The world of cryptocurrency has always felt particularly chaotic. Of course, many would state that this is because the concept goes very much against conventional financial currency systems. In many ways, cryptocurrency has become so powerful that most countries are starting to realize that it can no longer be ignored.
While the concept has been around since the early 1980s and the first cryptocurrency was launched in 1990, it wasn’t as powerful. It was only with Bitcoin, which launched in 2009, that the world started to realize how revolutionary a decentralized digital currency could be.
That said, it’s had its share of problems, and until they can be ironed out, it’s going to have a tough time gaining institutional acceptance. That’s where POLYX, a native protocol token of POLYMESH comes in. If it delivers on what it promises, it’s likely to take institutional acceptance of cryptocurrency to the next level. Let’s learn how.
To Understand POLYX and POLYMESH, We First Need Some Blockchain Context
Odds are that even if you aren’t a tech person, you have heard of the term “blockchain.”
Essentially, the very functionality of cryptocurrency is closely dependent on blockchain technology.
You can think of blockchain as a sort of ledger that keeps track of every transaction made with cryptocurrency.
Typically, this role is performed by a centralized authority, such as a bank. However, the blockchain removes banks from the picture by making use of a network of nodes, which refer to the computers of other users of the blockchain.
Currently, financial institutions are hesitant to accept the concept of blockchain due to a number of concerns. These range from the lack of identity verification to issues with compliance, regulation, and more.
POLYMESH aims to address such concerns and appears to have a comprehensive strategy to achieve it. Let’s find out how it works.
How Do POLYMESH and POLYX Work?
As Polymesh Association puts it, POLYMESH is a blockchain that is built specifically for security tokens, in this case, POLYX.
POLYMESH is an institution-grade blockchain that focuses on regulated assets. However, as we discussed earlier, large financial institutions are still iffy about cryptocurrency.
In order to win more confidence, it operates on five key pillars. These include:
Many blockchains end up splitting into two, a process known as forking. Unfortunately, this can become a problematic situation if tokens are backed by real assets.
This is because the assets appear on both chains, which can cause problems when figuring out taxes and other regulatory aspects. POLYMESH solves this by offering a forkless architecture for its blockchain.
It’s easy to forget that most blockchains were built with extreme privacy in mind. However, this ends up creating a serious conflict, as the issuance of securities obviously requires a known identity. POLYMESH addresses this by ensuring customers verify and identify themselves with a third-party due diligence provider.
POLYMESH manages to counter compliance issues by ensuring that the logic behind security tokens, with regard to creating and even managing them, is standardized.
As a result, processing fees are far lower, and processing times become even faster– a win-win for all involved.
At the end of the day, confidentiality is a key reason why people use cryptocurrency. However, financial institutions still want visibility to meet regulatory compliance. To deal with this conundrum, POLYMESH came up with “Mercat,” a secure asset management protocol.
This allows for asset issuance and transfer to happen in a confidential manner. At the same time, it also manages to meet the visibility needs of authorized parties.
One of the key processes involved in any transaction made on a blockchain network is the “settlement.” This ensures that transactions have been recorded and the tokens or assets have been transferred. With typical blockchain systems, only the sender ends up affirming settlements. It’s not a two-party system.
One risk of this is that it opens up the possibility for malicious agents to send tokens to another party without consent. This can end up creating legal issues, especially for financial institutions.
POLYMESH addresses this by using deterministic finality instead of probability finality. This ensures that transactions are completed only after a certain level of consensus is received from both parties.
To summarize things, the five pillars that POLYMESH is built on address many of the core challenges of blockchain.
While these challenges might have been ideal for individuals seeking pseudonymity or anonymity, they make it tough for financial institutions to work with cryptocurrency.
POLYMESH manages to find an ideal compromise that is likely to win over several institutions. As a result, we are likely going to see a rapid increase in the number of institutions working with POLYX and POLYMESH.