The Rise of Decentralized Cryptocurrency Exchanges: Evaluating the Role of Airdrops and Governance Tokens

42 Pages Posted: 3 Oct 2021 Last revised: 7 Dec 2021

See all articles by Christos Makridis

Christos Makridis

Stanford University; Columbia University - Columbia Business School; Arizona State University (ASU); Department of Veterans Affairs (VA)

Michael Froewis

University of Innsbruck

Kiran Sridhar

Stanford University

Rainer Böhme

University of Innsbruck; University of Münster - Department of Information Systems; ICSI Berkeley; TU Dresden

Date Written: August 31, 2021

Abstract

This paper introduces the most comprehensive data available to date on centralized and decentralized exchanges run off of distributed ledger technologies. First, we document the rapid growth in decentralized exchanges and their differences in volume and price dynamics from centralized exchanges. Second, motivated by these differences, we investigate the role of airdrops and governance tokens as mechanisms for expanding the base of users and driving up the value of an exchange. Our results suggest that both mechanisms are effective for expanding and strengthening networks, particularly for decentralized exchanges. We also exploit two event studies that suggest the growth in decentralized exchanges is not driven by speculation, but at least partially by value-creating cybersecurity benefits.

Keywords: Airdrops, Blockchain, Decentralized Exchanges, Decentralized Finance, Expectations, Smart Contracts

JEL Classification: D82, D84, G29, L86

Suggested Citation

Makridis, Christos and Froewis, Michael and Sridhar, Kiran and Böhme, Rainer, The Rise of Decentralized Cryptocurrency Exchanges: Evaluating the Role of Airdrops and Governance Tokens (August 31, 2021). Available at SSRN: https://ssrn.com/abstract=3915140 or http://dx.doi.org/10.2139/ssrn.3915140

Christos Makridis (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Department of Veterans Affairs (VA) ( email )

810 Vermont Avenue NW
Washington, DC 20420
United States

Michael Froewis

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Kiran Sridhar

Stanford University ( email )

Stanford, CA 94305
United States

Rainer Böhme

University of Innsbruck ( email )

Technikerstraße 21A
Innsbruck, Innsbruck 6020
Austria

HOME PAGE: http://informationsecurity.uibk.ac.at/people/rainer-boehme/

University of Münster - Department of Information Systems ( email )

Leonardo-Campus 3
Muenster, NRW D-48143
Germany

HOME PAGE: http://www.wi.uni-muenster.de/security/

ICSI Berkeley ( email )

1947 Center Street, Ste. 600
Berkeley, CA 94704
United States

TU Dresden ( email )

Dresden, 01062
Germany

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