The Wisdom of Crowds and Information Cascades in FinTech: Evidence from Initial Coin Offerings

Lee, Jong-Sub; Li, Tao; Shin, Dong-Hwa

doi:10.2139/ssrn.3195877

Cited by 47 publications

(33 citation statements)

References 49 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…As a result, we suspect a self-fulfilling prophecy: If sufficient potential users have confidence in the platform and the token, they buy tokens to be part of the platform and expect a financial profit, because the token value increases with the increasing number of platform participants. This finding is also in line with Lee et al (2018), who find that aggressive first-day token subscriptions by institutional investors drive token sales and lead to successful ICOs. Fig.…”

Section: Model Set-upsupporting

confidence: 88%

“…Some examples of these platforms include Ethlance, a marketplace for jobs (Urgo et al 2017), Golem, a marketplace for computing power (Zawistowski et al 2016), or DataBroker, a marketplace for sensor data (van Niekerk and van der Veer 2018). The entity behind the platforms issues its own blockchain-enabled token (Bachmann et al 2019;Fridgen et al 2018;Lee et al 2018). So far, various token designs enable different applications.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The token’s secret: the two-faced financial incentive of the token economy

et al. 2020

View full text Add to dashboard Cite

Multi-sided platforms are omnipresent in today's digital world. However, establishing a platform includes challenges: The platform utility usually increases with the number of participants. At an early stage, potential participants expect the platform utility to be low and lack an incentive to join (i.e., "chicken and egg" problem). Blockchain-enabled utility tokens hold the promise to overcome this problem. They supposedly provide a suitable financial incentive for their owners to join the platform as soon as possible. In the first half of 2018, investors seemed to believe in the presumption and spent more than US$ 17.6 billion in token sales. To date, we know little about this financial incentive in the context of the token economy. For this purpose, we model the token value development and the associated incentives in a multi-sided blockchain-enabled platform. The resulting findings suggest that blockchain-enabled utility tokens can help to overcome the "chicken and egg" problem. However, these tokens lead to contradictory incentives for platform participants, and can even inhibit platform usage. The contribution of our work is twofold: First, we develop one of the first models for token value development. Second, our research contributes to a deeper understanding of the utility token's financial incentive.

show abstract

Section: Model Set-upsupporting

confidence: 88%

Section: Introductionmentioning

confidence: 99%

The token’s secret: the two-faced financial incentive of the token economy

et al. 2020

View full text Add to dashboard Cite

show abstract

“…A natural question is what is the source of their value? A number of recent papers build models to value cryptocurrencies such as Bitcoin based on its use in transactions (see, e.g., Athey et al, 2016;Schilling & Uhlig, 2018;Sockin & Xiong, 2018) or to value tokens issued in ICOs based on their use as a store of value (Cong, Li, & Wang, 2018), or on information produced during the ICO process (Catalini & Gans, 2018;Li & Mann, 2018). Although a full-blown model to value cryptocurrencies or tokens is beyond the scope of our paper, we outline below some thoughts on valuation in this sector.…”

Section: Evaluating Coin Returnsmentioning

confidence: 99%

“…Various authors have investigated the properties of ICOs and cryptocurrencies, including Lyandres, Palazzo, and Rabetti (2019), who reflect on the similarities between cryptocurrencies and other securities, Bourveau, DeGoerge, Ellahie, and Macciocci (2019), who investigate information provision on ICOs, while Lee, Li, and Shi (2019) considers information aggregation. Finally, Howell, Niessner, and Yermack (2019) provide detailed analyses of ICO markets.…”

Section: Introductionmentioning

confidence: 99%

Cryptocurrencies: Stylized facts on a new investible instrument

Parlour

Rajan

2019

Financial Management

116

View full text Add to dashboard Cite

We present stylized facts on the asset pricing properties of cryptocurrencies: summary statistics on cryptocurrency return properties and measures of common variation for secondary market returns on 222 digital coins. In our sample, secondary market returns of all other currencies are strongly correlated with Bitcoin returns. We also provide some investment characteristics of a sample of 64 initial coin offerings.

show abstract

“…A common way for such startups to fund themselves is through initial coin offerings (ICOs)-a type of crowdfunding similar to initial public offerings (IPOs) [17]. As opposed to IPOs, however, ICOs aim to raise "capital by creating and selling a virtual currency […] which provides a set of rights to its holders […] and can be resold in the secondary market" [13]. Against this background, previous studies have already investigated (i) the different facets of ICOs without a specific emphasis on FinTechs [7]; (ii) the characteristics of FinTech startups without a focus on blockchain-based applications [10]; and (iii) the "business models of startups using blockchain in the financial sector" [4] without the requirement of ICO funding.…”

Section: Introductionmentioning

confidence: 99%

A Consolidated Business Model Canvas of Blockchain- Based FinTech Startups: Evidence from Initial Coin Offerings

Welsch¹,

Dürr²,

Thiesse³

2020

WI2020 Zentrale Tracks

View full text Add to dashboard Cite

FinTech (financial technology) applications are evolving at a rapid speed and are increasingly based on blockchain technology. Startups developing and offering such blockchain-based FinTech applications frequently raise capital through initial coin offerings (ICOs). Against this backdrop, it remains unclear to what extent these startups exploit the disruptive potential of blockchain. Therefore, the present article examines business models of current FinTech startups funding themselves through ICOs. The authors present their results in a consolidated business model canvas, which illustrates the current state of blockchain-based FinTech startups.

show abstract

The Wisdom of Crowds and Information Cascades in FinTech: Evidence from Initial Coin Offerings

Cited by 47 publications

References 49 publications

The token’s secret: the two-faced financial incentive of the token economy

The token’s secret: the two-faced financial incentive of the token economy

Cryptocurrencies: Stylized facts on a new investible instrument

A Consolidated Business Model Canvas of Blockchain- Based FinTech Startups: Evidence from Initial Coin Offerings

Contact Info

Product

Resources

About