NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Redeemable Platform Currencies

Yang You, Kenneth S. Rogoff

NBER Working Paper No. 26464
Issued in November 2019, Revised in February 2020
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

Can massive online retailers such as Amazon and Alibaba issue digital tokens that potentially compete with bank debit accounts? There is a long history of trading stamps and loyalty points, but new technologies are poised to sharply raise the significance of redeemable assets as a store of value. Here we develop a simple stylized model of redeemable tokens that can be used to study sales and pricing strategies for issuing tokens, including ICOs. Our central finding is that platforms can generally earn higher revenues by making tokens non-tradable unless they can generate a sufficiently high outside-platform convenience yield.

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Document Object Identifier (DOI): 10.3386/w26464

 
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