The cryptocurrency market is swirling with news of all kinds. A recent string of government regulations has rocked the market, while logical partnerships such as that announced by SelfKey and Polymath have boosted confidence. The current climate is so unpredictable that it renders involved investors more wary than ever before and potential investors confused as to if, where, and how they should make an entry.
Even the strongest of coins, such as Bitcoin, Ethereum, and IOTA, are not safe when regulatory entities pass judgement, or when social media stirs itself into a frenzy. But partnerships between blockchain companies, like that between SelfKey and Polymath, announced in late January 2018, is a reassuring indication of things to come. Collaborations between projects serve as an antidote to the fear generated from the tinkerings and deliberations of authorities. They are a sign of growing stability, commercial value, and practical forms of working around the barriers of entry. They act as padding against volatility.
Of course, it is undoubtedly true that price corrections in the crypto market are necessary, if overly brutal, occurrences, acting as extinguishers of the wildfire of hype that has grown since late last year. Corrections weed out those investors who endanger the future of the market by dabbling in it to make a quick buck, while being ignorant of the underlying technology, which holds far more importance than any one coin. The implications of such extreme corrections for the long-term prospects of the market are not good, however.
Before we look in greater detail at the good example the SelfKey–Polymath partnership sets for the future of blockchain as a whole, let’s have a look at the effects of fear, uncertainty, and doubt (known colloquially as FUD) has on the marketplace and why the presence of spikes and corrections is ultimately a detriment to mass adoption.
Fear, Uncertainty, and Doubt
The point in contention is that the market is undergoing unwarranted levels of volatility, triggered by unsteady investors reacting to the slightest whiff of negativity, sometimes even misconstruing events and sending shockwaves of panic through the market. This causes the kind of damage that stunts the growth and credibility of a market in the long run. The recent early panic at the announcement of the US Senate’s hearing on virtual currencies is an example of this.
The first wave of responses to the hearing smacked of superficial understanding and wanton fearmongering. Clearly, it has come to the point where the word “regulation” cannot be disassociated from the idea of a government crackdown. One need only look at the viral spread of favourable memes featuring the speakers of the hearing, Jay Clayton and J. Christopher Giancarlo, to learn how high-strung the market is.
However, Clayton and Giancarlo both agreed that cryptocurrency had its value and could empower the world. They noted that its technical aspects could make our economies more efficient. They supported the growth of the technology while advising rules to secure the safety of uninformed investors. What about all of this should generate fear, uncertainty, and doubt among crypto traders?
A portion of the community, without applying reservation to their judgement, decided that it must be bad news from the get-go. The joy that followed the hearing, which was on the whole positive regarding the status of cryptocurrency, is no compensation for the panic that preceded it – this only further emphasizes how unpredictable the market can be. Cryptocurrency is mature enough by now that it should have reached some degree of stability. Slow and steady progress would be preferable to these manic-depressive swings of euphoria and depression.
Such wild swings and irrational thought processes guiding much of the market are not the ideal tracks for cryptocurrency to take towards a recognizably global market cap. To think that sudden announcements, good or bad, and knee-jerk emotional reactions provide good medication or prognosis of the market is erroneous. This situation is comparable to the phenomenon of bloodletting in centuries past, a remedy we now know to be harmful and have replaced with better treatments, those grounded in reason and informed understanding.
It is time for cryptocurrency stakeholders to adopt a more collected mindset, and employ better methods to treat and nourish the market so that it will ultimately prosper. The bloodletting and dog-eat-dog mentality of market surge, correction, and shake-out must be replaced by beneficial enterprise alliances and blockchain partnerships.
Could Partnerships Add to the Credibility of Cryptocurrencies?
There are several steps cryptocurrencies can take to win over the world, but none that would lead to more steady and permanent progress than partnerships with fellow projects. The properties of blockchain technology, namely that it does not discriminate on the basis of border or entity, and its ease of integration with other projects, make it suitable for openness and cooperation. What one project can offer to an industry, another can supplement with its own unique features. We should strive for a world where an ecosystem of blockchains cooperate with each for mutual prosperity, as opposed to competing with each other to the detriment of both the platform and the user.
There’s another to point consider here: the enterprise market is an effective and durable way of staking your claim on a large portion of the market. Once businesses and micro-economies have opted for a platform(s) as their solution to business challenges, it takes a great deal of persuasion for them to migrate to a rival platform or software. Microsoft is an example of a company that perfectly executed this strategy. Windows has dominated the desktop OS market for nearly 30 years now and continues to hold, despite Apple’s upswing and the recent and modest success of Chrome OS.
Similarly, there is potential for collaborative blockchain efforts to entrench themselves in key inter-industry markets, such as healthcare and insurance, trading and AI marketplaces, or cloud computing and software. This is just a smattering of the endless possibilities for partnerships. Like the 12 musical notes that can be combined to form an infinite number of chords, melodies, and scales, so too can blockchain projects be combined to form diverse and satisfying solutions to the problems of users, businesses and society. Success lies in working together, not against each other.
The recent announcement that the blockchain platform SelfKey would partner up with Polymath sparked this realization. Both platforms are perfectly suited for each other’s services. They also operate in industries that have extreme revenue-generating possibilities. It is is this kind of thoughtful collaboration that gives us hope that the cryptocurrency market will eventually mature and stabilize.
Let us examine how this partnership would benefit each platform and the end user. Before we do so, it would help if we understood the nature of each project.
What is SelfKey?
SelfKey is a digital identity system that allows individuals and companies to control, manage, and utilize personal data safely and conveniently. The idea behind the project was born in 2012, which the team says is a result of their frustration with redundancy of sensitive personal data – data is held on file far beyond its time of necessity, and by multiple providers – in corporate services businesses. It has benefited from multiple accelerators, including Accenture FinTech, SCB Digital Ventures, and SuperCharger accelerator. It is also working with Standard Chartered and has received a Regulatory Sandbox License.
The necessity of blockchain for this particular use case is readily obvious. Our data is now predominantly stored, disseminated, and validated on digital systems. It is convenient, swift, and paperless, expediting and easing processing, much to the relief of administrative employees in industries that include banking, governance, telecom, healthcare, and insurance. “Know Your Customer” (KYC) norms are mandatory identification processes that financial institutions and governments must employ to combat money laundering.
The digital sphere in its current state is vulnerable, as evinced by the string of recent hacks at Equifax, FedEx, and Uber. In the wake of the realization of blockchain’s potential for data storage and exchange, this imperfection in current digital data management systems has only further been highlighted.
Personal data is a precious resource, more so than, or at least par with, our financial resources. It is easily exploitable by individuals, corporate greed, targeted advertising, and malicious hackers. Indeed, to a determined attacker, even Bitcoin’s supposed capability in masking transaction data is a minor irritation at best. Web trackers and cookies from the sites you visit play a critical part in discovering personal details behind transactions.
Nor has the full capability of blockchain been leveraged until this point, including the utilization of smart contracts and tokens to enable end-to-end practical usages of personal data to be executed, such as the creation and verification of bank accounts. Blockchain makes it possible for any individual in the world, including the 2 billion that are unbanked, to obtain access to financial services – all without requiring the presence of a third party.
The security and accessibility of personal data, which SelfKey encapsulates in their concept of “Self-Sovereign Identity,” is the key to banishing these problems. The platform provides for all digital data needs with the following:
- An identity wallet, composed of an individual’s ID attributes and their personal documents, which can be attested by governmental entities, notaries, and utility companies. This information can also be securely accessed by banks.
- The SelfKey marketplace, a digital portal where a user can apply for passports, claim citizenship through investment, create a bank account, avail of residency services, and more. The totality of services will cover exchanges, money transfers, credit cards, mortgages, loans, and airline tickets, and it consists of over 250 such services. SelfKey has already launched a demo of the marketplace, which can be interacted with here. They have stated that new services will periodically be released.
- The KEY token, which fuels the ecosystem. The purpose of the SelfKey platform is to create a safe and convenient KYC system for individuals, attesting authorities, and relying parties. Attesting authorities include governmental entities, notaries, and utility providers. Relying parties include financial institutions. To facilitate interaction between these stakeholders, the KEY token be the form of the fee that the user pays to attesting authorities and relying parties.
In addition, corporations will be able to utilize the features of the platform to streamline large-scale corporate KYC processes with a multi-verification technique and a Corporate Identity Wallet.
SelfKey’s intention is to allow individuals to reclaim control over their personal identities.
What is Polymath?
Polymath is a token platform for financial assets like bonds and stocks. Rather surprisingly, this segment of finance is still bereft of blockchain integration. Polymath’s purpose is to transform shareholders into “token holders,” helping companies transition into a new era where ICOs and public ledgers are the source and record of capital acquisition.
Blockchain is ripe for introduction into traditional finance, and there is nothing to be lost. ICOs have shown themselves to be a resourceful means for raising capital, with over $4 billion being raised by various startups in the past 2 years.
The magnitude of capital raised has attracted the attention of governments, who seek to regulate and tighten operations so as to prevent consumer fraud – which, to be fair, has happened far too frequently in the cryptocurrency space. In recent months, there has been a slew of government directives curtailing the freedom of the cryptocurrency market. The situation is similar to the American business landscape in the 1920s, when securities where sold on the promise of large returns but backed by misleading and false information. This resulted in the Great Crash of 1929. Polymath describes this in detail in their whitepaper.
The apparent motivation of governments’ curtailing of crypto is to prevent disingenuous projects and ICOs from fleecing users who are ignorant about the technology in a market where no securities law exist. And while the public must be protected from outright theft, drastic blanket regulations suffocate the burgeoning cryptocurrency market, which also constitutes of numerous well-meaning and well-designed projects.
In the traditional market, multiple laws have been enacted to protect consumers from risky investments. Businesses are required to make state filings, disclose financial information, undergo an extensive underwriting process, accept limits on how much capital can be raised, and study the profile of the investors. Liquidity in private markets is also poor, to the point where it obstructs trading.
All of this goes to say that the regulations that have accumulated over the years, from the Securities Exchange Act of the 1930s to the Dodd-Frank Act of 2010, have made public offerings of securities by businesses an expensive, onerous, and time-consuming process.
It is in the context of this scenario that Polymath comes in with its blockchain platform for securities. Up until now, in a centralized economy, we have depended upon governments and regulating entities to ensure that the public is protected from fraud and bad market practice. Blockchain, however, is a system that guarantees trust without the presence of a monitoring authority. It can be programmed such that both parties in a transaction are compelled to hold up their end of the bargain.
Additionally, blockchain is well known for its potential in functioning as a global ledger, with reduced settlement times and costs, and the absence of middlemen. The openness of blockchain ledgers, which supports the idea of inter-project partnerships, is an upgrade from the systems of today, in which disjointed, closed-off systems must undergo long data transfers and verifications before transactions can be settled.
Lastly, blockchain’s public ledgers are secure, transparent, and democratic.
Specifically, Polymath’s goals are to provide a decentralized protocol for trading securities tokens, which, unlike currency-based tokens (like Bitcoin) or utility tokens (like BAT), offer the holder a stake in the company’s profits, should they grow in value.
To open up to a larger pool of investors, Polymath will enable individuals and institutions to authenticate themselves, including their accreditation status, so that they can participate in Security Tokens Offerings (STOs).
The POLY token powers the system and the operational workflow of security issues, KYC providers, investors, and legal delegates. The process is as follows:
An issuer issues a security token, which is to be reviewed by a legal delegate. The latter can make a bid for the token, and the issuer chooses from among the various bids. Once the legal delegate has reviewed and approved of the security, the issuer can begin the trading process when ready. A smart contract is then created for the STO and the investor can purchase the security token.
On the investor’s side, he or she chooses a KYC provider and pays them in POLY so that they can get whitelisted. When this happens, their Ethereum address is linked to their real identity, based on the documents provided. They can then purchase active security tokens and sell them to other whitelisted investors.
Polymath will also feature multiple marketplaces: one for KYC providers, a second for legal delegates, and a third for developers. The developer marketplace will let them bid for smart contract developer jobs that an issuer of an STO might list.
Benefits of the SelfKey-Polymath Partnership
The CEO of Polymath, Trevor Koverko, has said:
Working with a project like SelfKey is paramount to achieving our goals. Our mission is to guide companies through every step of a securities token launch. One of the steps, and a key focal area for us, is KYC.
And KYC is the role that SelfKey will play, while Polymath focuses on securities offerings. Since the latter is so strictly tied to authenticity and disclosure, this partnership is an ideal collaboration. We can expect at the very least the following benefits:
Accelerated Wall Street Adoption of Blockchain
Although the world of investing is changing, Wall Street is still the most influential name. And they are indeed adopting the blockchain, having noted its potential. Polymath has also teamed up with tZERO to bring blockchain to Wall Street.
The securities regulations which are embedded into Polymath’s securities tokens could entice Wall Street participants, and the KYC services of SelfKey will only further catalyze adoption by big names. This whole ecosystem is shaping up to be an easy way for any and all companies to deploy their securities on blockchain – comprehensive, secure, and with end-to-end services catered to.
Rapid Capital Raising Opportunities For Small Businesses
It is well known at this point that blockchain technology supports the individual and the small business. It allows both to receive funds and interact with a larger audience without the need to spend capital, actions which have previously only been accessible to large corporations. The internet has reduced this problem to a certain degree, but advertising and outreach still remain a problem.
A partnership of this kind makes it possible for a small business to easily raise capital – and to succeed purely on the basis of their idea, product, or service. Polymath’s primary purpose is to let businesses raise capital in a secure manner. They will do so by having their securities verified and deployed on the platform, which can be bought with securities tokens. It is similar to how fundraising functions in the real world, but with all of the benefits of blockchain, eliminating the need for a lot of time, effort, and money. The KYC streamlining for corporations will be behind this benefit.
A Marriage of Marketplaces
At the center of both projects is their marketplace, a distribution platform for various services and businesses to make themselves accessible to the public. SelfKey’s KYC-oriented services and Polymath’s finance-oriented sales will ease entry into financial securities for both investors and businesses. The time-consuming task of getting personal data verified through KYC processes can be accelerated through SelfKey for both parties. In addition, businesses are likely to see increased involvement from the public because they can be linked to SelfKey, as a service, through the Polymath.
While there is no indication that the partnership will result in this, any legal services that require KYC verification can also be provided on SelfKey through Polymath, which, as we mentioned, has established a space for legal delegates to ply their services.
The result of this is that many of the services and processes of the platforms are suited for cross-application, and that makes it easier for users to avail of the host of finance-related services on SelfKey (whether securities or not), while gaining access to the legal and development services on Polymath.
The partnership between these two projects is truly a match made in heaven. They both complement each other’s services, and through blockchain’s salient features of having lower transaction fees and oversight built into the protocol, they can achieve their targets with increased success and reduced costs. Such partnerships are what will be required for blockchain to take the next step into global acceptance and truly flourish.
This is the kind of positive news that must be highlighted and discussed deeply. The health of the market is dependent upon the confidence and understanding of its investors.
Partnerships offer two significant benefits. First, they help create a stable ecosystem in which businesses can more fluidly collaborate with each other, bolstering revenue, employment, innovation, and, as a result of all of that, the general economy.
Secondly, they inspire the investor market, which when it comes to cryptocurrency are far less educated in the matter than their stock market counterparts, to more keenly consider and evaluate the potential of blockchain technology, thereby serving to educate people and hopefully prevent them from making decisions based on fear, uncertainty, and doubt.
Cryptocurrency is still ripe for great gains – it is yet to take off, whatever Bitcoin’s price charts might say. There is no need to feel regret about having missed out – there is still plenty of time to get in before the real gains manifest themselves. Many wonderfully thought-out coins are excellent investment choices, but to make the most of it we must study, discuss, and encourage the stability that partnerships bring.
We cannot sit back and continue contributing to market volatility. We must understand that the crypto world must support each other and cooperate if it intends to survive. Governments, having taken notice of Bitcoin’s rise, are now directing their attention to cryptocurrencies. This will undoubtedly result in varying degrees of regulation, and for the market to continue to flourish, we must collectively participate in distributing relevant and accurate information to the less informed.
We must, as the saying goes, HODL, no matter what chaos and hysteria the internet is selling us. And as cryptocurrency markets stabilize over the course of 2018, more blockchain companies will hopefully take inspiration from SelfKey and Polymath, and we will see more partnerships like theirs in the works.