Initial Coin Offerings Research Articles

A robust financing theory of ICOs under demand uncertainty of products of token platforms

PurposeThe market products produced by Initial Coin Offerings (ICO) platforms are often relatively new and have no previous transaction records and therefore are hard to estimate for its demand. The purpose is to study the impacts of the degree of ambiguity aversion of entrepreneurs to demand uncertainty on the ICO financing ratio, the optimal expected output, the optimal efforts and the token price.Design/methodology/approachIn an optimal ICO design, we introduce demand uncertainty of the product and establish a robust optimization method to solve the ICO optimal design. We compare ICO financing and the general venture capital (VC) financing model. We analyze the impact of demand uncertainty on the optimal ICO financing ratio.FindingsFindings include that the ICO financing ratio is positively related to the degree of ambiguity aversion, the token price is negatively related to the degree of ambiguity aversion and the “ambiguity premium” exists in the ICO market, the optimal effort levels are negatively related with the ICO financing ratio, but positively related with token price, and in the environment of high production cost, VC financing is not as good as ICO financing.Originality/valueWe develop a robust ICO financing model by assuming that the entrepreneur is ambiguity aversive to the demand uncertainty. Analyze the impact of the degree of ambiguity aversion on the ICO financing ratio in theory and find that the entrepreneur can raise funds with the higher ICO token ratio when she has a larger degree of ambiguity aversion to the demand uncertainty. Extend the impact analysis of the degree of ambiguity aversion on the expected token price and find a negative relationship between the expected token price and the degree of ambiguity aversion of the entrepreneur to the demand uncertainty.

Picturing Success: The Informational Role of Visual Cues in Initial Coin Offerings

Picturing Success: The Informational Role of Visual Cues in Initial Coin Offerings

Blockchain Espousal in Legal Compliance with Corporate Governance

There is much exhilaration about blockchain technology in practically every business, including financial, and significant investments are being made worldwide. In order to uncover critical criteria for blockchain espousal in corporate governance, we undertook a systematic examination of a sample of 52 articles (10 industrial and 42 academics) through a preliminary research period from 2012 to 2020. We perform textual and empirical research to build a paradigm for decentralised autonomous governance. Additionally, we relate classic corporate governance theories to blockchain espousal using this framework. Our research also focuses on how blockchain technology may be used to improve the way corporations are run, now and in the future, as well as its possible consequences. By doing a systematic study and conducting an analysis of the text, we uncovered other gaps in the earlier academic and industrial literature and common tendencies. In addition, as part of our empirical research, we are compiling a one-of-a-kind blockchain investment database to make future investment projections. In addition, in the course of and after the COVID-19 conference, we researched the many ways blockchain technology may be used to improve corporate governance. According to our findings, previous academic publications prefer to concentrate on regulation and Initial Coin Offerings (ICOs). In contrast, previous publications in the sector have focused on exchanges and cryptocurrencies. Final thoughts on the impact of blockchain technology on corporate governance from the perspectives of behaviour, law & regulatory requirements, ethical considerations and managerial practices.

The new era of Bitcoin: Profits, progress and potential in the inscription-driven crypto industry

The introduction of the Ordinals Protocol and BRC-20 tokens, featuring the pioneering concept of Inscriptions, signifies a pivotal evolution in the Bitcoin network. Officially launched on 21st January, 2023, this innovation embeds a unique blend of tokenisation and non-fungible attributes directly into Bitcoin’s base layer, akin to engraving precious metals. This paper thoroughly examines the technical underpinnings and market implications of BRC-20 tokens, focusing on the stark contrasts with traditional ERC-20 tokens and initial coin offerings. Unlike ERC-20, Inscriptions integrate seamlessly into Bitcoin’s existing structure, offering a decentralised model that strengthens the principles of a true fair launch in decentralised finance. The study critically assesses the reception within the Bitcoin community, balancing the potential enhancements in Blockchain functionality against concerns regarding foundational principles. Furthermore, it explores the profound implications for stakeholders such as miners, exchanges and developers and evaluates the transformative impact on the cryptocurrency ecosystem at large. Ultimately, this paper elucidates the role of Inscriptions in redefining the trajectory of Bitcoin and shaping the future landscape of Blockchain technologies, emphasising their potential to foster equity and innovation in token distribution.

(De)centralized governance and the value of platform-based new ventures: The moderating role of teams and transparency

AbstractDrawing on institutional and demand-side perspectives, we investigate performance implications of (de)centralized governance modes in platform-based new ventures, and the conditions under which (de)centralization generates more value. Using a sample of 1,431 Initial Coin Offerings (ICOs), a new source of entrepreneurial finance, we find that centralization of decision-making is positively associated with platforms’ market value. Further, we consider how platform characteristics affect this relationship, finding that both the presence of an experienced Chief Technology Officer (CTO) and project transparency negatively moderate the positive relationship between centralization and market value. Thus, decentralized platforms need leaders with technical experience and project transparency to generate more value. Overall, this study provides a better understanding of the boundary conditions that increase the value of (de)centralized governance.

Constructing a Novel Network Structure Weighting Technique into the ANP Decision Support System for Optimal Alternative Evaluation: A Case Study on Crowdfunding Tokenization for Startup Financing

This study constructed a novel decision-making framework for startup companies to evaluate token financing options. A Network structure weighting (NSW) technique was developed and integrated with the analytic network process (ANP) to create a comprehensive assessment model. This innovative approach addressed the limitations of traditional multi-criteria decision-making methods by effectively capturing the complex interdependencies between factors influencing token financing decisions. The proposed model comprises three main steps: (1) utilizing a modified Delphi method to identify key factors affecting token financing, (2) developing the NSW technique to determine the network structure of these factors, and (3) integrating the NSW results into the ANP model to evaluate and rank the critical factors and alternatives. This study applied this framework to assess three token financing alternatives: Initial Coin Offerings (ICO), Initial Exchange Offerings (IEO), and Security Token Offerings (STO). The results indicate that STO is the optimal financing alternative for the analyzed startup scenario in token financing, followed by Initial Exchange Offerings and Initial Coin Offerings. The model identified platform fees, issuance costs, and financing success rate as the three most critical factors influencing the decision. This study contributes to both methodology and practice in FinTech decision-making. The NSW-ANP framework offers a more robust approach to modeling complex financial decisions, while the application to token financing provides valuable insights for startup companies navigating this emerging funding landscape. The proposed framework lays the groundwork for more informed and structured decision-making in the rapidly evolving field of cryptocurrency-based financing.

The importance of team diversity in initial coin offerings (ICO) success

The importance of team diversity in initial coin offerings (ICO) success

Token-Based Crowdfunding: Investor Choice and the Optimal Timing of Initial Coin Offerings

This article examines the operating and financial performance of venture firms conducting initial coin offerings (ICOs) with different types of investors and at different points along a venture’s life-cycle. Relative to purely crowdfunded ICO ventures, institutional investor-backed ICO ventures exhibit weaker operating performance and fail earlier. However, conditional on survival, these ventures financially outperform their peers that do not receive institutional investor support. The diverging effects of investor backing on financial and operating performance are consistent with our theory of “certification exploitation” through a new form of a pump-and-dump scheme. Institutional investors exploit their reputation to drive up ICO valuations and quickly exit the venture post-ICO, with the difference in pre- versus post-certification token prices being their exploitation profit in liquid markets for startups. Our findings further indicate that there is an inverted U-shaped relationship between the financial success of an ICO and the timing along a venture’s life-cycle, with the product piloting phase representing the pivotal point. JEL Codes: G24, G32, K22, L26

FOMO and the ICO: The changing salience of quality signals

The manuscript investigates whether the individual personality trait, Fear of Missing Out (FOMO)—typically considered negative—influences the willingness of individuals to contribute to Initial Coin Offerings (ICOs), a phenomenon that emerged after the blockchain revolution. We conducted both qualitative and quantitative work in this space and present the results of an international survey, including a conjoint experiment. Theoretically, we anchor our study in signaling theory and propose that signal valence (the positive or negative interpretation of a signal) can diverge from signal intent. Specifically, we find that candidate ICO funders with strong FOMO behave predictably irrationally. They are more likely to invest in financially irresponsible projects and are less likely to invest in projects that have received recognition from established media sources or multinationals. While both financial responsibility and stakeholder recognition are ostensibly positive signals of team and project quality, we find that for ICO funders with high FOMO, the valence of these signals changes.

Legitimization by Aspiration Setting: Evidence from Token Supply in Initial Coin Offerings

Legitimization by Aspiration Setting: Evidence from Token Supply in Initial Coin Offerings

Crowdfunding Real Estate Investments Using Ethereum Smart Contracts and Tokenization

This research paper explores the Ethereum blockchain technology in revolutionizing real estate investment through crowdfunding. Traditional real estate markets face challenges in liquidity, accessibility, and transparency, which this study addresses by proposing a blockchain-based solution. The research examines the implementation of a system utilizing Ethereum smart contracts, Initial Coin Offerings (ICOs), and ERC20 tokens to enable fractional property ownership and automate investment processes. The study employs a technical stack comprising Vue.js for the front-end, Solidity for smart contract development, and the Truffle framework for deployment. Ethereum serves as the blockchain platform, with Ganache-CLI used for local testing. The system incorporates MetaMask for wallet management and Stripe for fiat currency processing, demonstrating a comprehensive approach to integrating blockchain technology with existing financial systems. Through detailed implementation and analysis, this paper provides insights into the practical applications and challenges of blockchain in real estate crowdfunding. The findings suggest that while this technology offers promising solutions to longstanding issues in real estate investment, considerations around scalability, regulatory compliance, and user adoption remain critical [4]. Keywords: Blockchain, Ethereum, Smart Contracts, Crowdfunding Real Estate Tokenization, ERC-20 Tokens, Initial Coin Offering (ICO), Fractional Ownership, Liquidity, Transparency, Ganache, Remix IDE, MetaMask, Solidity, Truffle Framework.

Followers beat content: social media and the managers in initial coin offerings (ICOs)

AbstractOur research investigates the role of social media communication in amplifying high-quality information and its impact on the success of ICOs in achieving their soft cap. We analyzed data from 3,644 ICOs and the demographics of 1,987 CEOs, CFOs, and CTOs to compare their quality attributes against their number of social media followers. Our findings reveal that the most significant factors for reaching the soft cap are the number of followers and team size, while the competencies (education and skills) of the management team have a very marginal effect, even when enhanced through social media. This indicates that widespread social media signals can positively influence investor behavior without necessarily reducing information asymmetries regarding the quality of the team. We propose that this effect arises from the combination of minimal investment amounts and stimulated herding behavior among investors.

Token governance in initial coin offerings: Implications of token retention and resale restrictions for ICO success

AbstractThe high degree of asymmetric information in initial coin offerings (ICOs) increases the probability of moral hazard, adverse selection, and outright fraud. Token governance mechanisms may help mitigate such investment risks. Using novel data on token retention in the primary market and resale restrictions in the secondary market, we estimate the impact of these governance mechanisms on the fundraising success and post-funding performance of ICOs. First, we estimate the valuation elasticity of token retention, indicating that 10% fewer tokens sold increases the ICO funding amount by 3.2%. Second, restricting ICO investors’ ability to resell tokens in the secondary market has a detrimental impact on the 12-month buy-and-hold abnormal return. We also discuss contingency effects of the specific implementations of these governance signals and show that the effects are moderated by the quality of the venture’s human capital.

The Influence of National Economic and Financial Systems on the Performance of Initial Coin Offerings

The Influence of National Economic and Financial Systems on the Performance of Initial Coin Offerings

Analytic Hierarchy Process Assessment Framework for Blockchain in Renewable Energy

The urgency to reach net-zero emissions until 2050 has created a vast interest in innovative technologies for renewable energy sector. At the same time the need for trusty and unfailing solutions will rise considering the increasing amount of decentralized and decarbonized energy systems. It has previously been described in the literature that the aforementioned characteristics could be combined by blockchain technology. Therefore, this study focuses on the practical side – the opinion of industry experts about the use of blockchain technology in renewable energy. By using analytic hierarchy process analysis, the goal of this study is to develop a methodology for the selection of the most appropriate blockchain applications in renewable energy and to identify and evaluate the possible types of use taking into account socio-economic, political and legal, technological and environmental factors. The results of this study highlights the important influence of political, legal and technological factors like involvement of government institutions and possible attacks to the system, but considers the economic factors as the least significant for the introduction and use of blockchain technology in the renewable energy sector. The most promising use cases for blockchain would be associated with reliable and immutable certificates of origin for renewable energy and use in smart grid (including smart metering), smart homes and relevant Internet of Things applications. The use of crypto-assets and initial coin offerings for renewable energy development should be viewed with precaution and willingness to inform and educate considering social factors like public opinion and societies’ knowledge on crypto-assets.

The Adoption Process of Cryptocurrencies

Cryptocurrencies have emerged as a truoblemaking technology with the prospective to reform the financial landscape. This research study future aim to explore and evaluate the topic of the adoption process of cryptocurrencies from many perspectives. This research study is based on secondary data possessed by researchers from various sources i.e journal, articles, magazines, newpapers, and papers reviewed by the researcher. It was shown in secondary data that the cryptocurrency landscape continues to mature and overcome the challenges it faces, and the prospect of bitcoin and other cryptocurrencies revolutionizing the worldwide financial framework and redesigning how we engage in transaction, preserve wealth, and obtain financial affordable appears more plausible. A digital currency centric environment can offer openings for fresh participants in the market and support new businesses by streamlining the fundraising procedure. Initial coin offerings allow entrepreneurs and investors to fund new ventures without relying on intermediaries and approvals from conventional investors and financial institutions. Cryptocurrency represents an ongoing progression guiding by a varied and fervent community encompassing developers, innovators, financiers, and adopters. The route of monetary evolution undergoes reinterpretation, with digital currencies like Bitcoin assuming a very important role in this dynamic metamorphosis.

Reward-Based Crowdfunding Versus Initial Coin Offerings

Inspired by emerging financing techniques that offer additional financing options for entrepreneurs, we establish a stylized model to compare two prevalent crowdfunding strategies: Reward-based crowdfunding and Initial Coin Offerings (ICOs). First, we highlight that the fundamental difference between reward-based crowdfunding and ICO lies in the distinct types of price distortion, resulting in different agency costs. Specifically, compared to the first-best benchmark, reward-based crowdfunding sets a lower funding price to attract more consumers to pre-order, while ICO sets a higher market price due to speculators’ revenue-sharing in the market stage. Second, we show that the financing limit (i.e., the maximum funds raised) of reward-based crowdfunding is driven by the platform traffic, whereas that of ICO is driven by the marginal production cost. Therefore, even with numerous speculators, ICO may result in a lower financing limit than reward-based crowdfunding when the platform traffic or the marginal production cost is high. Third, we explore how products’ cost structures shape entrepreneurs’ financing preferences. ICO suits intangible products with high fixed cost and low marginal production cost, while reward-based crowdfunding aligns better with products exhibiting the opposite cost structure. Finally, we extend our model to show the robustness of our findings and offer some additional insights. For example, ICO may amplify the risk of market uncertainty compared to reward-based crowdfunding; Security Token Offerings (STO) benefits from the absence of agency costs between the entrepreneur and speculators compared to ICO while it may suffer from equity loss, particularly in risky and regulated markets, etc.

Efficient Market Hypothesis on the blockchain: A social‐media‐based index for cryptocurrency efficiency

AbstractThis paper proposes the use of social media as a proxy for financial information. Using an extended sample of 53,580,759 tweets and employing text analysis tools (Latent Dirichlet Allocation and Term Frequency–Inverse Document Frequency), we determine the information being exchanged on any given day. We train machine‐learning classifiers and forecast crypto price movements for more than 8000 cryptocurrencies and gauge market efficiency through successful forecasts based on public information. We propose various metrics of market efficiency for cryptocurrency assets and demonstrate that market efficiency is higher during the first 6 months after the Initial Coin Offering. We also examine the efficiency behavior of individual currencies during crisis periods.

The power of a name: Exploring the relationship between ICO name fluency and investor decision making

This study examines the impact of the fluency of Initial Coin Offering (ICO) project names on fundraising and post-ICO performance. Analyzing 8,878 ICOs from July 2012 to July 2021, we find a robust and positive correlation between name fluency (e.g., projects with succinct and English-like names) and fundraising success. Moreover, we find that this relationship is heightened for ICOs with popular names and that it influences an ICO’s performance over time by increasing listing likelihood, shortening the listing time, and prolonging survival. Overall, the results of this paper align with psychological insights suggesting that fluency in stimuli enhances familiarity and memorability, which therefore, enables investors to make heuristic-based decision amidst the informationally constrained ICO landscape.

Extracting informational cues between initial coin offering projects and the public

AbstractAn initial coin offering (ICO) seeks to raise initial investments for companies by selling crypto tokens to individuals interested in crowdfunding. As ICOs have gained popularity, a lack of information regarding startup companies' prior financial status and business health has led to information asymmetry between potential investors and ICO projects. This study explores the informational cues necessary to bridge this gap. Employing signaling theory, we elucidate the presence of information asymmetry and conduct two case analyses to identify relevant informational cues. Twitter data from two ICO projects (Stratis and NEO), which achieved the highest return on investment at the time of data collection, are extracted and analyzed to identify informational themes. Our findings reveal multiple and distinctive themes of informational cues for each ICO project, demonstrating that transmitted signals vary across different stages and are generated by both the coin publisher and the public. This research illuminates the flow of informational cues between ICO initiators and potential investors on social media. By analyzing online communication threads using qualitative methods, this study significantly contributes to the understanding of information asymmetry in the context of ICOs.