The Tokenomics of Staking

62 Pages Posted: 6 Apr 2022 Last revised: 16 Feb 2025

See all articles by Lin William Cong

Lin William Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management; Cornell SC Johnson College of Business; National Bureau of Economic Research (NBER)

Zhiheng He

Tsinghua University - Institute of Economics

Ke Tang

Institute of Economics, School of Social Sciences, Tsinghua University

Multiple version iconThere are 2 versions of this paper

Date Written: March 16, 2022

Abstract

Tokens offer convenience in digital networks and earn rewards when staked for consensus generation or economic activities. In our continuous-time model, agents dynamically allocate wealth over on-platform transactions and staking. Aggregate staking ratio crucially shapes platform productivity, grows userbase, and links staking to endogenous reward rates and price dynamics. Transaction fees, token issuance, and user heterogeneity all affect platform lifecycle. Empirical findings support the theoretical predictions: (i) correlation between staking ratio and reward rate is cross-sectionally positive, but time-series-wise negative; (ii) staking ratios positively predict excess returns; (iii) the convenience wedge generates UIP violations and significant crypto carry premia.

Keywords: Carry, Cryptocurrencies, DeFi, Inequality, Proof-of-Stake, Redistribution, UIP.

Suggested Citation

Cong, Lin and He, Zhiheng and Tang, Ke, The Tokenomics of Staking (March 16, 2022). Available at SSRN: https://ssrn.com/abstract=4059460 or http://dx.doi.org/10.2139/ssrn.4059460

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/

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Zhiheng He

Tsinghua University - Institute of Economics ( email )

MingZhai Building
Beijing, 100084
China

Ke Tang

Institute of Economics, School of Social Sciences, Tsinghua University ( email )

No.1 Tsinghua Garden
Beijing, 100084
China

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