Token-Based Platform Finance

Lin Cong, Ye Li and Neng Wang

No 27810, NBER Working Papers from National Bureau of Economic Research, Inc

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

JEL-codes: E5 G3 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-pay
Note: AP CF EFG ME
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Citations: View citations in EconPapers (7)

Published as Lin William Cong & Ye Li & Neng Wang, 2021. "Token-based platform finance," Journal of Financial Economics, .

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Journal Article: Token-based platform finance (2022)
Working Paper: Token-Based Platform Finance (2019)
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