Token-Based Platform Finance
We develop a dynamic model of platform economy where tokens serve as a means of payments among platform users and are issued to ﬁnance investment in platform productivity. Tokens are optimally issued to reward platform owners when the productivity-normalized token supply is low and burnt to boost the franchise value when the productivity-normalized normalized supply is high. Although token price is determined in a liquid market, the platform’s ﬁnancial constraint generates an endogenous token issuance cost, causing underinvestment through the conﬂict of interest between insiders (platform owners) and outsiders (users). Blockchain technology mitigates underinvestment by addressing the platform’s time-inconsistency problem.
Lin William Cong & Ye Li & Neng Wang, 2021. "Token-based platform finance," Journal of Financial Economics, . citation courtesy of