Token-based Platform Finance

64 Pages Posted: 29 Oct 2019 Last revised: 3 May 2021

See all articles by Lin William Cong

Lin William Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management

Ye Li

Ohio State University (OSU)

Neng Wang

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); Asian Bureau of Finance and Economic Research (ABFER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 3, 2021

Abstract

We develop a dynamic model of platform economy where tokens serve as a means of payments among platform users and are issued to finance investment in platform productivity. Tokens are optimally issued to reward platform owners when the productivity-normalized token supply is low and burnt to boost the franchise value when the productivity-normalized normalized supply is high. Although token price is determined in a liquid market, the platform's financial constraint generates an endogenous token issuance cost, causing underinvestment through the conflict of interest between insiders (platform owners) and outsiders (users). Blockchain technology mitigates underinvestment by addressing the platform's time-inconsistency problem.

Keywords: Blockchain, Cryptocurrency, Dynamic Corporate Financing, Durable Goods, Gig Economy, Optimal Token Supply, Time Inconsistency, Token/Coin Offering

Suggested Citation

Cong, Lin and Li, Ye and Wang, Neng, Token-based Platform Finance (May 3, 2021). Fisher College of Business Working Paper No. 2019-03-028, Charles A. Dice Center Working Paper No. 2019-28, Columbia Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3472481 or http://dx.doi.org/10.2139/ssrn.3472481

Lin Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.linwilliamcong.com/

Ye Li (Contact Author)

Ohio State University (OSU) ( email )

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Neng Wang

Columbia Business School - Finance and Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Asian Bureau of Finance and Economic Research (ABFER) ( email )

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