NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Initial Coin Offerings and the Value of Crypto Tokens

Christian Catalini, Joshua S. Gans

NBER Working Paper No. 24418
Issued in March 2018, Revised in June 2018
NBER Program(s):Productivity, Innovation, and Entrepreneurship

This paper explores how entrepreneurs can use initial coin offerings — whereby they issue crypto tokens and commit to accept only those tokens as payment for their products — to fund venture start-up costs. We show that the ICO mechanism allows entrepreneurs to generate buyer competition for the token, giving it value. We find that venture returns are independent of any committed growth in the supply of tokens over time, but that initial funds raised are maximized by setting that growth to zero to encourage saving by early participants. Nonetheless, since token value depends on a single period of demand, their ability to raise funds is more limited than traditional equity finance. A lack of commitment in monetary policy does, however, undermine saving, and therefore the cost of using tokens to fund start-up costs is inflexibility in future capital raises. Crypto tokens can also facilitate coordination among stakeholders within digital ecosystems when network effects are present.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24418

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us