Tokenomics: When Tokens Beat Equity
In a token offering, investors fund a venture in exchange for tokens that grant rights to future economic output. To many financial industry insiders, tokens have no intrinsic merit and exist only as a way to evade regulations. We demonstrate that generic revenue-based token contracts are indeed eco...
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Veröffentlicht in: | Management science 2023-11, Vol.69 (11), p.6568-6583 |
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Sprache: | eng |
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Zusammenfassung: | In a token offering, investors fund a venture in exchange for tokens that grant rights to future economic output. To many financial industry insiders, tokens have no intrinsic merit and exist only as a way to evade regulations. We demonstrate that generic revenue-based token contracts are indeed economically inferior to equity and lead to over- or underproduction. However, an optimally designed token contract, which is a combination of an output presale and an incremental revenue-sharing agreement, yields the same payoffs as equity and debt. Moreover, with entrepreneurial moral hazard, tokens can finance a strictly larger set of ventures than equity.
This paper was accepted by Will Cong, Special Section of
Management Science
: Blockchains and Crypto Economics.
Funding:
This work was supported by the Social Sciences and Humanities Research Council of Canada and Canadian Securities Institute Research Foundation [Grants 20013075 and 435-2017-064]. Financial support from the Global Risk Institute and the Mackenzie Investment Chair in Evidence-Based Decision Making is also acknowledged. |
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ISSN: | 0025-1909 1526-5501 |
DOI: | 10.1287/mnsc.2023.4882 |