Fundamental Pricing of Utility Tokens
Management Science, https://doi.org/10.1287/mnsc.2023.00566
49 Pages Posted: 15 Apr 2024 Last revised: 12 Feb 2025
Date Written: July 28, 2024
Abstract
We propose a framework for the fundamental valuation of utility tokens. We introduce a requirement that is reminiscent of the cash-in-advance constraint, stipulating that services have to be accessed immediately. Our model endogenizes the velocity of token circulation, yielding a microfounded pricing formula that we calibrate using Ethereum’s adoption data. The equilibrium price path goes through two successive phases: Initially, a portion of the tokens are held for purely speculative motives, and later on, all tokens are held with the intention of being used.
Keywords: Asset pricing, utility token, Blockchain, cryptocurrency, ICOs, platform
JEL Classification: E42, G12, G24
Suggested Citation: Suggested Citation