Title:

"Tokenomics: Optimal Monetary and Fee Policies"

Urban Jermann and Haotian Xiang

Abstract

We document key properties of crypto monetary policies based on more than 2,000 tokens: (1) Money growth rates decline with age and stabilize at 0.1% per month on average, with younger cohorts converging faster to the long-run growth rate; (2) Long-run money growth rates and convergence speeds are positively correlated in the cross-section; (3) Tokens held widely by retail investors have relatively low long-run money growth rates and convergence speeds. We present a dynamic model to determine the optimal token issuance and fee policies for issuers. Committing to low future money growth and fees increases profits, and the degree of commitment matters for the existence of equilibria. A Ramsey issuer who maximizes profits, after the initial period, makes choices that maximize the utility value of all tokens. We present a model with probabilistic commitment and show that issuers with high commitment choose low long-run money growth rates and fee ratios, and they reduce them slowly.

Bio:

Urban Jermann is the Safra Professor of International Finance and Capital Markets at the Wharton School of the University of Pennsylvania. His research focuses on the interactions between financial markets and the macroeconomy. Recent projects have covered topics such as cryptocurrencies, long-term debt dynamics, benchmark interest rates, exchange rate policies, and government debt management.

Jermann holds a Ph.D. from the Graduate Institute of International Studies in Geneva Switzerland. He is a Research Associate at the National Bureau of Economic Research and a Co-Editor of the Journal of Finance. He has been an Editor of the Journal of Monetary Economics and a Senior Economist at the Federal Reserve Bank of Minneapolis.

About the series:

The Center for Digital Finance and Technologies, together with the Columbia Business School's Briger Family Digital Finance Lab, hosts the Columbia Digital Finance Seminar Series throughout the academic year (Fall and Spring Semesters). The seminars feature a broad variety of academics, professionals, and policy markers on topics related to digital assets, including but not limited to crypto tokens and securities, decentralized finance (DeFi), blockchain consensus protocols, regulation of digital platforms, and blockchain market design. The seminars are designed to expose students, faculty, and the broader community to the latest developments in the area of crypto and blockchain economics.

For more details about the seminar series, please contact the organizers Prof. Agostino Capponi and Prof. Ciamac Moallemi.