Token-Based Platform Finance

Fisher College of Business Working Paper No. 2019-03-028

Charles A. Dice Center Working Paper No. 2019-28

45 Pages Posted: 29 Oct 2019 Last revised: 19 Nov 2019

See all articles by Lin William Cong

Lin William Cong

Cornell University

Ye Li

Ohio State University

Neng Wang

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

Date Written: November 16, 2019


We develop a dynamic model of platform economy where tokens derive value by facilitating transactions among users and the platform conducts optimal token-supply policy to finance investment in platform quality and to compensate platform owners. Even though token price is endogenously determined in a liquid market, the platform's financial constraint generates an endogenous token issuance cost that causes under-investment and conflict of interest between insiders (owners) and outsiders (users). The franchise value (seigniorage) incentivizes the owners to buy back and burn tokens out of circulation, reducing token price volatility. Blockchain technology is crucial for token-based platforms because it enables platform owners to commit to predetermined rules of token supply that can significantly improve efficiency by addressing platform owners' time inconsistency and mitigating under-investment.

Keywords: Blockchain, Cryptocurrency, Dynamic Investment, Dynamic Corporate Finance, Financial Constraint, Gig Economy, Token and Coin Offerings, Optimal Token Supply

Suggested Citation

Cong, Lin and Li, Ye and Wang, Neng, Token-Based Platform Finance (November 16, 2019). Fisher College of Business Working Paper No. 2019-03-028. Available at SSRN:

Lin Cong

Cornell University ( email )

Ithaca, NY 14853
United States


Ye Li (Contact Author)

Ohio State University ( email )

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


Neng Wang

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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