The Role of Technology and Network Externalities in the Long-Term Performance of ICOs

47 Pages Posted: 22 Feb 2021 Last revised: 1 Feb 2023

See all articles by Tatja Karkkainen

Tatja Karkkainen

Ulster University - Business School

Date Written: January 31, 2023


This study examines the impact of technology and network externalities on exchange-listed Initial Coin Offerings (ICOs). ICOs are a new fundraising instrument used to finance technological innovation against a digital voucher or receipt. They diffuse the ownership of claim for a digital good. Utilising an online database comprising of self-reported ICO characteristics, measures of post-ICO performance, along with information on business social networks, higher fundraising figures are found to contribute to the ICO long-term success, but this impact is multiplied by six times when fundraising is conducted to existing, proprietary blockchain. This is explained by the network effect. The modified information ratio measure is used to approximate the quality signalling of ICO organisations using price timeseries and benchmarking these to already functioning blockchain technology, e.g. ethereum in the long-term. The ICO sample’s mean trading period on exchanges is 1.5 years and is used for long-period asset analysis. Additionally, the cointegration to the market technology benchmark is found to have a large, significant negative effect on long-term ICO organisational success as this indicates lower ICO intrinsic value.

Keywords: Initial Coin Offerings, Return Series, Networks, Financial Technology, Blockchain, Ethereum

JEL Classification: B26, D18, D47, G11

Suggested Citation

Karkkainen, Tatja, The Role of Technology and Network Externalities in the Long-Term Performance of ICOs (January 31, 2023). Available at SSRN: or

Tatja Karkkainen (Contact Author)

Ulster University - Business School ( email )

United Kingdom

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