Polymath has fallen out of love with ethereum.
The security token issuer has migrated its Polymesh blockchain onto Substrate, the platform developed by ethereum co-founder Gavin Wood’s Parity Technologies. Polymesh becomes one of the first blockchains to make the jump. Polymath first announced it was building the Polymesh blockchain in May.
As part of the transition, Parity has agreed to build certain business-logic features on Polymesh’s base layer, including smart contract communication and runtime modules, said Parity Technologies chief commercial officer Björn Wagner.
Polymath’s ST20 security token (built on ethereum’s ERC-1400 standard) and native POLY token (an ERC-20) will journey over to the new Substrate-based chain, the firm's head of blockchain, Adam Dossa, said in an email. A bridge for POLY tokens will be maintained for at least one year.
At the center of contention is ethereum’s consensus mechanism, proof-of-work (PoW), which only offers a statistical guarantee of transaction finality. Dossa said a different mechanism is needed for the institutions Polymath aims to serve. (Ethereum is in the process of upgrading to proof-of-stake (PoS) with a target launch date of early 2020.)
“While ethereum has some great attributes, regulated assets and security tokens live in a world which quite often jar with the world ethereum lives in,” Polymath's Dossa said in a phone interview.
A major issue Dossa pointed out was block reorgs, which are technically possible in PoW systems. In a block reorg, individual blocks containing transactions are rolled back to rescind a disputed transaction. However, ethereum has only experienced one reorg ever following the infamous DAO hack of 2016.
For businesses working with regulated assets and security tokens, even strong statistical guarantees aren’t enough, Dossa said.
“When a [Substrate] transaction is finalized, it cannot be undone,” he added.
How ethereum settles transactions through mining also came into consideration for Polymath, Dossa said. Since miners, who process and sign-off on transactions for a fee, can operate anywhere in the world, institutions could face government scrutiny if fees are traced back to a sanctioned country.
“The mining process is permissionless. If you’re paying transactions on ethereum, you don’t really know where that transaction is going to end up. For a large institution that could be an issue,” Dossa said.
Substrate and Polymesh
It’s not just ethereum, however. Dossa said the team looked at Hyperledger Fabric, among other candidates, at the behest of Polymesh technical advisor Charles Hoskinson.
Describing Substrate as a “modular, flexible framework,” Dossa said the platform beat out the competition due to the simplicity of building smart contracts from the ground up, a must for the firm.
“Security tokens need to be flexible,” Dossa said. “There might be some very custom compliance logic you may need. We wanted to give people the option in a rich and flexible way.”
Regarding Polkadot, which was built on Substrate by both Parity and the Web3 Foundation, Dossa said Polymath remains open to interoperability down the road.
“At the moment we are focused on building the Polymesh blockchain,” he said. “Of course, we keep an eye on other types of technology. In the future, it’s something we will keep it closely under review.”
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