Initial Coin Offerings, Blockchain Technology, and White Paper Disclosures

Abstract

We examine disclosures made by issuers of initial coin offerings (ICOs) in the so-called “white paper” and use them to rate the blockchain platforms being adopted or developed by the ICO issuers. First, we find that most ICOs receive a low rating. In fact, over half of the ICOs actually do not need a blockchain. Second, ICO projects with a higher rating raised more funds over the ICO period, after controlling for whether the issuers also disclose information on their business plans, founding teams, token distributions, use of proceeds, etc. Furthermore, highly-rated ICOs are more likely to exceed the minimum funding target. These results are consistent with ICO token buyers/investors taking into consideration the underlying blockchain technology of the ICO projects when making their purchasing/investing decisions. Since the white paper is the main source of ICO information, our findings imply that the credibility of this information is important to protect the interests of ICO buyers/investors and to ensure the long-term viability of ICO as a capital-raising tool for blockchain-based ventures.