Decentralization Through Tokenization / Michael Sockin, Wei Xiong.

Format:

Book

Author/Creator:

Sockin, Michael.

Contributor:

National Bureau of Economic Research.

Xiong, Wei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29720.

NBER working paper series no. w29720

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We examine decentralization of digital platforms through tokenization as an innovation to resolve the conflict between platforms and users. By delegating control to users, tokenization through utility tokens acts as a commitment device that prevents a platform from exploiting users. This commitment comes at the cost of not having an owner with an equity stake who, in conventional platforms, would subsidize participation to maximize the platform's network effect. This trade-off makes utility tokens a more appealing funding scheme than equity for platforms with weak fundamentals. The conflict reappears when non-users, such as token investors and validators, participate on the platform.

Notes:

Print version record

February 2022.