The Impact of Financing on Multisided Platforms: Evidence from the Digital Asset Market

Abstract

We examine the impact of introducing financing on the market outcomes of a multisided digital asset platform, and examine whether platforms can use financing as a growth lever. The platform intermediates buyers and sellers of digital assets, specifically Non-Fungible Tokens (or NFTs). The focal platform, Blur, introduced financing (Buy-Now-Pay-Later) for some product collections, holding the digital asset as collateral. The loans are provided by other users. Using a unique dataset from both the focal platform and its biggest competitor, we identify the impact of financing on buyers' purchases and sellers' listing decisions. We find that offering financing increases quantities sold and total revenue for treated collections, without affecting selling prices. Moreover, financing does not influence the sales and revenues at the rival platform. Decomposing these effects, we find that supply-side responses account for only 26% of the increase in sales. On the demand side, existing users exhibit a "flight to quality," purchasing higher-quality products when financing is available. While financing attracts new users from rival platforms to act as lenders on Blur, these users do not shift their trading activity to Blur. Consequently, financing does not expand Blur's overall user base, and its spillover effects on the competing platform remain minimal.

Keywords: Multisided Platforms, Financing, Digital Assets, Buy Now Pay Later