Token-based platform finance

Lin Cong, Ye Li and Neng Wang

Journal of Financial Economics, 2022, vol. 144, issue 3, 972-991

Abstract: We develop a dynamic model of a platform economy where tokens serve as a means of payment among platform users and are issued to finance investment in platform productivity. Tokens are optimally rewarded to platform owners when token supply (normalized by productivity) is low and burnt to boost franchise value when the normalized supply is high. Although token price is determined in a liquid market, the platform’s financial constraint generates an endogenous token issuance cost that causes underinvestment through the conflict of interest between insiders (owners) and outsiders (users). Blockchain technology mitigates underinvestment by addressing the owners’ time inconsistency problem.

Keywords: Blockchain; Cryptocurrency; Dynamic corporate financing; Durable goods; Gig economy; Optimal token supply; Time inconsistency; Token/coin offering (search for similar items in EconPapers)
JEL-codes: E41 E42 E51 G1 G23 G31 G32 G35 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Working Paper: Token-Based Platform Finance (2020)
Working Paper: Token-Based Platform Finance (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:3:p:972-991

DOI: 10.1016/j.jfineco.2021.10.002

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