Tokenomics: Dynamic Adoption and Valuation

Lin Cong, Ye Li and Neng Wang
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Ye Li: Oh State U

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: We provide a dynamic asset-pricing model of (crypto-)tokens on (blockchain-based) platforms, and highlight their roles on endogenous user adoption. Tokens intermediate transactions on decentralized networks, and their trading creates an inter-temporal complementarity among users, generating a feedback loop between token valuation and platform adoption. Consequently, tokens capitalize future platform growth, accelerate adoption, and reduce user-base volatility. Equilibrium token price increases non-linearly in platform productivity, user heterogeneity, and endogenous network size. The model also produces explosive growth of user base after an initial period of dormant adoption, accompanied by a run-up of token price volatility. We further discuss how our framework can be used to discuss cryptocurrency supply, token competition, and pricing assets under network externality.

JEL-codes: C73 E42 F43 L86 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-com, nep-ict, nep-mac and nep-pay
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Citations: View citations in EconPapers (54)

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http://www.ssrn.com/abstract=3222802

Related works:
Journal Article: Tokenomics: Dynamic Adoption and Valuation (2021)
Working Paper: Tokenomics: Dynamic Adoption and Valuation (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2018-15

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