Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales Sabrina T. Howell, Marina Niessner, and David Yermack⇤ August, 2018 Abstract Initial coin offerings (ICOs) are a significant innovation in entrepreneurial finance. The sale of a blockchain-based digital token associated with a specific platform or venture is a new financing instrument with some parallels to IPOs, venture capital, and pre-sale crowdfunding. We examine the relationship between issuer characteristics and measures of success, with a focus on liquidity, using 453 ICOs that collectively raise $5.7 billion. We also employ proprietary transaction data in a case study of Filecoin, one of the most successful ICOs. We find that liquidity and trading volume are higher when issuers offer voluntary disclosure, credibly commit to the project, and signal quality. s s ss s ss ss ss s ⇤NYU Stern and NBER; AQR; NYU Stern, ECGI and NBER. Email:
[email protected]. For helpful comments, we are grateful to Yakov Amihud, Bruno Biais, Will Cong, Darrell Duffie, Alex Edmans, seminar participants at the OECD Paris Workshop on Digital Financial Assets, Erasmus University, the Swedish House of Finance, the Munich Crowdfunding Symposium, the University of Adelaide, Deakin University, Melbourne University, Monash University, LaTrobe University, and the University of Western Australia. We thank Protocol Labs and particularly Evan Miyazono and Juan Benet for providing data. Sabrina Howell thanks the Kauffman Foundation for financial support. We are also grateful to all of our research assistants, especially Jae Hyung (Fred) Kim. Part of this paper was written while David Yermack was a visiting professor at Erasmus University Rotterdam.