Polymath: Q4/2019 & 2019 EoY Network and Revenue Data Report

Abstract

Polymath is a service provider company in the nascent security token market. The security token market aims to facilitate the tokenisation of assets, improve capital formation and aid in liquidity of regulatory compliant securities via digital ledger technologies.

The services within the Polymath network, including security token contract creation, may be paid for by redeeming Polymath’s POLY utility token.

This data report provides performance of the Polymath network for Q4/2019 (October 1 — December 31, 2019) and the year 2019. The report also contains reference charts since the WE.R.LIVE contract at the beginning of service production.

This data only references network and revenue performance from the creation of ST-20 tokens and modules. It does not reference other revenue from white label activities, evaluate business or marketing activities.

Motivation

The motivation for this data report stems from the following:

1. End of the fourth quarter Q4/2019 and End of Year 2019.
2. Service pricing changes beginning on Dec 2, 2019.
3. Ongoing observation of Polymath performance vs. marketing message.

This report is not intended to be interpreted as financial or legal advice. It is for informational purposes only. The review is an account of blockchain activity. See the Appendix at the bottom of the report for more details and issues.

Executive Summary

Performance since WE.R.LIVE ST-20 contract creation July 30, 2018 — December 31, 2019:

• Total amount of recognizable revenue for ST-20 creation and management via POLY redemption: ~ $45,933
• Total For-Fee Template purchase revenue: ~ $28,400
• Total Ticker Symbol Reservation revenue: ~ $12,152
• Total ST-20 Contract creation revenue: ~ $5,380
• Total number of Ticker Symbols reserved: 344
• Total number of ST-20 Contracts created: 182
• Ticker Symbol to ST-20 contract conversion rate: 52.9%
• Total number of For-Fee STO Templates purchased: 7
• Total number of POLY tokens redeemed: 518,000

Quarter ending December 31, 2019:

Revenue

• $4,871 recognizable revenue collected for the quarter ending December 31, 2019. This is up +923.3% from Q3/2019 ($476).

Tickers Symbol Reservation

• $433 in Ticker Symbol Reservation recognizable revenue for the quarter ending December 31, 2019. This is up +54% from Q3/2019 ($281).
• 48 tickers created this quarter. This is a +92% difference from Q3/2019 (25).

ST-20 Contract Creation

• $204 in ST-20 Contract Creation recognizable revenue collected for the quarter ending December 31, 2019.
• This is up +4.6% from Q3/2019 ($195).
• 34 ST-20 contracts created this quarter. This is a +100% difference from Q3/2019 (17).

Modules

• $4,437 in revenue for fee modules attached to any ST-20 contract this quarter ending December 31, 2019.
• First modules added since April 2019.
• 2 - modules were added to one existing and one new ST-20 contract respectively.

ST-20 Upgrades to Polycore v3.0

• 2 - ST-20 contracts self-upgraded to v3.0 during the quarter ending December 31, 2019. One upgrade in October and November respectively.

POLY Token

• The POLY token reached its all time low (ATL) value of $0.0161 on December 31, 2019.
• This is a -30% difference from the Q3/2019 ($0.023) ATL set in September.
• This is a -78.6% difference from the Q2/2019 ($0.075) ATL set in May.

Year Ending December 2019

Revenue

• $15,668 recognizable revenue collected for the year 2019. This is down -48.2% from 2018 ($30,264).

Tickers Symbol Reservation

• $3,416 in Ticker Symbol Reservation recognizable revenue for the year 2019. This is down -60.8% from 2018 ($8,735).
• 178 tickers created in 2019. This is a +7.2% difference from 2018 (166).

ST-20 Contract Creation

• $1,931 in ST-20 Contract Creation recognizable revenue collected for the year 2019.
• This is down -44% from 2018 ($3449).
• 110 ST-20 contracts created in 2019. This is a +52.7% difference from 2018 (72).

Modules

• $10,320 in revenue for fee modules attached to any ST-20 contract in 2019.
• This is down -42.9% from 2018 ($18,080).
• 5 — for fee modules created in 2019. This is up +150% from 2018 (2).

POLY Token

• The POLY token began 2019 at $0.144 and ended 2019 at $0.0161.
• This is a -88.8% difference from the beginning to the end of the year.
• As of this publication, the POLY token has a -97.85% ROI since the token began trading on February 2, 2018.

ST-20 Contracts with High Wallet Count

Analysis

2019 ends with Polymath implementing a new and much needed pricing structure by raising the amount of POLY tokens required to use the network. The first registration occurred on Dec 2, 2019. Prior to this, November had one of the highest ticker, ST-20 and add on module creation rallies to date. Ironically, following the price increase, December had the lowest ticker, ST-20 and module creation on record.

Revenue for the year 2019 was -48% lower than 2018 totals at $15,668. Low revenue is a continuation of a combination of a nearly -88.8% decline in POLY token value since the beginning of 2019, low usage of the network services and a poor pricing model. Q4/2019 was one of the better performing quarters in the year with $4,437 in revenue.

Temporary ticker symbol reservation outpacing ST-20 creation was an ongoing trend for 2019. Q4/2019 pushed the ratio up a bit at nearly a 60% conversion rate. Less ticker symbols have converted into an ST-20 since Q3/2019.

The usage drought for the two for-fee STO template modules found some hope in November with 2 purchases of the USD module @ 100,000 POLY each. A total of 5 for-fee modules purchased for all of 2019.

Even at the ever decreasing and consistently low POLY token prices, service users have not been compelled to pay for what appears to be Polymath’s highest priced/margin service offerings in 2019. Though, with 3.8% (7 STO templates) purchased against 182 ST-20 contracts since the service going live 17 months ago, this 3.8% still represents Polymath’s largest revenue stream to date.

Continuing for the duration of 2019, the circulating POLY token pool has been inflating in quantity and deflating in value at the same time. This pattern has been ongoing since the service went into production. POLY token redemption rates cannot keep up with new POLY automatically added at scheduled intervals to the overall supply.

A bright spot for Q4, wallet growth continues in a few contracts. This is a continuation from Q3 performance.

Unfortunately, wallet growth has no bearing on Polymath’s revenue. Operational income opportunities in Polymath’s business model end at creating the ticker symbol, ST-20 and optional use of an STO template. However, non-token creation income such as white label licensing exists.

It will take a number of quarters to see what effect this new pricing structure has on revenue and service usage. So far, run up to price increase deadline resulted in a stream of new registrations. Yet, post price increase creation activities in December were dismal.

Polymath expects exciting things to occur in 2020 with the launch of a new blockchain, Polymesh, and a new whitepaper in Q1 potentially detailing a revamped revenue structure.

As for 2019, it was painful for the POLY ‘hodlers’: the retail investors whose backs SAFT investors stood upon in early 2018 and beyond. As for the Polymath business, like any business, an opportunity to fine tune and improve. Polymath should still have tens of millions of dollars at their disposal. Regardless, 2020 looks to be interesting.

The Polymath Network Contracts

Activity reported is from the Ethereum Mainnet from the Polymath Network Core 1.x.x, Core 2.1.0 and Core 3.0 platforms.

There are 16 contracts in the Polymath Network Core 3.0 available on both the Ethereum Mainnet and Kovan networks.

The basic workflow of using the Polymath network to create and manage a ST-20 contract:

1. Create an Ethereum ticker symbol reservation. This is a 60 day temporary reservation of the ticker symbol. If not used against a ST-20 contract after 60 days, the symbol becomes available for anyone to use.
2. Create a ST-20 contract.

At this point, the basic workflow is complete. However, the service user has the option to apply a number of modules to the contract. These modules are Solidity programming methods that give ST-20 contract owners more options when conduction their STO or managing their security token’s life cycle.

Ticker Symbol Reservation

Total number of ticker symbols reserved per month during Q4/2019: 48.

Total number of ticker symbols reserved per month during 2019: 178.

Total number of ticker symbols reserved per month since the WE.R.LIVE ST-20 contract on July 30, 2018: 344.

ST-20 Token Contract Creation

Total number of non-test ST-20 contracts created per month during Q4/2019: 34.

Total number of non-test ST-20 contracts created per month during 2019: 110.

Total number of non-test contracts created per month since the WE.R.LIVE ST-20 contract on July 30, 2018 through September 30, 2019: 182.

Wallet Count Per ST-20 Token Contract

Wallet count per ST-20 from month contract was originally created in Q4/2019.

Wallet count per ST-20 from month contract was originally created in 2019.

Wallet count per ST-20 from month contract was originally created since the WE.R.LIVE ST-20 contract on July 30, 2018.

Total Number of Wallets

Number of wallets per contract starting at the WE.R.LIVE ST-20 contract up to December 31, 2019: .

• 58.3% of the contracts created to date have 0 wallets and 0 tokens. There are 106 total.
• 18.1% of the contracts created to date have 1 wallet with > 0 tokens. There are 33 total.
• 6.1% of the contracts created to date have 2 wallets with > 0 tokens. There are 11.
• 7.2% of the contracts created to date have between 3 and 7 wallets with > 0 tokens. There are 13 total.
• 2.8% of the contracts created to date have 8–20 wallets with > 0 tokens. There are 5 total.
• 3.3% of the contracts created to date have 21–50 wallets with > 0 tokens. There are 6 total.
• 3.8% of the contracts with wallet counts > 50. There are 7 total.

POLY Token Redeemed Revenue

Revenue may be recognized when the POLY utility token is redeemed as payment to access a service on the Polymath network. Revenue is assumed recognizable against deferred revenue from the Polymath SAFT fund raising event.

In this report, the token value is determined by the close of day value of the POLY token. The POLY token is removed from the circulating pool of tokens when redeemed for ticker symbol reservation and ST-20 creation as well as STO template use.

Ticker Symbol Reservation Revenue

Total amount of recognizable revenue from ticker symbol reservation per month during Q4/2019: $433.

Total amount of recognizable revenue from ticker symbol reservation per month during 2019: $3,416.

Total amount of recognizable revenue from ticker symbol reservation per month since the WE.R.LIVE ST-20 contract through December 31, 2019: $12,152.

The below chart represents the total cost of ticker symbol reservations up to December 31, 2019. The spike at the end of 2019 is from the new POLY requirement increase.

ST-20 Contract Creation Revenue

Total amount of recognizable revenue from ST-20 contracts created per month during Q4/2019: $204.

Total amount of recognizable revenue from ST-20 contracts created per month during 2019: $1,931.

Total amount of recognizable revenue from ST-20 contracts created per month since the WE.R.LIVE ST-20 contract through December 31, 2019: $5,380.

The below chart represents the cost of a contract over time up to December 31, 2019. There has not been an ST-20 created since the new price increase.

STO Template Use Revenue

There was $4,437 in STO Template revenue in Q4/2019.

Total amount of recognizable revenue from template (3 Capped STO, 2 USD) use per month during 2019: $10,320.

Total amount of recognizable revenue from template (4 Capped STO, 1 USD Tiered) use per month since the WE.R.LIVE ST-20 contract through December 31, 2019: $28,400.

POLY Token Redemption Rates

The Polymath network requires the use of the POLY token to pay for the network’s services. POLY tokens are removed from the circulating supply of 563,671,456 tokens. A total of 518,000 have been removed from the circulating supply through ticker reservation, ST-20 creation and module purchasing since July 30, 2018.

New pricing changed the amount of POLY to use the network starting Dec 1, 2019.

The Polymath network fee schedule:

• (Pre-Dec 1st price 250) 2,500 POLY to reserve a ticker symbol
• (Pre-Dec 1st price 250) 10,000 POLY to create the ST-20 token contract
• (Pre-Dec 1st price 20,000) 50,000 POLY for the ‘CappedSTO’ template
• (Pre-Dev 1st price 100,000)150,000 POLY for the ‘USD Pegged to Fiat STO’ template

Unless volume dries up, the charts should begin to show a higher amount of POLY redeemed based on the new POLY fee schedule.

Ticker Symbol Reservation Redemption

Total amount of POLY tokens removed from the circulating supply from ticker symbols reserved per month during Q4/2019: 18,750. The amount in POLY tokens for a new ticker went up by 10x on Dec 1, 2019.

Total amount of POLY tokens removed from the circulating supply from ticker symbols reserved per month during 2019: 51,250.

Total amount of POLY tokens removed from the circulating supply from ticker symbols reserved per month since the WE.R.LIVE ST-20 contract through December 31, 2019: 92,750.

ST-20 Redemption

Total amount of POLY tokens removed from the circulating supply from ST-20 contracts created per month during Q4/2019: 8,500. The amount in POLY tokens for a new ST-20 went up by 40x on Dec 1, 2019.

Total amount of POLY tokens removed from the circulating supply from ST-20 contracts created per month during 2019: 27,250.

Total amount of POLY tokens removed from the circulating supply from ST-20 contracts created per month since the WE.R.LIVE ST-20 contract through December 31, 2019: 45,250.

STO Template POLY Redeemed

There were 200,000 POLY tokens redeemed for template use purchases in Q4/2019. The amount in POLY tokens for a new ticker went up by ~2.5x and 1.5x respectively on Dec 1, 2019.

Total amount of POLY tokens removed from the circulating supply from template use purchases per month during 2019: 260,000.

Total amount of POLY tokens removed from the circulating supply from template use purchases per month since the WE.R.LIVE ST-20 contract on July 30, 2018: 380,000.

Modules & Templates

Accompanying the ST-20 contract are 13 modules that ST-20 owners can apply to their security token. Use of modules demonstrates the intensity at which its ST-20 contract owners interact with their security. In effect, these modules are features that enable various types of functionality.

Of all the modules, only one appears mandatory for each ST-20 contract: GeneralTransferManager.

Of all the ST-20 contracts created to date, only 7 non-mandatory modules have been utilized. Module use can be found in the event log of each ST-20 contract.

Appendix

Change Log

The change log captures major changes to the article since publication.

• January 7, 2019 — Published

Data Sources

The data sources to conduct this analysis originate from the following:

1. Polymath Core service 1.x.x contract address.
2. Polymath Core service 2.1.0 addresses.
3. Polymath Core service 3.0 addresses.
4. Polymath Core legacy addresses.
5. Individual ST-20 contract addresses.
6. Polymath Service Fees.
7. Polymath POLY Token Distribution.
8. Polymath Circulating Supply.

Tools

1. Etherscan.io

Errors

1. Errors were found in how the for-fee module revenue was being calculated since the Q2/2019 report. The specific smart contract has been found that contains a time stamp for when a module is added. For-fee modules can be added any time. Revenue is now calculated on exactly when the module was added as opposed to when the contract was created.
2. There were errors in Q3/2019 accounting for the number of POLY redeemed. The amount was much higher than it should have been.

Constraints

1. The data may be incomplete and contain errors. It is sourced without the assistance of the ST-20 contract owner or Polymath.
2. Errors were found in how the for-fee module revenue was being calculated. The specific smart contract has been found that contains a time stamp for when a module is added. For-fee modules can be added any time. Revenue is now calculated on exactly when the module was added as opposed to when the contract was created.
3. There were errors in Q3/2019 accounting for the number of POLY redeemed. The amount was much higher than it should have been.
4. There may be rounding errors in % of or $ value totals.
5. There may be missing ticker, ST-20 contracts, module templates from the data set thus under representing all totals.
6. The exact intention of the contract owners is unknown. Both Polymath and any third party evaluating the data may have no information describing what contract owners intend(ed) to do. Intention may be inferred from information within the contract address (dates, wallets, tokens, transaction activity, marketing, etc.)
7. How Polymath recognizes revenue is not exactly known. However, due to the nature of the network, capital fund raise via SAFT and POLY utility token to pay for services, a deferred revenue model is assumed.

Metrics

This review evaluates the following metrics:

• Ticker symbol and ST-20 contract creation date

Date the ST-20 token contract was created on the Polymath Core v2.0.0 Ethereum Mainnet contracts. This includes contract upgrades from Polymath Core v1.x.x that occurred in the November 2018 time frame. This upgrade makes it appear as if there was a large number of contracts created all at once. This is not the case. Most of the November contracts were created prior to November 2018. Polymath now has 2 versions of contract in production. The latest version 3.0 is not upgraded automatically. The contract owner is required to perform the upgrade.

• Quantity of ticker symbols and ST-20 contracts

Number of ETH ticker symbols and security tokens produced on the ETH blockchain within month, quarter, etc.

• Number of POLY token redeemed

The number of POLY token redeemed demonstrates how the market is removing the tokens from the network through use of the Polymath Network.

• Number of wallets

Number of wallets in the ST-20 token contract that contains ST-20 tokens. The number of wallets represents the number of individual entities holding tokens in the wallet. A low count indicates a low number of investor participation within the security.

• Number of tokens

In this review, the number of tokens is not considered. The impact the number of tokens has in contract is difficult to gauge without having knowledge about how the issuer intends to use the tokens. This, along with closure that states a milestone has been met, like the close of a fund raise.

• Token transactions

There are few token transactions in the data set. Transactions accounting in this review is limited to the Polymath Core contracts on the Ethereum Mainnet.

• Modules

Polymath offers its ST-20 contract owners numerous modules to help better manage the security token offering and life cycle. Modules are simply code functions or methods added to the contract and executed when applicable. Modules use is derived from entries in a ST-20’s event log.

• $ revenue from contract creation

Values are a combination of the service fees published by Polymath as described here plus the Close $ value of the Poly token found in Coin Market Cap’s historical data range for any of the services on the date of creation.

Ethereum GAS costs are not factored into the revenue models or assumed costs to the service user.

The $ value of the POLY token and service costs is different on any given day.