Design and Valuation of Cryptocurrencies
43 Pages Posted: 1 May 2023 Last revised: 21 May 2024
Date Written: May 12, 2022
Abstract
We analyze whether the design of cryptocurrencies helps to explain the huge cross-sectional
variation in the market values of cryptocurrencies. We propose a taxonomy of design features
and hand-collect data on these features for a sample of 79 cryptocurrencies. Using a two-
stage regression approach and LASSO regressions, we find, inter alia, that forks and deviations
from the design of Bitcoin are associated with lower valuation. In contrast, non-anonymous
cryptocurrencies and cryptocurrencies that do not pass on any transaction fees and/or tips to
agents who maintain the integrity of the network have, on average, higher market values. These
results are robust to variations in the way we measure market valuation.
Keywords: Blockchains, Cryptocurrencies, Cryptocurrency Design, Market Valuation, LASSO
JEL Classification: G1, G2, O30
Suggested Citation: Suggested Citation