Token-based platform finance

Lin William Cong (Cornell University), Ye Li (The Ohio State University), Neng Wang (Columbia University and NBER)

We develop a dynamic model of platform economy where tokens derive value by facilitating transactions among users and the platform conducts optimal token-supply policy. Token supply increases when new tokens are issued to finance platform growth and to reward platform owners. Token supply decreases when the platform buys back tokens to boost the franchise value (seigniorage). Although token price is endogenously determined in a liquid market, the platform's financial constraint generates an endogenous token issuance cost that causes under-investment and conflicts of interest between insiders (owners) and outsiders (users). Blockchain technology improves efficiency by enabling commitment to predetermined rules of token supply that address the platform owners' time inconsistency and thereby mitigates under-investment

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Year of publication:	[2019]
Authors:	Cong, Lin William ; Li, Ye ; Wang, Neng
Publisher:	[Columbus, Ohio] : The Ohio State University, Fisher College of Business
Subject:	Blockchain \| Cryptocurrency \| Dynamic Corporate Financing \| Gig Economy \| Time Inconsistency \| Token/Coin Offering \| Optimal Token Supply \| Virtuelle Währung \| Virtual currency \| Unternehmensfinanzierung \| Corporate finance \| Zeitkonsistenz \| Time consistency \| Geldtheorie \| Monetary theory

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