Tokenomics: Dynamic Adoption and Valuation

40 Pages Posted: 30 Jul 2018 Last revised: 22 Oct 2018

See all articles by Lin William Cong

Lin William Cong

University of Chicago - Booth School of Business

Ye Li

Ohio State University

Neng Wang

Columbia University; China Academy of Financial Research (CAFR)

Date Written: October 2018


We provide a dynamic asset-pricing model of cryptocurrencies/tokens on platforms and highlight their roles on endogenous user adoption. Tokens facilitate transactions among decentralized users and allows them to capitalize future growth of promising platforms. Tokens thus can accelerate adoption, reduce user-base volatility, and improve welfare. Token price increases non-linearly in platform productivity, users' heterogeneous transaction needs, and endogenous network size. The growth of user base starts slow, becomes explosive and volatile, and eventually tapers off. Our model can be extended to discuss platform token supply, cryptocurrency competition, and pricing assets under network externality.

Keywords: Bitcoin, Blockchain, Cryptocurrency, Digital Currency, ICOs, FinTech, Network Effect, Platforms, Tokens

JEL Classification: C73, F43, E42, L86

Suggested Citation

Cong, Lin and Li, Ye and Wang, Neng, Tokenomics: Dynamic Adoption and Valuation (October 2018). Becker Friedman Institute for Research in Economics Working Paper No. 2018-49; Fisher College of Business Working Paper No. 2018-03-015; Charles A. Dice Center Working Paper No. 2018-15; Columbia Business School Research Paper No. 18-62. Available at SSRN: or

Lin Cong (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Ye Li

Ohio State University ( email )

Fisher Hall 836, 2100 Neil Ave
Columbus, OH 43210
United States


Neng Wang

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030

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