Design and Valuation of Cryptocurrencies

43 Pages Posted: 1 May 2023 Last revised: 21 May 2024

See all articles by Fabian E. Eska

Fabian E. Eska

Karlsruhe Institute of Technology

Yanghua Shi

University of Mannheim

Erik Theissen

University of Mannheim - Finance Area

Marliese Uhrig‐Homburg

Karlsruhe Institute of Technology

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

Eska, Fabian Erich and Shi, Yanghua and Theissen, Erik and Uhrig‐Homburg, Marliese, Design and Valuation of Cryptocurrencies (May 12, 2022). Available at SSRN: https://ssrn.com/abstract=3978904 or http://dx.doi.org/10.2139/ssrn.3978904

Fabian Erich Eska (Contact Author)

Karlsruhe Institute of Technology ( email )

Blücherstr. 17
Karlsruhe, 76185
Germany

Yanghua Shi

University of Mannheim ( email )

L 9, 1-2
Mannheim, 68161
Germany

Erik Theissen

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

Marliese Uhrig‐Homburg

Karlsruhe Institute of Technology

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

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