A Theory of Initial Coin Offerings

 

 

Speaker: Evgeny Lyandres, Boston University

 

We develop a theory of financing of entrepreneurial ventures via an initial coin offering (ICO). Pre-selling a venture's output by issuing tokens allows the entrepreneur to transfer part of the venture risk to diversified investors without diluting her control rights. Issuing tokens, however, leads to an agency conflict between the entrepreneur and investors that is unique to ICO financing and manifests itself in underinvestment. We characterize conditions under which an ICO dominates traditional venture capital financing. Overall, our model suggests that an ICO can be a viable financing alternative for some entrepreneurial ventures. An implication is that while regulating ICOs is desirable, banning them outright is not.

 

Time: 12.00 – 1.00 p.m.

Venue: University of Technology, Sydney

             Building 8, Room 8.002, Dr Chau Chak Wing Building
             Dr Chau Chak Wing Building

            14 - 28 Ultimo Road, Ultimo

 

 

Enquiries: Mala Kapahi (Ph: +61 2 9514 7777