Growing Entrepreneurship with Crypto Tokens

Posted: 29 Oct 2019 Last revised: 20 May 2020

See all articles by Wei Chen

Wei Chen

University of Arizona - Eller College of Management

Karen Xie

University of Denver, Daniels College of Business

Weifeng Li

University of Georgia

Date Written: October 18, 2019

Abstract

The advent of crypto tokens has enabled ventures to raise funding through initial coin offerings (ICOs). As of 2019, ventures worldwide have raised over $27 billion from token-based financing. Yet, crypto tokens’ developmental value to ventures is less understood but of significant interest to entrepreneurs and policymakers. In this study, we examine the developmental value of crypto tokens through the lens of token liquidity obtained on secondary market exchanges. Specifically, we study how exchange-listed tokens affect a venture’s growth toward application development. We study a sample of 1,285 ventures that have collectively raised $15.6 billion in ICO funding and committed 28.4 million code updates to application development. We find that ventures with exchange-listed tokens experienced more tangible growth relative to counterpart ventures without tokens listed on exchanges. The mechanism centers on demand discovery and price change that facilitate application development. Heterogeneous impacts across the cryptocurrency market waves and regulatory stances of countries further confirm these mechanisms. Finally, exchange listing is positively associated with project survival and popularity in application development, indicating that access to token liquidity has important implications for venture growth.

Keywords: Blockchain, Initial Coin Offering, Exchange Listing, Token Liquidity, Application development

JEL Classification: L26, L17, G23, G24

Suggested Citation

Chen, Wei and Xie, Karen and Li, Weifeng, Growing Entrepreneurship with Crypto Tokens (October 18, 2019). Available at SSRN: https://ssrn.com/abstract=3472069

Wei Chen (Contact Author)

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Karen Xie

University of Denver, Daniels College of Business ( email )

2101 S. University Blvd.
Denver, CO 80208
United States

Weifeng Li

University of Georgia ( email )

610 S. Lumpkin St.
Benson C404
Athens, GA 30602
United States

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