Financial incentives for the development of blockchain-based platforms

A developer creates a new blockchain-based decentralized digital platform by investing resources and exerting costly effort. Performing exchanges on the platform is possible only by using a new crypto-token. The initial stock of this token is owned by the developer, who can sells some in an Initial Coin Offering (ICO), and more later on a frictionless financial market. I show that, if the developer raises funds via an ICO, then in every subsequent period with strictly positive probability he may liquidate his tokens and stop the development of the platform. Even if the developer does need to hold an ICO, the equilibrium will nonetheless be inefficient because the developer's payoff depends on the volume of transaction on the decentralized digital platform in each period. Instead, the social value of the platform depends on the present discounted value of the total surplus created. The developer's effort and investment could be above or below their optimal levels, depending on the discount factor and the elasticity of supply/demand of the users of the platform.