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Tokenomics: When Tokens Beat Equity

Author

Listed:
  • Katya Malinova

    (DeGroote School of Business, McMaster University, Hamilton, Ontario L8S 4E8, Canada)

  • Andreas Park

    (University of Toronto Mississauga and Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

Abstract

In a token offering, investors fund a venture in exchange for tokens that grant rights to future economic output. To many financial industry insiders, tokens have no intrinsic merit and exist only as a way to evade regulations. We demonstrate that generic revenue-based token contracts are indeed economically inferior to equity and lead to over- or underproduction. However, an optimally designed token contract, which is a combination of an output presale and an incremental revenue-sharing agreement, yields the same payoffs as equity and debt. Moreover, with entrepreneurial moral hazard, tokens can finance a strictly larger set of ventures than equity.

Suggested Citation

  • Katya Malinova & Andreas Park, 2023. "Tokenomics: When Tokens Beat Equity," Management Science, INFORMS, vol. 69(11), pages 6568-6583, November.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:11:p:6568-6583
    DOI: 10.1287/mnsc.2023.4882
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    References listed on IDEAS

    as
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    Cited by:

    1. Yulin Liu & Mocca Schweitzer, 2025. "EconAgentic in DePIN Markets: A Large Language Model Approach to the Sharing Economy of Decentralized Physical Infrastructure," Papers 2508.21368, arXiv.org.
    2. Farooq Malik & Zaghum Umar, 2025. "Quantile connectedness of artificial intelligence tokens with the energy sector," Review of Financial Economics, John Wiley & Sons, vol. 43(2), pages 135-146, April.
    3. Canidio, Andrea, 2025. "Auctions with tokens: Monetary policy as a mechanism design choice," Journal of Economic Theory, Elsevier, vol. 230(C).
    4. Piyarisi, Mevni Manarangi & Shalpegin, Timofey, 2025. "Incentives in decentralised autonomous organisations," International Journal of Production Economics, Elsevier, vol. 280(C).
    5. Rachana Harish, Arjun & Liu, Xinlai & Li, Ming & Zhong, Ray Y. & Huang, George Q., 2025. "The new supply chain information sharing Renaissance through crypto valuation mechanism of digital assets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 195(C).
    6. Kane Falco ter Veer & Timo Heinrich, 2025. "Communicating tokenomics and monetary policy: A comparative analysis of real and virtual economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 2849-2866, July.
    7. Benedetti, Hugo & Rodríguez-Garnica, Gabriel, 2025. "Does what happens on-chain stays on-chain? The dynamics of blockchain token transactions and prices," Journal of International Money and Finance, Elsevier, vol. 158(C).
    8. Li, Renzhong & Fei, Chen & Fei, Weiyin, 2025. "Impact of government’s support policy on decision-making of platform participants under ESG," The North American Journal of Economics and Finance, Elsevier, vol. 75(PA).
    9. Garratt, Rodney J. & van Oordt, Maarten R.C., 2026. "The crypto multiplier," Journal of Corporate Finance, Elsevier, vol. 96(C).
    10. Johann Lussange & Stefano Vrizzi & Stefano Palminteri & Boris Gutkin, 2024. "Modelling crypto markets by multi-agent reinforcement learning," Papers 2402.10803, arXiv.org.
    11. Hanneke, Björn & Skiera, Bernd & Kraft, Thilo Gerwien & Hinz, Oliver, 2025. "Decoding blockchain data for research in marketing: New insights through an analysis of share of wallet," International Journal of Research in Marketing, Elsevier, vol. 42(3), pages 711-727.
    12. Junliang Luo & Xihan Xiong & Zonglun Li & Hong Kang & Xue Liu & William J Knottenbelt & Katrin Tinn, 2026. "SoK of RWA Tokenization: A Systematization of Concepts, Architectures, and Legal Interoperability," Papers 2604.06608, arXiv.org, revised Apr 2026.
    13. Itay Goldstein & Deeksha Gupta & Ruslan Sverchkov, 2024. "Utility Tokens as a Commitment to Competition," Journal of Finance, American Finance Association, vol. 79(6), pages 4197-4246, December.
    14. Shilin Ou & Yifan Xu & Luyao Zhang, 2026. "SolarChain-Eval: A Physics-Constrained Benchmark for Trustworthy Economic Agents in Decentralized Energy Markets," Papers 2607.08681, arXiv.org.

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