Beyond Funding: How Exchange Listing Shapes Application Development in Token-Funded Ventures

Abstract

Application development makes or breaks a token-funded venture. Amid concerns of operational commitment post-funding through token sales, we investigate the impact of exchange listing on the application development in token-funded ventures. We highlight two mechanisms enabled by exchange listing: the feedback effect and the governance effect. These mechanisms empower investors to actively shape application development through their trading actions. Our extensive analysis encompasses 2,076 token-funded ventures, which have collectively raised $14.9 billion via token sales and contributed 1.8 million code updates towards application development. We find that exchange listing significantly elevates application development, bolstered by investor feedback and governance. Higher token prices and trade volume, as well as a larger stake held by token-funded ventures and direct participation through decentralized autonomous organizations, amplify such an effect. Moreover, variations in country-specific regulations and fluctuations in the crypto market underscore the diverse conditions under which these mechanisms are more pronounced. As the landscape of token-based fundraising evolves, our findings pivot the conversation towards a critical focus on application development, underpinned by robust feedback and governance channels, offering actionable strategies for stakeholders and policymakers in the crypto domain.

Keywords: Token-funded ventures, blockchain, initial coin offering, exchange listing, application development

JEL Classification: L26, L17, G23, G24