The security token launch platform Polymath recently partnered with the decentralized exchange (DEX) Loopring. The partnership allowed Polymath to prove that their ST-20 tokens can remain compliant in secondary markets. The test results showcased this ability as the developers completed their tests successfully.
Two tests were conducted. Both tests involved trading an ST-20 token with a “wrapped ETH” token. Wrapped ETH tokens are ETH wrapped in the ERC-20 protocol. The first test attempted to exchange the tokens with all the necessary regulatory requirements met. This test completed as planned. The next test was similar but developers purposely left out certain compliance requirements. This test failed to complete.
Transfer Management Modules
The tests prove Polymath's ST-20 tokens function properly on DEXs. Compliance on DEXs is possible through the integration of special transfer management modules. Think of these protocols as a third party verification layer built into your ST-20 token. Prior to the transfer of any ST-20 token, the transfer management module requires verification.
Transfer management modules work as mini regulators for ST-20 tokens. Only after these modules approve a transaction can the token transfer. Polymath's ST-20 protocol embeds regulatory compliance regulations directly into the tokens smart contract programming.
Speaking on the success of the tests, the Vice President for Marketing, Graeme Moore explained the benefits gained from opening up security tokens to DEXs. He described how security tokens are more efficient, secure, and cost less to institute. He argued that security tokens make it easier for companies to meet compliance standards when compared to traditional securities.
Polymath entered the market in 2017 with the goal of simplifying the token issuance process. The platform is based out of Saint George, Barbados and lists Chris Houser as the founder. Polymath is a leader in the security token sector. The platform is one of the main security token issuance platforms in the space.
The firm's ST-20 protocol functions in a manner similar to Ethereum's ERC-20 and ERC-1400 token standards. ERC-20 tokens are the most popular type of token in the cryptomarket at this time. Erc-1400 tokens are security tokens that operate on the Ethereum blockchain. ST-20 tokens borrow the best features from both of these standards.
Loopring is a 100-percent open-source decentralized exchange. The platform features a powerful user interface and trading tools. The firm's focus on an exceptional UX is what made their platform the perfect choice for Polymath's project. Additionally, Loopring is available in a mobile app.
Decentralized exchanges are the natural evolution of the cryptomarket. These exchanges function on a peer-to-peer premise which greatly reduces the risk of hacked or stolen funds. Analysts predict a stark rise in the number of DEXs in operation over the coming months.
Polymath ST-20 Continues to Expand
Polymath's latest test is sure to bolster the firm's already excellent positioning in the market. Analysts continue to point to liquidity as the main choke point for further security token adoption. The inclusion of DEXs could change this situation in the near future.