Design and valuation of cryptocurrencies


Eska, Fabian ; Shi, Yanghua ; Theissen, Erik ; Uhrig-Homburg, Marliese



Document Type: Conference presentation
Year of publication: 2022
Conference title: 11th International Conference of the Financial Engineering and Banking Society
Location of the conference venue: Portsmouth, UK
Date of the conference: 10.-12.06. 2022
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Publication language: English
Institution: Business School > ABWL u. Finanzierung (Theissen)
Subject: 330 Economics
Abstract: The broad variety of cryptocurrencies is associated with very different designs. In this paper, we introduce a unique, hand-collected data set of cryptocurrency design features which we use to analyze the relative valuation of 79 cryptocurrencies. Controlling for general market movements during the coins’ different lifetimes, we are able to reduce the influence of age and associated network effects. Our approach identifies that transaction-fee-driven reward structures and, more notably, a lack of innovation, measured as whether the cryptocurrency is a spin-off from an existing network, significantly lessens market capitalization. The prospect for regulatory acceptance is a positive valuation driver. Furthermore, we identify Bitcoin-like combinations of design features as being favorable towards the accumulation of a remarkable market capitalization of the respective cryptocurrency.




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