New publication on Optimal Financing with Tokens by Prof. Morellec

© 2021 EPFL

© 2021 EPFL

The paper “Optimal Financing with Tokens”, written by Professor Morellec and coauthored with Simon Mayer and Sebastian Gryglewicz, has been accepted for publication in the Journal of Financial Economics

Optimal Financing with Tokens


We develop a model in which a startup firm issues tokens to finance a digital platform, which creates agency conflicts between platform developers and outsiders. We show that token financing is preferred to equity financing, unless the platform expects strong cash flows, has large financing needs, or faces severe agency conflicts. Tokens are characterized by their utility features, facilitating transactions, and security features, granting cash flow rights. While security features trigger endogenous network effects and spur platform adoption, they also dilute developers' equity stake and incentives so that the optimal level of security features decreases with agency conflicts and financing needs.

Read the paper online