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Tokenomics: When Tokens Beat Equity

Malinova and Park investigate the competitive landscape between blockchain-based tokens and traditional equity financing. The paper argues that tokens offer uni

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Abstract

Malinova and Park investigate the competitive landscape between blockchain-based tokens and traditional equity financing. The paper argues that tokens offer unique advantages in information asymmetry reduction and liquidity provision, particularly for projects in nascent stages. By utilizing corporate finance theory, the authors compare the incentive alignment features of token-based projects against those of venture-backed firms. The analysis demonstrates that tokens can resolve specific agency problems that equity cannot, specifically regarding direct user engagement and network effect bootstrapping. However, the study also notes the trade-off in legal and regulatory clarity. This work is highly significant for entrepreneurs and investors navigating the choice between traditional venture capital models and initial coin offerings or token generation events, providing an empirical basis for the ‘token superiority’ thesis in specific market conditions. Authors: Katya Malinova, Andreas Park Publication: Academic Paper Publication date: 2023-01-01

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Key findings

  • Tokens provide superior incentive alignment for user-led projects compared to traditional equity.
  • Tokens effectively mitigate specific agency problems through direct participation.
  • Liquidity provision via tokens offers a more flexible exit mechanism than traditional equity markets.
  • Regulatory uncertainty remains the primary friction point for the adoption of tokenized financing.

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Citation

Katya Malinova, Andreas Park (2023). Tokenomics: When Tokens Beat Equity. Academic Paper. https://pubsonline.informs.org/doi/10.1287/mnsc.2023.4882
Canonical knowledge ID: research:tokenomics-when-tokens-beat-equity