Decentralization through Tokenization

Sockin, Michael; Xiong, Wei

doi:10.1111/jofi.13192

Cited by 51 publications

(15 citation statements)

References 56 publications

(49 reference statements)

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“…This paper also contributes to a large growing literature on Defi, FinTech, and blockchain in finance. Sockin and Xiong [2022], among many others. Our analysis rests on a view of the decentralized platform's strategic transaction packaging game for coordination and allocation.…”

Section: Literature Reviewmentioning

confidence: 99%

A Framework of Transaction Packaging in High-throughput Blockchains

Lu¹,

Qi²,

Chen³

2023

Preprint

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We develop a model of coordination and allocation of decentralized multi-sided markets, in which our theoretical analysis is promisingly optimizing the decentralized transaction packaging process at high-throughput blockchains or Web 3.0 platforms. In contrast to the stylized centralized platform, the decentralized platform is powered by blockchain technology, which allows for secure and transparent Peer-to-Peer transactions among users. Traditional single-chain-based blockchains suffer from the well-known blockchain trilemma. Beyond the single-chain-based scheme, decentralized high-throughput blockchains adopt parallel protocols to reconcile the blockchain trilemma, implementing any tasking and desired allocation. However, unneglectable network latency may induce partial observability, resulting in incoordination and misallocation issues for the decentralized transaction packaging process at the current high-throughput blockchain protocols.To address this problem, we consider a strategic coordination mechanism for the decentralized transaction packaging process by using a game-theoretic approach. Under a tractable two-period model, we find a Bayesian Nash equilibrium of the miner's strategic transaction packaging under partial observability. Along with novel algorithms for computing equilibrium payoffs, we show that the decentralized platform can achieve an efficient and stable market outcome. The model also highlights that the proposed mechanism can endogenously offer a base fee per gas without any restructuration of the initial blockchain transaction fee mechanism. The theoretical results that underlie the algorithms also imply bounds on the computational complexity of equilibrium payoffs.

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Section: Literature Reviewmentioning

confidence: 99%

A Framework of Transaction Packaging in High-throughput Blockchains

Lu¹,

Qi²,

Chen³

2023

Preprint

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“…In addition, the firm can increase its equilibrium profit by committing to the number of tokens sold via a smart contract. Sockin and Xiong (2023) find that tokenization through utility tokens acts as a commitment device that prevents a platform from exploiting users by delegating control to users, which makes utility tokens a more appealing funding scheme than equity for platforms with weak fundamentals.…”

Section: Cryptocurrencies and Traditional Financial Assetsmentioning

confidence: 99%

Hedging in the Stock Market: Is the Colored Coin Better than the Physically-Backed Diamond Index?

Cui,

Gao,

Wang

et al. 2024

Journal of Alternative Finance

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The present paper examines the potential utilization of diamond-connected cryptocurrencies as one novel means to acquire long or short positions in tangible diamonds. We evaluate the equity risk hedging capability of two popular colored coins associated with diamonds, namely PinkCoin and CaratCoin. PinkCoin is chosen over CaratCoin for further analysis due to its extensive transaction data, allowing for a comparison with a benchmark diamond price aggregate. Our results suggest incorporating such tokens in portfolios enables protection against swings in the equity market, particularly during periods of market decline. Moreover, these assets have the attribute of augmenting portfolio diversification within a conventional mean-variance frontier framework. The reconciliation of colored coins’ accessibility and price fluctuations with the safe-haven characteristic of diamonds has resulted in unique diversification benefits comparable to those associated with trading natural gemstones. Although the conclusion above holds significant appeal for investors who favor the inclusion of diamonds in their investment portfolios, it harbors concerns regarding liquidity and the assurance of genuineness.

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“…Decentralised autonomous organisations (DAOs) can be envisioned as democratic, crowdfunded, trust-less and consensus-based organisations driven by blockchain smart contracts (SC;Du Pont, 2017;Morrison et al, 2020;Sockin and Xiong, 2022). Blockchain design principles and user experience values require more attention from the research fraternity to bring novel innovations into practice (Bianco, 2020).…”

Section: Theoretical Background: Decentralised Autonomous Organisatio...mentioning

confidence: 99%

A study on blockchain-based marketplace governance platform adoption: a multi-industry perspective

Saurabh,

Upadhyay,

Rani

2023

DPRG

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Purpose Decentralised autonomous organisations (DAOs) are internet-native self-governing enterprises where individual groups, communities, agencies, consumers and providers work together using blockchain-led smart contracts (SCs). This study aims to examine the role of DAO marketplaces in technology-led autonomous organisation design for enterprise technology sourcing industries, with algorithmic trust and governance. Design/methodology/approach The authors examined the importance of an enterprise marketplace governance platform for technology sourcing using DAO as a decentralised/democratised business model. A total of 98 DAO products/services are evaluated across 11 industries that envisage DAO as a strategic choice for the governance of decentralised marketplace platforms. Findings The research findings validate how a DAO-led enterprise marketplace governance platform can create a cohesive collaboration between consumers (enterprises) and providers (solution vendors) in a disintermediated way. The proposed novel layered solution for an autonomous governance-led enterprise marketplace promises algorithmic trust-led, self-governed tactical alternatives to a strategic plan. Research limitations/implications The research targets multiple industry outlooks to understand decentralised autonomous marketplace governance and develop the theoretical foundation for research and extensive corporate suitability. Practical implications The research underpinnings boost the entrepreneurs’ ability to realise the practical potential of DAO between multiple parties using SCs and tokenise the entire product and service offerings over immutable ledger technologies. Originality/value To the best of the authors’ knowledge, this research is unique and the first of its kind to study the multi-industry role of algorithmic trust and governance in enterprise technology sourcing marketplaces driven by 98 decentralised and consensus-based DAO products across 11 industries.

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Decentralization through Tokenization

Cited by 51 publications

References 56 publications

A Framework of Transaction Packaging in High-throughput Blockchains

A Framework of Transaction Packaging in High-throughput Blockchains

Hedging in the Stock Market: Is the Colored Coin Better than the Physically-Backed Diamond Index?

A study on blockchain-based marketplace governance platform adoption: a multi-industry perspective

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