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Optimal Financing with Tokens

Author

Listed:
  • Sebastian Gryglewicz

    (Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE))

  • Simon Mayer

    (Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE))

  • Erwan Morellec

    (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute)

Abstract

We develop a unifying model of the optimal issuance and design of tokens in the presence of frictions typical to the financing of entrepreneurial projects, such as the need to raise outside funds to finance platform development and the ensuing agency conflicts between platform developers and outsiders. Tokens possess utility features when they serve as the transaction medium on the platform. They possess security features when they distribute dividends. The paper shows how the optimal provision of utility and security features relates to financing needs, moral hazard, and platform characteristics and specifies the conditions under which initial coin offerings or security token offerings are optimal for platform financing.

Suggested Citation

  • Sebastian Gryglewicz & Simon Mayer & Erwan Morellec, 2019. "Optimal Financing with Tokens," Swiss Finance Institute Research Paper Series 19-78, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1978
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    Citations

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    Cited by:

    1. Barth, Andreas & Laturnus, Valerie & Mansouri, Sasan & Wagner, Alexander, 2021. "ICO analysts," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242429, Verein für Socialpolitik / German Economic Association.
    2. Cong, Lin William & Li, Ye & Wang, Neng, 2022. "Token-based platform finance," Journal of Financial Economics, Elsevier, vol. 144(3), pages 972-991.
    3. Anton Miglo, 2021. "STO vs. ICO: A Theory of Token Issues under Moral Hazard and Demand Uncertainty," JRFM, MDPI, vol. 14(6), pages 1-35, May.
    4. Ye Li & Simon Mayer & Simon Mayer, 2021. "Money Creation in Decentralized Finance: A Dynamic Model of Stablecoin and Crypto Shadow Banking," CESifo Working Paper Series 9260, CESifo.
    5. Lin William Cong & Yizhou Xiao, 2021. "Categories and Functions of Crypto-Tokens," Springer Books, in: Maurizio Pompella & Roman Matousek (ed.), The Palgrave Handbook of FinTech and Blockchain, edition 1, chapter 0, pages 267-284, Springer.
    6. Jingxing (Rowena) Gan & Gerry Tsoukalas & Serguei Netessine, 2021. "Initial Coin Offerings, Speculation, and Asset Tokenization," Management Science, INFORMS, vol. 67(2), pages 914-931, February.

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