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Challenges of the market for initial coin offerings

Author

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  • de Andrés, Pablo
  • Arroyo, David
  • Correia, Ricardo
  • Rezola, Alvaro

Abstract

This article analyzes the main problems and the solutions adopted in the market for Initial Coin Offerings (ICO), to anticipate the future of this market and determine implications for issuers, investors and regulators. ICOs represent an alternative and innovative financing solution that has experienced spectacular growth and notoriety in recent years. ICOs rely on Blockchain protocols and the ICO market is, therefore, characterized as decentralized, disintermediated and unregulated. Our results show that although the ICO market is innovative, it already displays many of the problems of traditional financial markets, and that these problems were at the genesis of the last financial crisis. Our analysis of the problems and solutions adopted shows a tension between what the Blockchain technology offers, and the problems associated with the financing of innovation. Considering the problems and solutions adopted, we no longer expect the ICO market to be characterized as disintermediated, unregulated or even decentralized in the near future. Furthermore, it is a real possibility that ICOs may end up being a progressor model eventually replaced by similar but more specialized financing models, some of which may already exist. With respect to the particular solutions of the ICO market, while some represent the realization of the potential of Blockchain, others such as forks have important Governance implications with the potential to create as many problems as the ones they address.

Suggested Citation

  • de Andrés, Pablo & Arroyo, David & Correia, Ricardo & Rezola, Alvaro, 2022. "Challenges of the market for initial coin offerings," International Review of Financial Analysis, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:finana:v:79:y:2022:i:c:s1057521921002842
    DOI: 10.1016/j.irfa.2021.101966
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    More about this item

    Keywords

    Blockchain; Alternative financing solutions; Initial coin offerings; Asymmetrical information;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • K24 - Law and Economics - - Regulation and Business Law - - - Cyber Law
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O36 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Open Innovation

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