Digital Tokens and Platform Building

2018 WFA, 2019 AFA

48 Pages Posted: 18 Dec 2017 Last revised: 11 May 2020

See all articles by Jiasun Li

Jiasun Li

George Mason University - Department of Finance

William Mann

Emory University - Department of Finance

Date Written: October 1, 2018

Abstract

We present a model rationalizing the economic value of digital tokens for launching peer-to-peer platforms: By using the blockchain to transparently distribute tokens before the platform begins operation, a token sale overcomes later coordination failures between transaction counterparties during the platform operation. This result follows from forward induction reasoning, under which the costly and observable action of token acquisition credibly communicates the intent to participate on the platform. Our theoretical framework demonstrates the applications of digital tokens to entrepreneurship, including initial coin offerings (ICOs), and offers guidance for both practitioners and regulators.

Keywords: blockchain, coordination, entrepreneurship, FinTech, initial coin offering, ICO, platform, tokenomics

Suggested Citation

Li, Jiasun and Mann, William, Digital Tokens and Platform Building (October 1, 2018). 2018 WFA, 2019 AFA. Available at SSRN: https://ssrn.com/abstract=3088726 or http://dx.doi.org/10.2139/ssrn.3088726

Jiasun Li (Contact Author)

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

HOME PAGE: http://sites.google.com/site/jiasunlihome/

William Mann

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States

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