There is a TL;DR on Reddit that I am not posting here since it's way too long to fit as an introduction before the script, so feel free to check that out if the script / video looks daunting.

Script

Today we’re going to talk about a new protocol named Polymath and its related token, POLY. Now I know at least a few of you will be frustrated or confused by the title, so all I’m going to say is just stay tuned and reserve your judgment until after you finish the video.

For those of you unfamiliar with Polymath, let me give you a brief definition and their overall sales pitch. Polymath is a new protocol being developed to make it easier to create security tokens. Security tokens are just as they sound – it is a token which is a security. This is in contrast to utility tokens which is what practically all current ICOs are.

A security token is designed to comply with a specified jurisdiction’s regulatory requirements for securities and KYC is baked into the token itself so that only whitelisted, authorized investors can hold the token. Unlike a utility token, security tokens are bought with the expectation of profit and are meant to work within the confines of the law for whatever region they are issued in.

This is particularly timely as in the second half of 2017, we began seeing a global crackdown of ICOs, or utility tokens, all the way from strict governments like China to much looser regulatory environments like Switzerland. Couple that with an increased focus on ICOs by the SEC in the United States and we’re seeing a serious uptick in the number of entities interested in launching security tokens.

This is where Polymath comes in. Polymath is a protocol designed to connect security token issuers, legal professionals, developers and investors on one platform so that both the supply side and demand-side is accounted for and to create a network effect that is unstoppable.

Long-term, the vision for Polymath is to do more than just enable brand new security token issuances; In other words, Polymath wants to enable all current securities to move over to the blockchain as they view this as the ultimate future. As such, they claim the total addressable market is massive, in the trillions, and that Polymath could do for securities what Ethereum did for ICOs and utility tokens.

That’s the pitch Polymath provides – now let’s talk about why I claim Polymath to be a “complete joke,” which admittedly is a bit harsh because I think there are legitimate people working there, but there are enough red flags that I don’t feel too uncomfortable making that statement.

First and foremost, let’s talk about the CEO: Trevor Koverko. If there was ever an example of a figurehead, this guy is it. His sole purpose is to get the plankton excited (AKA us) and to raise capital from seed investors.

You might be wondering what led to me this conclusion – he seems like a nice enough guy and he’s plenty charismatic.

First, the guy is effectively a walking pitch deck. He almost never gives an answer that isn’t pre-constructed from the slides he presents on at multiple conferences. Here are just a FEW examples (trust me, there are many more) of him during an AMA where he probably would have just been better off presenting the Polymath pitch deck rather than fielding questions from an audience (clips are shown at this point in video).

Now you could argue the guy is just prepared or he just has certain stories he likes to tell, that’s all and I should stop looking so much into it. But if you actually listen to all his talks in succession like I have, you’ll quickly realize he’s practically a cassette tape even in more casual conversations, at least when it comes to anything that’s material to Polymath. In other words, he hardly brings anything original to the table – and I heavily doubt he’s the brains behind this operation.

He’s also the guy who says over and over and over again that one of the reasons that security tokens aren’t launched today is due to a lack of liquidity – no exchanges will list them so you effectively, in his words, become a “zombie coin.”
Now a normal person would expect based off this statement that Polymath is aiming to provide a liquid platform where you could exchange these tokens easily, but nope – you’d be wrong - sort of at least.

See, Polymath doesn’t want to have to deal with the legality concerns of becoming a broker dealer or a securities exchange itself, as they mention themselves in their whitepaper, so instead they want to outsource that risk to either:

1. Other exchanges that partner with the platform, like T-Zero. Of course, those quote-on-quote “exchanges” also face the same problem of not wanting to be considered securities exchanges, so they then go and say that Polymath is the exchange.

2. Decentralized exchanges

What’s ironic about this is that the whole point of Polymath is to stop trying to find legal loopholes and to fit within the confines of the law. This is practically the mantra of their whitepaper, yet here they are trying to avoid being labeled a securities exchange because they know the SEC and most other regulatory agencies would shut that down the second it became serious.

I would also like to note that Trevor himself claims that there are currently no exchanges that support securities tokens, as if Polymath will be the first even though they specifically state: “Polymath itself is not an exchange or a broker-dealer. It is a protocol that resides on top of Ethereum that allows issuers to restrict access to tokenized securities.”

I would also like to note that in an earlier version of the investor deck, which Trevor graciously pointed out was the wrong deck while presenting on it, there was a slide that noted the ultimate goal for Polymath was to move to its own Proof-of-Stake blockchain and that the ERC20 POLY tokens initially issued would interact with this new chain. I haven’t seen this mentioned in their whitepaper or in any blog posts since, so I guess they just casually scrapped that idea unless any of you have any info that I happened to have missed.

This is also kind of funny because one of Trevor’s favorite slides is the one where he shows how Ethereum started the utility token revolution, but Polymath has the potential to start the security token revolution with a total addressable market of $10 trillion by 2020. I guess Polymath will launch that revolution on top of Ethereum now rather than having its own blockchain like what appeared to be originally planned. Naturally you might wonder whether or not Polymath can scale on Ethereum, but perhaps there is a more important question you should be asking which is… Will it need to scale?

For the total addressable market to be in the trillions, regular securities would have to move to the blockchain using Polymath which, if you recall from earlier, is Polymath’s long-term goal. Yet without Polymath being a registered securities exchange for these more traditional tokenized securities to trade on, do you really think the likes of the New York Stock Exchange is going to list these tokenized securities?

And the answer of course ... is no. There are far too many uncertainties as it relates to custodianship, security, governance, and the legality of such securities as dictated by the SEC. And for those who are shaking their head saying that the world is larger than the US, you’re going to find the same concerns are valid in almost any region in the world where securities are traded and regulated.

Now you might argue that if all Polymath outsourced was the regulatory risk associated with becoming a securities exchange or broker-dealer, that’s really not all that bad. First I’d disagree with you because they did more than just outsource the risk – they also manipulated investors by representing themselves as a liquidity provider in their presentations and blogs when they really aren’t according to their lesser-read white paper.

But even if you disregard that, the reality is they are outsourcing everything, even the most important portion of the network which is the legal professionals. The Polymath protocol is designed to match issuers with developers who can help them create a token … and legal delegates which can help have the token comply with a local jurisdiction’s regulatory framework for securities.

Now Polymath argues that legal delegates will join the platform as they will be rewarded in POLY to create legitimate legal templates. The idea is that over time, different templates will be identified that work in different jurisdictions, therefore easing the security token creation process and rewarding legal delegates who create these templates.

One huge assumption here is the notion that there will be legal delegates who actually know how to make a token compliant with securities laws in the first place (ESPECIALLY when you consider it’s through coding of all things) and, furthermore, who aren’t already occupied with another blockchain related company given the ridiculous demand for such lawyers.

There’s an even worse concern than this though because the entire platform is based on an even larger assumption which is that you can actually create a security token without involving a much more sophisticated process with the SEC or relevant regulatory authority. In other words, it’s very unlikely at this stage that even the best lawyers could create a template that works consistently or even at all.

Now Polymath’s big technical claim to fame is baking KYC into the tokens themselves, hence only allowing whitelisted Ethereum addresses with verified identities to participate in securities offerings. Of course, it’s worth noting they’ve also outsourced this responsibility to KYC providers as well.

However, what I really want to note about this is that Trevor and Polymath consistently reiterate the fact that KYC will be integrated into the tokens as if this in of itself creates security tokens. Now obviously they don’t really believe that, given the discussion in their whitepaper about creating legal templates for offering security tokens, but it’s what they focus on in their blogs and conferences. Do you know why they focus on KYC?

It’s because it’s what we all understand and are familiar with. We’ve heard KYC and AML many times as it is an important requirement for most exchanges – that familiarity makes us feel comfortable with the idea that KYC will go a long way to creating security tokens. Is it any surprise, then, that they also decided to name their token standards ST20, after ERC20? Again, it’s all about creating a feeling of familiarity which provides investors comfort.

However, KYC being baked into the tokens really doesn’t do much aside from possibly limit who can hold the tokens to accredited investors only. This would be useful if the purpose of Polymath was to issue security-exempt tokens, but then it wouldn’t be too different from other ICOs which have attempted to satisfy regulation D or regulation A requirements. This is clearly not the focus of Polymath either given their goal of wanting to tokenize existing public securities which are obviously already registered.

There are a dozen other red flags with Polymath as well. For example, Trevor constantly boasts about the size of Polymath’s Telegram which hit the 50k cap prior to Telegram boosting it to 75k. From my understanding, and I will preface this by saying I am by no means a Telegram expert, but I’m fairly certain to get all the info related to the airdrop, you had to sign up to their Telegram. In other words, people just signed up for free tokens so the growth wasn’t organic, yet Polymath talks about it all the time.

Then you have the fact that the distribution of the tokens is … questionable to say the least. 1% is distributed out via the airdrop, with the remaining 99% being held by presale purchasers, founders, advisors or in “reserve” which I’m still not totally sure what that’s all about. Trevor has mentioned the reserve in passing a few times, but it’s generally obscure language so I’d love if anyone had any sources out there on what Polymath plans on doing with this overwhelmingly large portion of the supply.

Moving on, Trevor has mentioned repeatedly how easy Polymath wants to make the process of creating a security token, which is complete stupidity as creating securities is a serious endeavor that shouldn’t be taken lightly or be easy to do. Seriously, some of the barriers that exist now are very welcome because it prevents complete boneheads from creating securities – a feature that clearly DOESN’T exist when it comes to creating utility tokens given the magnitude and volume of stupid ICOs.

It’s also completely false because the process of creating a security will never be easy for as long as regulations exist, and Polymath has ZERO control over that. They make it sound like it will be easy to create legal templates for security tokens, but I guarantee you that this will NOT be the case… and yeah that’s right, I used the G word.

There’s also some less significant warning signs like the fact that Tai Lopez (of all people) is going to be at their Polycon event in the Bahamas. Then there’s the fact that the project is supposedly just under a year old and really seems to have only ramped up conveniently after the global crackdown on ICOs last year. If you look at their team, it looks like they have far more in-house resources in management than they do in developers for example. These are all things that concern me, but by themselves might not be that substantial. It’s really only once you start adding it up with all the other factors that it becomes rather concerning.

If you’ve survived to this point in the video, you might be wondering why in the world I’d ever buy Polymath and the answer is simple: It is brilliantly marketed and right on time. That’s it, that’s all there is to it. It will fool the plankton, it will fool the VCs, it will fool the angel investors, it will even fool many developers and lawyers because it all sounds incredible on paper. It’s not until you start delving into the reality that this pipeline dream falls apart, but fortunately the crypto space hasn’t grown smart enough yet to pick apart projects like this because it’s too focused on who’s who and very idealistic visions.

The point is, this project will persuade many people – and what I like about it most is that it will even convince rich and powerful people … who are the ones that actually matter. This is the kind of project that gets posted on Reddit over & over for a month because quote: “The opportunity is massive and it will change a trillion-plus dollar industry.” This is the kind of project that stirs up community leaders and gets them excited because they all see the writing on the wall for ICOs and Polymath is right on cue. You don’t think that’s a coincidence do you?

The management team at Polymath seems to know all the right people in all the right places, and they are working hard on using that network resource to belt out as many heavyweights as possible. Honestly I think this makes the quality of the project worse, not better, because it usually pulls projects into gridlock and dilutes the overall vision, but most crypto investors LOVE a team and advisor board with great resumes and Polymath delivers on that.

They’re also utilizing their network to create as many partnerships as possible and if you are familiar with the previous altcoin boom, you know that the word “partnership” was enough to send any crypto flying the same way the word “blockchain” would send any company’s stock flying. It’s a common metric by crypto investors on the success of a project and Polymath can easily deliver on that front, especially given the quality of the partnerships rarely matter.

The key to mitigating risk with a project like Polymath is to keep a close eye on their vesting schedule as detailed in their Github so you don’t get backhanded by supply surges when tokens are released. Furthermore, you generally want to limit your exposure to tokens that claim they’re the next revolution in xyz industry because that’s usually a sign of going to the moon … or much more frequently, complete and utter failure.

I would also consider not allocating 100% of your desired position size all at once in a project like this because even if you miss out by not doing so, you’ll feel a lot better if it goes down and you can buy more rather than having to be stuck with expensive bags. Always remember the pain of a loss has twice the effect as the pleasure of a gain.

Lastly, I want to briefly mention that at this time, there are limited options for where to get Polymath so if you don’t feel technically comfortable with joining a new exchange and the steps involved with securing your tokens, I would stay clear of this. Trust me on that.

Before I close out here, I want to say that this is obviously not financial advice so do your own due diligence… You know the drill. I’d love to hear your thoughts on Polymath. Do you agree with me? Disagree with me? Not sure where you stand? Let me know in the comments below. Thanks for watching / reading.