Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales

Abstract

Initial coin offerings (ICOs) have emerged as a new mechanism for entrepreneurial finance, with parallels to initial public offerings, venture capital, and presale crowdfunding. In a sample of more than 1,500 ICOs that collectively raise ${\$}$12.9 billion, we examine which issuer and ICO characteristics predict successful real outcomes (increasing issuer employment and avoiding enterprise failure). Success is associated with disclosure, credible commitment to the project, and quality signals. An instrumental variables analysis finds that ICO token exchange listing causes higher future employment, indicating that access to token liquidity has important real consequences for the enterprise.

Cryptocurrencies: Stylized facts on a new investible instrument

“…Various authors have investigated the properties of ICOs and cryptocurrencies, including Lyandres, Palazzo, and Rabetti (2019), who reflect on the similarities between cryptocurrencies and other securities, Bourveau, DeGoerge, Ellahie, and Macciocci (2019), who investigate information provision on ICOs, while Lee, Li, and Shi (2019) considers information aggregation. Finally, Howell, Niessner, and Yermack (2019) provide detailed analyses of ICO markets.…”

Serial and large investors in initial coin offerings

“…Adhami and Giudici (2019) study the effect of the governance signals of ICO-backed projects such as token rights, institutional setting and team quality. Howell et al (2018), Momtaz (2018a, b) and Benedetti and Kostovetsky (2018) instead look at post-ICO performance measures of success, such as trading volume, liquidity, first-day underpricing and long-run returns. Boreiko and Vidusso (2019) focus on the role of intermediaries behind successful token sales.…”

Entrepreneurial Incentives and the Role of Initial Coin Offerings

“…and De Jong et al (2018) study the determinants of successful attempts to raise funds with an ICO. Howell et al (2018) document factors that affect the liquidity and trading volumes of tokens in secondary markets.…”