IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/24418.html
   My bibliography  Save this paper

Initial Coin Offerings and the Value of Crypto Tokens

Author

Listed:
  • Christian Catalini
  • Joshua S. Gans

Abstract

This paper explores how entrepreneurs can use initial coin offerings — whereby they issue crypto tokens and commit to only accept those tokens as payment for their products — to fund venture start-up costs. We show that the ICO mechanism allows entrepreneurs to generate buyer competition for the token, giving it value. We also find that venture returns are independent of any committed growth in the supply of tokens over time, but that initial funds raised are maximized by setting that growth to zero to encourage saving by early participants. Nonetheless, since the value of the tokens depends on a single period of demand, the ability to raise funds is more limited than in traditional equity finance. Furthermore, a lack of commitment in monetary policy undermines saving behavior, hence the cost of using tokens to fund start-up costs is inflexibility in future capital raises. Crypto tokens can also facilitate coordination among stakeholders within digital ecosystems when network effects are present.

Suggested Citation

  • Christian Catalini & Joshua S. Gans, 2018. "Initial Coin Offerings and the Value of Crypto Tokens," NBER Working Papers 24418, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24418
    Note: PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w24418.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
    2. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    3. Athey, Susan & Parashkevov, Ivo & Sarukkai, Vishnu & Xia, Jing, 2016. "Bitcoin Pricing, Adoption, and Usage: Theory and Evidence," Research Papers 3469, Stanford University, Graduate School of Business.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rod Garratt & Maarten van Oordt, 2019. "Entrepreneurial Incentives and the Role of Initial Coin Offerings," Staff Working Papers 19-18, Bank of Canada.
    2. Yannis Bakos & Hanna Halaburda, 2019. "The Role of Cryptographic Tokens and ICOs in Fostering Platform Adoption," CESifo Working Paper Series 7752, CESifo Group Munich.
    3. Volodymyr Babich & Gilles Hilary, 2019. "Distributed Ledgers and Operations: What Operations Management Researchers Should Know about Blockchain Technology," Post-Print hal-02005158, HAL.
    4. Anil Savio Kavuri & Alistair Milne, 2019. "FinTech and the future of financial services: What are the research gaps?," CAMA Working Papers 2019-18, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:24418. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.