Token-Based Platforms and Speculators

This paper studies conflicts of interest between different token investors. Platform users, speculators, and an insider hold tokens that serve as transaction medium on a platform. The insider controls platform development but is subject to moral hazard and incentivized by retained tokens. Token liquidity reflecting speculative investment and platform adoption undermines these incentives. Vesting provisions and trading frictions compromising token liquidity mitigate moral hazard but induce the insider to cater to speculators at the expense of users. This paper also shows under what circumstances a dual token structure with a security token and a stablecoin stimulates platform development.