Agent-based Model of Initial Token Allocations: Evaluating Wealth Concentration in Fair Launches

E-print/Working paper (2022)

With advancements in distributed ledger technologies and smart contracts, tokenized voting rights gained prominence within Decentralized Finance (DeFi). Voting rights tokens (aka. governance tokens) are ... [more ▼]

With advancements in distributed ledger technologies and smart contracts, tokenized voting rights gained prominence within Decentralized Finance (DeFi). Voting rights tokens (aka. governance tokens) are fungible tokens that grant individual holders the right to vote upon the fate of a project. The motivation behind these tokens is to achieve decentral control. Because the initial allocations of these tokens is often un-democratic, the DeFi project Yearn Finance experimented with a fair launch allocation where no tokens are pre-mined and all participants have an equal opportunity to receive them. Regardless, research on voting rights tokens highlights the formation of oligarchies over time. The hypothesis is that the tokens' tradability is the cause of concentration. To examine this proposition, this paper uses an Agent-based Model to simulate and analyze the concentration of voting rights tokens post fair launch under different trading modalities. It serves to examine three distinct token allocation scenarios considered as fair. The results show that regardless of the allocation, concentration persistently occurs. It confirms the hypothesis that the disease is endogenous: the cause of concentration is the tokens tradablility. The findings inform theoretical understandings and practical implications for on-chain governance mediated by tokens. [less ▲]

Chapter 8: Tokenization and Regulatory Compliance for Art and Collectible Markets: From Regulators' Demands for Transparency to Investors' Demands for Privacy

in Lacity, Mary; Treiblmaier, Horst (Eds.) Blockchains and the Token Economy: Studies in Theory and Practice (2022)

Art and collectibles markets tend to involve lower liquidity and higher fees than public equity markets. Distributed ledger technology can tokenize artworks and collectibles, so that claims to these ... [more ▼]

Art and collectibles markets tend to involve lower liquidity and higher fees than public equity markets. Distributed ledger technology can tokenize artworks and collectibles, so that claims to these assets can be exchanged digitally without intermediaries. Tokenization offers investors access to a global market plus a digitized paper trail, as well as new options for the fractional ownership of artworks, art-collateralized loans, and yield-bearing art assets. The main challenge for tokenization researchers and platform developers is to simultaneously satisfy regulators’ demands for transparency and auditability as well as art investors’ demands for privacy. New technological solutions are required that enable market participants to disclose the absolute minimum amount of information that is required by regulators. We explore new concepts from distributed ledger technology, cryptography, and digital identity management that can help address this challenge. [less ▲]