Token-Based Platform Finance

50 Pages Posted: 14 Sep 2020

See all articles by Lin William Cong

Lin William Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management

Ye Li

Ohio State University

Neng Wang

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

Multiple version iconThere are 2 versions of this paper

Date Written: September 2020

Abstract

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. Token supply increases when new tokens are issued to finance platform growth and to reward platform owners. Token supply decreases when the platform buys back tokens to boost the franchise value (seigniorage). Although 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 conflicts of interest between insiders (owners) and outsiders (users). Blockchain technology improves efficiency by enabling commitment to predetermined rules of token supply that address the platform owners’ time inconsistency and thereby mitigates under-investment.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Cong, Lin and Li, Ye and Wang, Neng, Token-Based Platform Finance (September 2020). NBER Working Paper No. w27810, Available at SSRN: https://ssrn.com/abstract=3692166

Lin Cong (Contact Author)

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

Ithaca, NY 14853
United States

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

Ye Li

Ohio State University ( email )

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

HOME PAGE: http://yeli-macrofinance.com

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
3
Abstract Views
90
PlumX Metrics