Operations Seminar | Weatherhead School at Case Western Reserve University

Operations Seminar

Initial Coin Offerings, Speculation and Asset Tokenization

Initial Coin Offerings (ICOs) are an emerging form of fundraising for Blockchain-based startups. We examine how ICOs can be leveraged in the context of asset tokenization, whereby firms issue tokens backed by future assets (i.e., inventory) to finance growth. We (i) make suggestions on how to design such ``asset-backed'' ICOs---including optimal token floating and pricing for both utility and equity tokens (aka, Security Token Offerings, STOs)---taking into account moral hazard (cash diversion), product characteristics and customer demand uncertainty, (ii) make predictions on ICO success/failure, and (iii) discuss implications on firm operating strategy. We show that in unregulated environments, ICOs can lead to significant agency costs, underproduction, and loss of firm value. These inefficiencies, however, fade as product margins and demand characteristics (mean/variance) improve, and are less severe under equity (rather than utility) token issuance. Importantly, the advantage of equity tokens stems from their inherent ability to better align incentives, and thus continues to hold even absent regulation.

 


Fee: [Yes/No/Varies]

Contact Information:
Pamela White
Operations/Department Administrator
pamela.white@case.edu
368-3202
[Fax]

Friday, Oct. 1, 2021 from 10 a.m. to 11:15 a.m.
Peter B. Lewis Building
11119 Bellflower Road
Cleveland, OH 44106-7235
United States
Speaker(s): Gerry Tsoukalas
Sponsored by: Operations Department
Research paper

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