Andreas Park PRO
Professor of Finance at UofT
Is there economic merit to tokens?
Do tokens solve an economic problem?
This paper & nascent literature: tokens can achieve more economically than just regulatory arbitrage
Traditional economy
Decentralized economy
Traditional "centralized" economy
Chod and Lyandres (2018):
Davydiuk, Gupta, and Rosen (2018)
Lee and Parlour (2018)
Malinova and Park (2018)
file storage
computing power
verification
solar panels
babysitting
not barter but...
... everyone is producer and consumer
common resource that is lendable
pooled scalable resource
non-specialized service
Peer-to-peer interaction
Examples
\(t=1\)
\(t=2\)
producer
consumer
producer
consumer
participate: both pay \(\mu\)
producing: cost \(c\)
consuming: benefit \(s\)
premise: produce only if can consume later
generically: multiple equilibria including no production
\(t=1\)
\(t=2\)
producer
consumer
producer
consumer
first consumer buys token at \(P>0\)
token can only be used on platform
premise: token \(=\) credible commitment device/ costly signaling
result: select "always produce" equilibrium
\(t=0^*\)
buys
comment: the funds used to pay for the token are un-modeled and "discounted away" (a trick)
\(^*\)only before the very first stage game
\(t=1\)
\(t=2\)
producers
consumers
\(t=0^*\)
consumers
producers
?
?
equilibrium with full production exists
payoff to tokenholder higher
equilibrium with full production exists
everyone makes more than both together with single token
low price: all buy, coordination works
high price: none buys, no coordination
mid price: one buys, either coordination or not
Question: results show possibility not impossibility of coordination - where does impossibility come from?
Staggered sale improves coordination
Why?
Comment: result has similar flavor to Lee and Parlour (2018) (surplus extraction)
Another mechanism: pre-sell at low threshold price for participation and then high price for later mover
Hens, Schenk-Hoppe, and Vogt (JMCB 2007)
develop a price-taker model of the baby-sitting co-op
run experiments on
finding: people behave both strategically and acts as price-takers
Intuition for two-player setup is
clever and useful
Multi-player setup is conceptually simple and formally complex (cumbersome)
Is the strategic setup the right approach for decentralized economy?
Premise of staggered: "I am pivotal"
\(\Rightarrow\) does that reflect reality?
room for another paper
@financeUTM
andreas.park@rotman.utoronto.ca
slides.com/ap248
sites.google.com/site/parkandreas/
youtube.com/user/andreaspark2812/
Technology
Legal/Regulation
Economic functions
By Andreas Park
Discussion at the 2019 SFS Calvacade