Initial Coin Offerings, Blockchain Technology, and White Paper Disclosures

51 Pages Posted: 12 Oct 2018 Last revised: 9 May 2019

See all articles by Chen Feng

Chen Feng

University of British Columbia (UBC) - Faculty of Applied Science

Nan Li

University of Toronto - Rotman School of Management; University of Toronto at Scarborough - Division of Management

M.H. Franco Wong

University of Toronto - Rotman School of Management

Mingyue Zhang

University of Toronto - Rotman School of Management

Date Written: March 25, 2019

Abstract

We examine voluntary disclosures made by issuers of initial coin offerings (ICOs) in their “white papers” and use them to rate the blockchain technology being developed by the ICO issuers. First, we find that most ICOs receive a low rating. In fact, over 80% of the ICOs do not need to use a blockchain. Second, ICO projects with a higher rating raised more funds than their counterparts, after controlling for other project-, issuer-, and token-related features. Third, ICOs with a high rating are more likely to have their digital coins/tokens listed on a cryptocurrency exchange within 180 days after their ICO end dates. Finally, results indicate that providing technical details in the white paper can be an effective way to signal the quality of an ICO project. Overall, these results are consistent with ICO token buyers/investors taking into consideration the underlying blockchain technology of the ICO projects when making their purchasing/investing decisions. Since the white paper is the main source of ICO information, our findings imply that the credibility of this information is important to protect the interests of ICO buyers/investors and to ensure the long-term viability of the ICO as a capital-raising tool for blockchain-based ventures.

Keywords: Initial Coin Offerings, Blockchain, Distributed Ledger, Smart Contract, Cryptocurrency, Digital Tokens, White Paper, Disclosures, Securities Regulation

JEL Classification: G10, G20, G32, L26, M40, O30

Suggested Citation

Feng, Chen and Li, Nan and Wong, M.H. Franco and Zhang, Mingyue, Initial Coin Offerings, Blockchain Technology, and White Paper Disclosures (March 25, 2019). Available at SSRN: https://ssrn.com/abstract=3256289 or http://dx.doi.org/10.2139/ssrn.3256289

Chen Feng

University of British Columbia (UBC) - Faculty of Applied Science ( email )

Canada

HOME PAGE: http://people.ok.ubc.ca/cfeng01/

Nan Li

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-3126 (Phone)

University of Toronto at Scarborough - Division of Management ( email )

1265 Military Trial
Scarborough, Ontario M1C 1A4
Canada

M.H. Franco Wong (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-0729 (Phone)

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Wong.aspx

Mingyue Zhang

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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