Tokenomics: Dynamic Adoption and Valuation

44 Pages Posted: 30 Jul 2018 Last revised: 22 May 2019

See all articles by Lin William Cong

Lin William Cong

Cornell University

Ye Li

Ohio State University

Neng Wang

Columbia University; China Academy of Financial Research (CAFR)

Date Written: May 18, 2019


We develop a dynamic asset-pricing model of cryptocurrencies/tokens that facilitate peer-to-peer transactions on digital platforms. The equilibrium value of tokens is determined by users' transactional demand rather than cashflows as in standard valuation models. Endogenous platform adoption exhibits an S-curve -- it starts slow, becomes volatile, and eventually tapers off. Users' adoption generates positive network externality, which leads to endogenous token-price risk and boom-bust price dynamics. Tokens allow users to capitalize on platform growth, inducing an intertemporal feedback between user adoption and token price that accelerates platform adoption, reduces user-base volatility, and improves welfare.

Keywords: Asset Pricing, Blockchain, Cryptocurrency, Digital Marketplace, FinTech, Intertemporal Feedback Effect, Network Externality, Tokens

JEL Classification: G12, L86

Suggested Citation

Cong, Lin and Li, Ye and Wang, Neng, Tokenomics: Dynamic Adoption and Valuation (May 18, 2019). 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)

Cornell University ( email )

Ithaca, NY 14853
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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