Tokenomics: Optimal monetary and fee policies

Urban Jermann and Haotian Xiang

Journal of Monetary Economics, 2025, vol. 155, issue C

Abstract: We document properties of crypto monetary policies based on a large sample of tokens. We present a dynamic model to determine the optimal issuance and fee policies for issuers. Committing to low future money growth and fees increases profits, and the degree of commitment matters for equilibrium existence. A Ramsey issuer who maximizes profits, after the initial period, makes choices that maximize the utility value of all tokens. We present a model with probabilistic commitment, solve for the steady state in closed form, and show that empirically relevant long-run money growth rates align with very high levels of commitment.

Keywords: Cryptocurrencies; Monetary policy; Fees; Commitment (search for similar items in EconPapers)
JEL-codes: E52 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:155:y:2025:i:c:s0304393225000790

DOI: 10.1016/j.jmoneco.2025.103808

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