Working Papers Work in Progress
    Financial incentives for open source development: the case of Blockchain. (paper coming soon)
    Abstract: Unlike traditional open-source projects, developers of open-source blockchain-based projects can reap large financial rewards thanks to a modern form of seignorage. I study to what extent this novel form of financing generates incentives to innovate. I consider a developer working on an open-source blockchain-based protocol that can be used only in conjunction with a protocol-specific crypto-token. This token is first sold to investors via an auction (the ICO phase) and then traded on a frictionless financial market. I establish that seignorage is effective at generating incentives to develop the protocol. The strength of these incentives is however limited by the fact that, in all equilibria of the game, in each post-ICO period there is a positive probability that the developer sells all his tokens and that, as a consequence, no development occurs.