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Token-Based Platform Governance

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Abstract

develop a model to compare the governance of traditional shareholder-owned plat forms to that of platforms that issue tokens. The owners of a traditional platform have incentives to implement policies that extract rents from users. If the platform’s owners can commit to future policies, they can implement a more efficient outcome by issuing a token that offers claims on the platform’s services. Such a token alleviates conflicts of interest between the platform’s owners and its users, mitigating inefficiencies: a policy that benefits users increases the value of tokens and therefore the platform’s seignorage revenue. If the platform’s owners cannot commit to policies ex ante, however, they can achieve the same outcome by issuing a token that bundles claims on the platform’s ser vices with an ownership share (i.e., cash flow claims and voting rights).

Suggested Citation

  • Joseph Abadi & Markus K. Brunnermeier, 2025. "Token-Based Platform Governance," Working Papers 25-17, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:100006
    DOI: 10.21799/frbp.wp.2025.17
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    File URL: https://www.philadelphiafed.org/-/media/FRBP/Assets/working-papers/2025/wp25-17.pdf?sc_lang=en
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    More about this item

    Keywords

    Utility Tokens; Platforms; Decentralized Finance; Corporate Governance;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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