Token Financing vs. Equity and Crowdfunding

Résumé

We present a stylized model of three entrepreneurial financing methods based on two tradeoffs. First, token financing and crowdfunding reveal consumer-investors’ demand for the product prior to investment, but upfront purchase weakens the entrepreneur’s incentive to deliver. Second, token financing permits a bubble component in token value, but reduces consumer surplus because tokens are stored rather than consumed. We characterize the conditions under which entrepreneurs prefer each financing method. We show that token financing can fund socially efficient projects that cannot be funded through equity or crowdfunding, but leads to suboptimal consumption. Finally, we propose an implementable hurdle condition for regulators.

Mots-clés

financement participatif, financement des entreprises, offre initiale de jetons, réglementation des jetons, jeton utilitaire; utility token;

Codes JEL

G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill
G38: Government Policy and Regulation
L26: Entrepreneurship