In the context of digital platforms, the study examines the impact of allowing market-driven tradability of platform-specific digital tokens. It finds that such a policy leads to significant token value depreciation and a decrease in user engagement, with sellers becoming more conservative in their sales strategies. The research highlights the need for careful strategic management and oversight when devolving decision rights for digital tokens to maintain marketplace stability.

The development of Blockchains technologies, including smart contracts and cryptographic tokens, have a potential to change the competition between platforms. In this presentation, based on a couple of projects, I discuss how utility tokens can help new platforms enter the market, and how governance tokens can help platforms to increase social welfare. I also discuss limitations of these technologies in improving platform strategy and competition.

The development of Blockchains technologies, including smart contracts and cryptographic tokens, have a potential to change the competition between platforms. In this presentation, based on a couple of projects, I discuss how utility tokens can help new platforms enter the market, and how governance tokens can help platforms to increase social welfare. I also discuss limitations of these technologies in improving platform strategy and competition.

Blockchain technologies are designed to promote decentralization and self-governance in economic and social settings. In the context of platforms, an early claim of some proponents of these technologies was that blockchains would promote disintermediation, replacing intermediaries with decentralized governance, for instance leading to platforms governed by decentralized autonomous organizations (DAOs).

The core premise of permissionless blockchains is their reliable and secure operation without the need to trust any individual agent. At the heart of blockchain consensus mechanisms is an explicit cost (e.g., mining cost) for participation in the network and the opportunity to add blocks to the blockchain.

We use Transaction Cost Economics (TCE) to define the Digitization of Transaction Terms shift parameter that describes institutional changes associated with increased digitization in society. We then draw on legal scholarship to analyze how strong smart contracts, which are agreements with automatic execution and enforcement that are not reversible by courts, rely on a new level of Digitization of Transaction Terms.

We study the use of platform-specific tradable cryptographic tokens to solve the coordination problem that is common in adopting new marketplaces. We show that certain characteristics of platform-specific tokens—specifically, their tradability, the ability of the platform to commit both to accept and to require these tokens in the future, and the ability to commit to a price and/or quantity schedule—can help overcome the coordination problem and can support equilibria favorable to the new marketplace.

Considerations for the governance of distributed systems.