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A note on the dynamic adoption and valuation theory in tokenomics

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  • Shen, Zhuyi
  • Wang, Shibo
  • Yang, Jinqiang

Abstract

This paper employs the Pareto distribution to model participants’ transaction types in the dynamic digital platform adoption and valuation theory. By closed-form solutions, we derive the analytical condition determining whether the tokenized economy exhibits faster adoption than the numeraire economy. We generalize the conclusion of Cong et al. (2021) that the user adoption is faster in the tokenized economy than in the numeraire economy because of endogenous appreciation expectation based on their numerical analysis. Conversely, when the volatility effect of platform productivity outweighs the growth effect, the adoption rate of the tokenized platform is slower due to depreciation expectation.

Suggested Citation

  • Shen, Zhuyi & Wang, Shibo & Yang, Jinqiang, 2023. "A note on the dynamic adoption and valuation theory in tokenomics," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004191
    DOI: 10.1016/j.frl.2023.104047
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    References listed on IDEAS

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    1. Patrick Bolton & Hui Chen & Neng Wang, 2011. "A Unified Theory of Tobin's q, Corporate Investment, Financing, and Risk Management," Journal of Finance, American Finance Association, vol. 66(5), pages 1545-1578, October.
    2. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, December.
    3. Cong, Lin William & Li, Ye & Wang, Neng, 2022. "Token-based platform finance," Journal of Financial Economics, Elsevier, vol. 144(3), pages 972-991.
    4. Long, Huaigang & Demir, Ender & Będowska-Sójka, Barbara & Zaremba, Adam & Shahzad, Syed Jawad Hussain, 2022. "Is geopolitical risk priced in the cross-section of cryptocurrency returns?," Finance Research Letters, Elsevier, vol. 49(C).
    5. Long, Huaigang & Zaremba, Adam & Demir, Ender & Szczygielski, Jan Jakub & Vasenin, Mikhail, 2020. "Seasonality in the Cross-Section of Cryptocurrency Returns," Finance Research Letters, Elsevier, vol. 35(C).
    6. Markus K. Brunnermeier & Yuliy Sannikov, 2014. "A Macroeconomic Model with a Financial Sector," American Economic Review, American Economic Association, vol. 104(2), pages 379-421, February.
    7. Lin William Cong & Ye Li & Neng Wang, 2021. "Tokenomics: Dynamic Adoption and Valuation [The demand of liquid assets with uncertain lumpy expenditures]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1105-1155.
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    Cited by:

    1. Nicola Dimitri, 2023. "The Economic Value of Dual-Token Blockchains," Mathematics, MDPI, vol. 11(17), pages 1-19, August.
    2. Shen, Zhuyi & Wang, Shibo & Yang, Jinqiang, 2023. "Robust adoption and valuation in tokenomics," Economic Modelling, Elsevier, vol. 129(C).

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    More about this item

    Keywords

    Cryptocurrency; Numeraire; Tokenomics;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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