How Value is Created in Tokenized Assets

13 Pages Posted: 21 Apr 2018 Last revised: 5 May 2018

See all articles by John Hargrave

John Hargrave

Bitcoin Market Journal

Navroop K. Sahdev

Massachusetts Institute of Technology; Centre for Blockchain Technologies, University College London

Olga Feldmeier

Ludwig-Maximilians-Universität München

Date Written: February 28, 2018


A tidal wave of change is coming to the world of Economic Science. Digital tokens—including bitcoin, altcoins, and cryptocurrencies—will require a fundamental rethinking of valuation, in the same way that the introduction of the stock market required a new understanding of value. As of this writing, the total value of all tokens stands at $500 billion. How do investors place value on computer code, with no central bank or physical asset to support it? Drawing from the literature on behavioral economics and tools from cognitive psychology, we aim to provide the first anchor to understand the criteria that investors are deploying to value new digital assets, making this the first study of applied behavioral economics on token valuation. Using a new instrument called the Framework for Token Confidence, we show how value can be created out of “thin air,” and how tokens, and indeed the entire economic system, operate as something like a “vote of confidence.”

Keywords: Blockchain, Token Economics, Tokenomics, ICOs, Initial Coin Offerings, Token Sales, Distributed Ledger Technology, Cryptocurrencies, Economic Value, Behavioral Economics, Cognitive Psychology, Applied Behavioral Economics, Framework for Token Confidence, Altcoins, Bitcoin, Ethereum

Suggested Citation

Hargrave, John and Sahdev, Navroop K. and Feldmeier, Olga, How Value is Created in Tokenized Assets (February 28, 2018). Available at SSRN: or

John Hargrave

Bitcoin Market Journal ( email )

United States

Navroop K. Sahdev (Contact Author)

Massachusetts Institute of Technology ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States


Centre for Blockchain Technologies, University College London ( email )

UCL Computer Science
Malet Place
London, London WC1E 6BT
United Kingdom


Olga Feldmeier

Ludwig-Maximilians-Universität München ( email )

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