn't so much getting rid of middlemen there not really getting rid of middlemen but what polymath is doing is trying to create a standardize way to do this process that brings all the people together but all of the main players are still main players so in this case the the legal let's say for example the legal representative that would have to walk you through the issuance of a security token is still relevant the people who have to do k y c verifications for securities they're still in there you're not getting where these people bali math is just trying to bring them all together in a way that can reduce fees overall and make it more efficient overall but not necessarily by getting rid of any particular member. Now as far as the front and insurance like the investment banker i believe that that's the only middlemen that they do get rid off by being able to say hey, we're going to bring it tio kind of like the i c e o model you know that you could go straight to the people so based on what we discussed before and that cost here's the solution that polymath wants to provide number one they want to provide a decentralized protocol to trade the security tokens they want to make it so that individuals and institutions can authenticate i d and residents and accreditation because remember some investments you have to be an accredited investor right so they want they want to have it so on their platforms somebody's providing those services and they want to help match the people who are trying to launch a token with the developers that can actually construct security offering and a smart contract for that actual token sale so polymath essentially wants to you bring a bunch of people together so actually i think what makes a lot of senses let's first name the participants in the polymath ecosystem just to get a visual right the investors are participants and the people who are issuing the security tokens are participants right so mike is issuing crypto basic securities and then anybody who wants to invest those are the main ones then you have your legal delegates those are super important here and there the rial legal entities that are offering their services to ensure that you aren't hearing toe all the regulations so delegates are going to be placing bids they're going to include their proposals of how they would structure that token sale on dh when i say babes i'm talking about like their bidding their feast they're saying this is how much we would cost so polymath in theory would have an open market place so that you as an issuer khun come and evaluate the different legal delegates that could do this process for you but they're going to be these are really legal entities thes air the people that you would really go for toe launch our security but they're doing it through the policy my platform and specifically with the understanding that this is going to be a security launched on the botching the other really really important player here are the k y c providers just a reminder k y c stands for know your customer so since one of the things that polymath is trying to do is get rid of the anonymity of the i c o model where anybody can buy and anybody can sell here polymath wants to make it so if there whoever k y c provider is that's on the network i could go to them through the polymath network on the polymath marketplace and say hey i need you to verify my idee verify who i am verify that i'm qualified to invest in this and then they would essentially once they validated they'll provide like a hashing proof that's connected to my theory um address so that i could now automatically be allowed to invest in the tokens that you know require k y c and just real quick mike the difference would be let's say i might get a k y c that says i'm allowed to invest but i'm not an accredited investor where's your k y c might say oh mike is allowed to invest he's in the u s and he's also an accredited investor so that if the two of us go to try to invest on a project where you have to be an accredited investor the system would automatically know all karim's ether address is not in a crate investor you can't participate mike you're good to go because you've already been verified yeah, it's, pretty interesting and that's.

Karim:

From what you understand, that's going to be all within the polymath network, right?

Mike:

Yeah, more or less, or you're gonna get.

Karim:

Is there a way to add some type of data to in the theory of madras and kind of store it on there?

Mike:

Yeah. They will they were going to add the hash oil like you don't have to have your personal information out there but the k y c provider is going to add to the address the proof that is necessary so you you could do it automatically but there are some every project has its neck positives and his negatives i do think that one of my negatives about polly math is it's funny you say that but it's it's bringing it all into one network like one ecosystem and they're trying to make it that and if they and if they can create that ecosystem there's going to be a lot of value but there is a very real way in which polymath is just trying to bring existing processes together and put itself in between but not necessarily adding a ton of stuff right but this could be automated and it could be worthwhile the last player by the way that i haven't mentioned are the developers the ones that actually create how a token is launched because don't forget this all has to be done through code like you're legal when you get a legal delegate and they bid and you choose ok this is the legal delegate that's going to represent me you guys are gonna have a lot of real world interactions when you have your k y c provider once you've selected okay this's the k y c issuer you're going to send them your riel idea rheal documents and there's going to be really back and forth but when you actually go to launch a token and each token is gonna have different restrictions like maybe oh this can only they're only released after six months or you have to do that is to say all that stuff has to be put into code so the other very important players are the people who are writing those codes to developers and one of the ways that polymath tries to incentivize developers to participate ease you can create a contract template and put it on the polymath ecosystem and then if anybody wants to use the template that you have which they might because it'll be cheaper than getting one done from scratch and maybe it's already been audited and approved the u the coder get paid any time that contract gets used kind of like a royalty so i think the goal here is to get a bunch of developers to provide all of the possible structures right so that it becomes easy and they're still getting paid my question is on the legal delegates.

Karim:

Does this work mohr, for the investors, or for the person trying to launch the coin for the person trying?

Mike:

Tow launched a coin.

Karim:

So it's, basically an assistant that says, okay, you want to launch a business? I'm a legal delegate, here's, what i recommend. So that's called a kind of interesting and even more so than you know what profession i thought about even those part not the same but to me it sounded like kind of like if you're trying to sell your business you're going to go through real estate person that specializes in commercial real estate right you're not just going to like go do it randomly so this is a person with the legal background they have knowledge of the jurisdiction that you're in they're going to advise you on how to structure it bah blah blah so the legal delegate works for the issuer of the security token that's was contracting them where's the k y c provider is really providing a service to the individual investor that's basically saying hey well go ahead and verify my identity go ahead and verify my accreditations so that i'm good to invest in the projects that i want to invest steem all of that is being brought together into these different marketplaces and part of the way that they want to add value to the marketplace is is by the nominating everything in poli tokens the polymath token right?

Mike:

So anytime that you're paying a fee anytime that something is going into escrow that's all being done in polly when there's going to be a k y c provider marketplace when you're paying the k y c or when they're posting their price they're going to post their price in polly and you're going to pay them in poly write the same thing with the legal delegate marketplace right all securities omise single thing that's launch has tohave a legal delegate they're going to help the azure go through all the steps all the legal processes that we just discussed so for each token that gets launch or created the delegates are going to see that that talking too strong to be created and they're going to be able to look at it give a plan of like how they would structure that token give their fee of what they would charge and then the issuer would be able to pick from all the possible delegates and like i told you with with the developer marketplace is the same thing people are putting up there smart contracts and you can either get a brand new smart contract that's going to cost something or you could use existing smart contracts and that developer would get paid a royalty in polly something that comes to mind right away with the legal delegate, i feel like that adds a lot of security to the likelihood of an i c e o being a scam, i think it adds a really important a layer of protection for the investor because somebody is sitting there with them from start to finish saying, this is what you need to do.

Karim:

This is your business model. I feel like if there is a notable scam it's going to be hard for to go through the legal delegate, in my opinion sure to thee and i agree with you and to the extent that initial public offerings are safer than ceos, so the legal delegate being in place, in my opinion makes it as safe but not safer, then a regular initial public offering, so it makes it less likely that, for example, that people who are raising all this money are just going to disappear overnight like we do see in some ice ceos that's going to be much less likely because they're working with legal representation.

Mike:

Now, could there still be scams? Yeah, sure to the extent that the regular world stock world deals with it, i'm just saying, i think this is a an interesting point of removal for a a problem that is notable totally.

Karim:

And this is why regulatory practices here are considered to be a form of consumer protection you know, like for example, we might not like it personally when it comes to accredited investors like oh you have to have a ton of money to be able to invest that sounds like b s but ah lot of it is also around protecting people that might not be familiar with investment and saying okay sure if you have this many investments or this much money you're on your own and do whatever you want right but definitely having a legal delegate is going to protect you from eggs scams or just outright money grabs so i agree with you mike that that's and that's part of what they're going for here so look i want to walk you through the process they did this in the white paper and i think that it helped clarify a lot so i'm gonna walk you through a couple of different processes a couple of different perspectives who would be using polymath so that we can envision how it works now remember i haven't mentioned this but polly methods anne rc twenty token and they intend to stay in the yard twenty token that means that they're built on the ethereum botching there's a building of them there's no menting there's no more poli tokens being created they are essentially functioning on ethereum secured by theory what was the total splay one billion, i believe.

Mike:

I think they're all ten billion.

Karim:

I could be wrong.

Mike:

I'm pretty sure they said to supply here was one billion.

Karim:

Ok, i don't mind that, but good.

Mike:

All right so let's start with an investor all right now let's say we gave the example before but mike's launching secure talking so let's say i want to invest in a token that's being launched on polly meth which is the crypto basic security token so the first thing that i need to do me karim is i need to have my i d checked by a k y c provider so i'm going to go on the internet i'm going to use a web interface to view what are the k y see options in the polymath ecosystem and they're all going to be there through smart contracts with their price their jurisdiction so let's say that i'm in colombia maybe i'm only looking for k y c providers that can du k y c in colombia immediately sorted by that maybe i'm in the us so i have a broader you know i could sort by cost whatever once i find a k wise he provided that i like for a price that i think is fair i can immediately hire them by sending polly to that smart contract locking in the rate and then that amount is going to go into escrow and then that engage starts the communication between me and the k y c provider i'm going to send them documents they're going to ask this this they're going to do what they're supposed to do when that process is finished they're going to produce a final hash that they're going to record on the block chain and that's going to allow me to engage in future trading because i've been verified now on the other side equation is my clock hee hoo who is the person issuing the security tokens for his company crypto basic so the first thing that crypto basic wants to do is there going to start with an ethereum transaction that's going to record the name the ticker symbol and a bunch of the other basic information once mike does that initial transaction which kick starts the process of a token creation then all of the tokens are created instantly believe it or not all the crypto basic tokens are created but you can't move them they're non transferrable you can't do anything with them because they're locked in until the legal representative the legal delegate process is completed so now mike has created the tokens they're sitting there doing nothing and he's going to go and look for legal delegates in the same way that karim was looking for k y c providers mike the issuer of the security tokens is going to go look for a legal delegate that will represent him and walk him through the process of creating the security token he's going to look at all the proposals all the costs that he's going to pick one once he actually chooses a bid and sends the poly to that chosen delegate then that relationship is going to commence and that delegate is going to make sure that mike does all the things that he needs to do and jump through all the proper hoops before they unlock those tokens for the actual token sale and this one i also describe but it's from the perspective of off the developer is ah security token offering contract that's a smart contract is called an sdo in their system and it's what controls the issuance and details off the actual token sail like a delayed release or maybe people can only have a certain amount of tokens maximum or whatever rules our associate id and you can save money by using a previously created in order to contract and the developer who made that contract is going to get paid a form of royalty so there's one billion total tokens in creation no more being minted and as you could see the way that they tried to create value for the token is that the token is necessary for all the services and everything is being the nominated through the token and by the way one of the things that polly matt does is let's see that i have now bought the crypto basic token security token well now if i want to sell it i'm also doing it on ly two accredited investors or people whose kyi see has been properly filled out and they have the same validation on their ethereum hash that i do right so since everything is the nominated in poly that's how they're trying to create the actual value for the token developers get polly for creating es dios issuers are paying out in poly investors are paying k y c with polly tokens and they're probably reselling in policy so that gives you an idea and that more or less covers the basic structure off how the ecosystem would work i'll add that there was a recent update they call it d toro version one point one that was released in mai and they just added a few more wrinkles it has better support with solidity it now gives issuers the ability to pause or freeze tokens for certain necessary scenarios like sometimes you have to freeze trading because like this happens maybe in the real world where company will have to freeze stock trading because of an important announcement that's coming so maybe for a certain amount of time it is they creates the option for what they call off chain white listing which has the users do a lot of the work you can make a security token indivisible so and you could make it so that you could sell a token into a quarter or a half zero point more more one or you could make it so that it can only be sold in once you can limit the investor count how many total investors can go into your project because there's jurisdictions where oh if two hundred people are investing then you're considered a medium business but once you have more than two hundred investors then you have to do all these other things so there might be issuers that want to a limit the total count of investors and even burning tokens can be done now through the most recent update that might be done for our reverse stock split oh if you want to eliminate a class of shares or maybe you have to reissue tokens so you want to burn the existing ones anyway those air all extra features that were created in the last update but i think that gives you a general outlook here of what paul the math really wants to do is for all these players it's just to create an entry point instead of doing their saying instead of doing an i c e o that's unregulated and you might have to deal with the consequences if you wanna have a regulated i seo and make sure all your customers have gone through their k y see and make sure that you have the proper legal work from a legal delegate then all of you come here use our platform denominator everything through polly and we're going to create a une efficient way for that ecosystem to exist so that's more or less than nuts and bolts of it yeah i mean, it seems like they've taken a lot of time and gone through every little detail a little bit more than some other projects have, especially when it comes to the regulatory sense and the future of what this space is going to be.

Karim:

There was something i came across here that i want your opinion on.

Mike:

Before we go to the pros and cons, how did they do there?

Karim:

I seo or an airdrop? How did that go, exactly?

Mike:

Okay. So they didn't do a nice ceo and they did something similar to ontology but too much lesser extent they on ly distributed one percent of their tokens and they did it through an air drop that essentially focused around joining their telegram but it was kind of ah like a free giveaway air drop from what i was able to come across, they gave away one percent of their tokens to people that join telegram i believe and they are still in control of ninety nine percent off the tokens and they're distributed there's not a lot of so as you could tell this is something that i was going to discuss is a con but there's not a lot of discussion from the team about exactly how all the tokens that they have are going to be distributed. There is a link to where you can go to their good hub and it shows a very literal small description, right? So founder's this, you know, fifteen percent and partners this percent and reserve this percent and marketing this present now. Okay, so how do they distinguish between partners and marketing or reserve and founders it's not very clear and they have control of almost all the tokens so that's kind of a negative, but from what i was able to research, there was no ice ceo or crowd sale, so take that for what it is and as we've discussed with other tokens, i think the the way the business model designed is much different with an i c e o versus an airdrop.

Karim:

I think that your response and i think we argue this on the ontology episode now, arguing that we just touched on it. But i think that your commitment to the community is a little bit different when you do an airdrop versus a public. So, yeah, i agree with that.

Mike:

I think ontology was the first project that made me even think about that idea or kind of, like even have to decide how i felt about it. But, yes, if you have only given away tall tokens as a project and you've never raised money from the public aion then yeah, i don't think you have the same level of responsibility to the public as a company that raised tens of millions of dollars from small investors. But you know, i'm still gonna have my, you know, you could call the nitpicking or things that i'm not.

Karim:

Sure, go ahead, move on to the pros and cons here, and, you know, we touched on the airdrop. First public sale probably falls in the tradeoff category. I think there's arguments, who made where that's good there's arguments to be made, where that's not as good. You know, one of the things that you have listed here, that i think it's super is, that this is a huge need for the space. There is tons of desire, too fit within the legal framework of the jurisdictions involved. What other pros or cons do you want to touch on right now?

Mike:

Yeah, so we'll go through the pros first, and you just hit on my biggest one. The big pro i think for polly, is that the question of how do we regulate i ceos? Or how do we make sure that we can have the security sail through the blockchain without, you know, the sec or the government coming down your door? That's a huge problem. And right now is the time because it's not like i ceos, were blowing up in twenty, sixteen, twenty fourteen and my guess is that ceos are going to be a huge topic of discussion in twenty twenty three when there's a more established system. So if there's a time to try to become the big player and in a space and solve this problem, then this is the time. And this is a big problem. So i think that that is the main pro that parliament has gone in his favor.

Karim:

You know, this was a little bit before both of our time, so i'm just gonna throw this out there and hope that you have an opinion on it. Were there these types of business is to transition other businesses to the internet era in the nineteen nineties, like, i feel like there had to have been right.

Mike:

Yeah, the differences, of course, that there's never been a system that's so fluidly could raise capital from the public. That's what i really think has made i seo is unique because if you transition your business to the internet, right, you just want to add a dot com or whatever. A lot of that stuff was internal now it was used to manipulate share prices. It was the old, just like now you had a blockchain, your stock to your name and in your stock tripled. I'm sure there was a lot of oh, where dot com now or we're going to have a website, but the problem of holy crap now somebody can just go and get hundreds of millions of dollars from a bunch of people by writing a white paper. I don't think that there's ever been a parallel to this other than like the first issuance of stocks before, like the bubble act and maybe that right, like we really have to go to pre modern times in my bed now or not pre modern times, but before all these securities and exchange regulations, so i guess one thing that i wantto kind of ask about is there a general number that a security token tends to offer, or is it just kind of case by case basis?

Karim:

Are you talking about value?

Mike:

Yeah, like it's not what i meant when i understand and this definitely could be wrong a security token, they tried to distribute some of the profits to token holders.

Karim:

I don't understand, yeah, they could have dividends, security tokens, you know, imply ownership over a company that so you can get that through a dividend process where the company's saying, we're going to directly distribute revenue this way this amount every quarter, but it could also be through the company taking its profits, re investing them in the company, and then that causing the token to increase in value and the theoretical position that you have a vote, those, you know, there's so many things that make it so security token could have a dividend or he could not security token could you know, maybe there there's voting shares, maybe their shares that don't vote.

Mike:

I'm not the most qualified person to know, but i know like a ton of businesses have class a and class b stock or voting stock or executive stock and there's different levels of rules that govern each one.

Karim:

Yeah, this is where my unfortunate lack of the financial world understanding could have came in handy, but, you know, look, i got friends that take care of that is anything else you want to touch on with the pros?

Mike:

Yeah definitely so another big pro for polymath is that they seem tohave excellent marketing and they have very good me stream exposure so these are the types of projects that are going to get articles on bloomberg they've had it on forbes financial post venturebeat so obviously that's an advantage because cracking the mainstream is not easy to do for most projects and whether it's because of their marketing strategy, internal contacts or private investors the bottom line is polymath is doing a good job of getting out there and getting out there to the audiences that they should be trying to get out there which are more mainstream they also have decent partnerships one other partnerships is with the open finance network there with them to try to sell the polymath power tokens on their trading platform they're also using trust route which is another blockchain project and they're using them for the security and verification protocol so this is what it gets a little bit of a trade off i mean those air good partnerships and their exposure and solution to promise these are all good things but this is where we get into one of my cons one of my cons is that there's no riel like i feel like everything that polymath and theories should provide they're really not it's all outsourced like you would think to yourself. Oh wow okay so just from reading the polymath white paper maybe glancing at it if you read carefully on you maybe not but if you just glance a polymath or you watch a video you see their marketing material you would get the impression that this is going to be the central hub where you're going to trade the tokens where you're going to sell them that's not one of things they have to outsource the exchange they have to outsource the k y c providers they have to outsource thie the developers and legal professionals there's not aa group of legal delegates that are specialized to work on polymath and then they're going to build off of that if there's any extra once right so in a way i don't see paulie math providing a central solution other than trying to connect a bunch of people together but without a tangible added value in such a way that like if you was an investor like i don't see that much about yes you want to adhere to the regulations but it just makes it so easy that it doesn't catch on if you don't get all the out of players you're basically saying i want to get all of these independent players to come on my boxing on my platform and use polymath as thie standard use it as thie denomination for all of their services but there's not like a central service that's being provided by polymath itself which i think would serve as a great anchor like if polymath had the exchange of the tope it's like afterwards we're going to be sold here then that's an anchor or if there was like a locked in team of legal delegates that could function then i feel like you're building outwards but with no anchoring i don't know if that makes sense you know this could be personal but basically they outsource everything and it's not like they have their own blockchain so since they don't have to build their own blockchain because it's a nearest twenty token and since they outsource every single service it's hard to pinpoint the tangible anchoring value added that polymath provides so my first thoughts are, this is the first project that we reviewed that has a heavy legal front to it.

Karim:

I don't have any experience in the legal field. I have some friends that are lawyers, and what i can tell is that that world operates very differently than most worlds you and i interact with. In a way a lot of law firms really are just hubs to do stuff for you in in a way, this makes a little bit of sense to me because this is its such an intimidating space that you don't like. I wouldn't even know where to begin to look for a legal delegate that could help me with this of other than google, perhaps, but right, if somebody were to say to me like, yeah, i would, i want to do this, but i'm nervous.

Mike:

This would be a really good, you know, way to send somebody that that really needs that mass adoption bridge to gap before they understand it as well, yeah.

Karim:

I agree with that mike what i'm worried about here is there's a very powerful network effect going on but i believe that the initial steep climb of trying to build that network is going to be very difficult especially because thie incentives for all the people that i have to join our really there if people have already joined so yes you definitely need legal experts are going to be like these individual hubs so it makes sense to me that you're just going to connect to the network but think about the first couple of tokens that are launching on this platform like here pauly math is going to be dependent on they partner with ah t zero and circle they're going to be dependent on those exchanges to be able to trade the platforms because polymath in a way doesn't want to deal with the legal responsibilities all the legal implications off trading the tokens so there in a way taking the easy way out by saying oh it's goingto we're just going to outsource this to these exchanges okay so what happens if those exchanges don't work out what happens if those exchanges don't attract any volume who's going to want to buy security denominated polymath like securities that can on ly be traded through polymath when there's a super limited number of customers that can participate already because of you i see but now uneven a smaller number the ones that are on polymath and they have to goto on outsource exchange i'm just not really sure and then like i guess what i'm really trying to get at here is this is a ecosystem that if it was all in place like hey we're coming in with this many k y c partners and this many legal partners and we're going to provide at least in exchange for these platforms to for these tokens to be traded but i don't know like there are other solutions right so the part that i'm finding a hard time seeing right now is if you're issuing a security token especially at the beginning if i'm investing i wouldn't want investor here because i'm gonna be limited on where i can sell it or how i can sell it later and i just feel like it's going to be tough to build the network if that makes sense i guess that's that's what it comes down to sure, i'm not.

Mike:

I'm not gonna argue that, and i'm gonna bring a little bit of ah, counterpoint.

Karim:

Just as a theory, let's, pretend we we're looking at the stock market back in the nineteen thirty three range when they talked about those two acts the securities exchange act in the securities act, you know, back then, if polymath a stock version of polymath were released, we would have had the exact same opinion because the regulation was so unclear. Things are not set in stone. One of the things that i wonder over time we look five years from now, ten years from now, what percentage of all exchanges people coins are going to be? S e c compliance that's hard for me to know. So what i think right now, years you might possibly be zooming in a little bit too much because there are so few options of legal delegates there's so few options of, you know, security legalised options, i think, and i'm hoping if this continues to grow, they're goingto create a much larger network over time need to be full time, and i'm sure there will be some full time, but i just don't think that it it needs to be something that's full process by tomorrow, no.

Mike:

Look i agree with that i and i understand that and it is very possible that i'm zooming in and and i think that in general the idea is positive i guess the the part that i'm grappling with is in many ways a lot of these projects seems to be removing middlemen and there's a very real sense in which even though i understand what polymath is trying to do, it has inserted itself as a middleman but that's fine because if it could do things more efficiently but my question from looking at this is saying to myself if somebody's trying to launch a security token why choose polymath and more importantly because i believed these things ultimately tend to be demand driven if i want to invest in a security token i want to make sure that i'm gonna be able to invest not just to make money but i'm goingto want to make sure that i have mobility around that so i don't know yet i wasn't able to find from the research if i buy the security token from polymath my going tohave resell options like what happens if that network doesn't grow? Can i sell that security token outside of polymath two people that have never been a part of the polymath network and if the answer's no then he makes that initial investment less likely and if there are an investor's flocking to the polymath network then issuers are going to hesitate to join the network now here's the thing it's very possible we discussed that one of the negatives was that they are holding on to ninety nine percent of the tokens one of the things that could change my mind or one of the things that i could see that turning into a positive is if the reason they're holding on to so many tokens is because they're going to have to invest so much money on incentivizing the initial creations off partners and ensuring that there is a good selection off legal delegates k y c providers etcetera to start attracting customers right because k y c providers are going to be selling their business so anybody will list on there as a bonus legal delegates yeah are going to be investing is a business so they're going to want to list there but are they really going to be able to attract the issuers and the investors to go into the polymath ecosystem and actually operate within that system that's i feel like that remains to be seen but i don't want to harp on that because this is like kind of my initial perspective we don't know how this is going to play out we could just sum that up by saying that this is going to be very dependent the value of this token is going to be developed is going to be dependent on the strength of their ecosystem and that ecosystem is going to be very difficult to develop not because polly matt doesn't know what they're doing or because they don't have a good idea but because this ecosystem is going to be very tough to develop especially i guess this is my main argument if you don't have an anchoring service if polymath was providing an anchor service that is on polymath and you go there for that thing i feel like it would be easier to have the other things built around it but they don't even have the exchange the exchanges not on polymath so you have to go through polly math to buy the tokens and sell the tokens but you can't buy or sell amon polymath it's a lot of outsourcing of everything that the project does all right so last too cons they're small but they're cons and i'm gonna mention them one is that if you look at their marketing material and if you look at a lot of stuff they say and social media the point that they try to push is that they have a strong community because of the amount of people on their telegram and the red flag there should be that the air drop was done by signing people up on telegram that's not an organic community i'm not saying that it's bad to pay to build to build a community like whatever you can but you essentially paid to get people to sign up to telegram you can't then take telegram that very same promotion and say hey look how strong our community is compared to the rest of the crypto space when it's clearly not an organic community it was a promotion and people signed up for free money and unless you're going to be able unless you're not going to be able to provide free money ah lot of those people are not active members of your community so it's a small negative where i'm not going to say that it's disingenuous because it's not when they point to how many people they have on their telegram they do have that many people in their telegram but to tout that as a strength as the strength of your community when you know that those numbers were driven by your air drop i'm not going to give you credit for having a strong telegram on that you know like i don't really think it's a point it should be bright about and then the last negative is their association with known scammer ty lopez who they had is one of their speakers also roger for apparently was associated with them and one of the conferences and he talk i'm not going to just say look ty lopez is a known scammer that's what he is his job is to be a hype man and to get attention from people who are not very educated so choosing him as a conduit doesn't speak well of the intentions of the people who are hiring him now here's what i will say they apparently got a very negative reaction to his image to initial ah like he was going to speak at a conference they had him as a investor or as a speaker and i guess they removed him i don't know what his relationship is to the project and at the end of the day tyler opus is not polymath the strength of polymath how well their ecosystem grows all that stuff is not going to be dependent on this guy being a part of the project so this is not a major khan and it's probably not even a medium khan but i will count it as a minor con that their team decided to associate with scare me scummy people as opposed to the many positive influences that they exist in this space that they could go on this kind of reminds me a little bit of when walton change screwed up their twitter situation and with their giveaway it's like it's, not the biggest deal in the world, but like, it seems so easy to just not have him so exactly totally agree with you.

Karim:

Is this a case of they didn't do their homework or they didn't care what the homework revealed or three?

Mike:

This is the part where would be the worst interpretation?

Karim:

The best interpretation is you guys didn't do your homework, and you didn't know this guy wass, which is forgivable but sucks, but the wars interpretation is you guys did know who this guy was, and you do know what he's good at and you got him for what he's good at ah hype man with very low ethics whose only job is to try to get money from people who admire him.

Mike:

So if that was your goal, then i do think that that doesn't reflect positively on the project, so i'm just throwing that out there, you know, like ty lopez, roger ver not the greatest association of characters at the end of the day, they're not part of the main team and they're not going toe they're not going to make or break this project.

Karim:

So off the ninety nine percent of tokens that air held by polymath themselves are.

Mike:

Are they locked up for any period of time?

Karim:

Did they give us any info as to what that looks like the tokens?

Mike:

Yes, that different ones are locked out from different periods of times like i think i saw the ones that were for the developers it was like for the first year percentage of them are locked up another percentages after three years the ones that are for partnerships are unlocked earlier like i said, they don't really spend almost any time discussing yeah, i'm talking about publicly ah lot of these projects have entire block post where there explaining to the community why they're doing it this way the only thing you could really find aunt polly matt is a link to a get humping where it shows the distribution and it's basically in code so not only is it like minimally it's vague it's also hard to look at, so since they didn't have a nice ceo i won't hammer that point to me if if they had raised money from the public eye would be going on all over this like how can he do that?

Karim:

This is i wouldn't trust him however it's basically an internal project they used some of the money to get people on telegram and they don't want to tell us really exactly how they're going to use the rest of the money whatever maybe they will in the future maybe they're still trying to decide exactly how it's going to be there's a lot of possible interpretations here and not all of them are super negative i will go ahead state officially on the record that whatever involvement with tylo pa's roger very combined with the fact that you know, they kept ninety nine percent of the tokens these air pretty big red flags for me and and i think that's a pretty disappointing combination of things yeah it's not good it's not good and i'm not going to pretend that it is good i think as usual with these projects is things coming together like you could have a good idea you could have a good concept, but when you mix that in like the fact that you're going with known people who tend to be disingenuous or people who have known who are known in the community to be not honest in their communications on top of that, you mix it with a huge percentage of the tokens being kept privately and not a lot of transparency about how they're going to be you.

Mike:

And then on top of that, what i argued is in some ways polymath feels like they're creating a middleman.

Karim:

That little part is a little bit more affair because there really are trying to create an ecosystem for this to exist and i think that it does have a place but all i'm saying is those the combination of some of those flags would yield me to lose interest in the project even if i thought the main idea was really good well why don't we recap the competition then?

Mike:

Yeah, i guess there's going to be some competition in the space obviously going forward but out of the coins that i could find a project that i could find that are doing similar things actually i think polly meth is by far the most well known so that's where i'm going while we cover the competition i think i'm much also going to give him a little credit here because their competitors are t zero there's something called swarm fund also coin list that are doing similar things to different levels each one and but more or less the same ballpark none of those are nearly as well known as polymath so yeah, i've never even heard of those three and i know quite a bit of the quinns right?

Karim:

So i think that polymath is doing a great job marketing itself and staying in the lead in this race whether they're going to be able to close that out or how they're going to be able to finish that out remains to be seen but i think it's not often that we get to cover a coin and say if there is competition these guys are in the lead because so many coins are like trying to compete with like ethereum you know and it's like good luck yeah so these guys are in the lead i think for what they're trying to accomplish is there anything else you want to touch on before we wrap this up?

Mike:

No, no, not really, not specifically i think we covered the general overall ill again wrap it up by saying, first of all, if you feel i misrepresented the project, we are always very open, we do our best to be objective when we're looking at these projects, maybe i missed something, maybe you feel that something was omitted, which is very relevant reach out to us on the discord via email, we make sure we get that information out to our audience overall, i think that polymath has great marketing and i think that they have a real problem that they're trying to solve.

Karim:

My personal opinion is that the ecosystem that they're trying to build is going to be harder to build and they think and specifically i don't think that they're going to be able to do it by just outsourcing all of the value that there platform creates.

Mike:

If every little thing that can give you value from using polymath comes from a third party, then i don't see polymath being able to build that ecosystem, but i think that if it finds a way to create some form of anchoring value that starts having people gravitate to it and choosing it, then there's real potential to build this ecosystem, which could be pretty pretty significant yeah, i mean, i already touched on a little bit of what i was considering as my personal opinion.

Karim:

I think that it's possible, that they could use their good marketing to remove themselves from the people that i have not necessarily been as pleasant to watch and other forms.

Mike:

And listen, i think that they need to understand that as investors, we care about transparency, we care.

Karim:

This is why we harp on decentralization a lot. This is a very centralized company, which is fine. But there are certain things that crypto enthusiasts really desire from the projects that you know. It might be not quite fully developed yet here.

Mike:

Yeah, by the way i'm i'm going to add a lasting here that we put him for personal future outlook but there is a bomb in my opinion like an actual there's not a lot of projects that have a self destruct possibility or something that could happen that would make them almost useless and what i will say is in tandem with polymath trying to bring this entire space into a regulatory framework or bait basically they're tryingto onboard the current regulatory framework into the blockchain world i'm not saying that this is likely but something that could happen is that the rest of the space is kind of going in different directions people launching i ceos without regulation or you know people are pushing for new regulations there's going to be so much happening in the next couple of years that in theory there could be legal events that make polymath completely unnecessary like if a new regulatory framework makes it easier for somebody to launch security tokens through the blocking or two hop back and forth or if it creates a more clear distinction that shows a lot of security tokens or people interested like oh you don't even have to go that way i'm not really sure here all i'm saying is polymath is trying to take the current legal framework and apply it to blockchain and since we are at a time of turmoil, that blocking framework could change easily and he could change in such a way that polymath isn't as necessary as clearly it is today, clearly they've isolated a problem that's really clearly there's value there. But what if there's just a ton of legislation in the next couple of years that makes polymath not necessary? That could really hurt the valuation of the token. So there's a lot of jurisdictions, i think that there's always going to be some kind of value i shouldn't have said completely eliminate the value, but just something to keep in mind. They're working with current regulatory frameworks and if regulatory frameworks are loosened, that could decrease the demand for their service.

Karim:

Thank you for that wrap up. We love our personal future. I look for that reason and again, that is opinion. If you guys happen to disagree with anything we've said, please get in touch with us will be happy to make any adjustments necessary, but i think that's going to wrap it up the crypto basic podcast my name is mike. I was here with karim. Thanks again for tuning in thie members of the crypto basic podcast are not financial advisors. This is for entertainment purposes only. Please do your own research. If you have the opportunity, please follow us on twitter, join our discord server and raid us on itunes or wherever you listen to podcasts oh

The members of the CryptoBasic podcast are not financial advisors, and this information is provided for entertainment purposes. Please do your own research, and don't listen to these idiots.

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