Optimal Financing with Tokens

Sebastian Gryglewicz, Simon Mayer and Erwan Morellec
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Simon Mayer: Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)
Erwan Morellec: Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

No 19-78, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We develop a unifying model of the optimal issuance and design of tokens in the presence of frictions typical to the financing of entrepreneurial projects, such as the need to raise outside funds to finance platform development and the ensuing agency conflicts between platform developers and outsiders. Tokens possess utility features when they serve as the transaction medium on the platform. They possess security features when they distribute dividends. The paper shows how the optimal provision of utility and security features relates to financing needs, moral hazard, and platform characteristics and specifies the conditions under which initial coin offerings or security token offerings are optimal for platform financing.

Keywords: Tokens; Platforms; Moral Hazard; Financial Constraints; Dividend Rights (search for similar items in EconPapers)
Pages: 62 pages
Date: 2019-12
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1978

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