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Financial incentives for open source development: the case of Blockchain

Canidio, Andrea (2018): Financial incentives for open source development: the case of Blockchain.

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Abstract

Unlike traditional open-source projects, developers of open-source blockchain-based projects can reap large financial rewards thanks to a modern form of seigniorage. I consider a developer working on an open-source blockchain-based software that can be used only in conjunction with a specific crypto-token. This token is first sold to investors via an Initial Coin Offering (ICO) and then traded on a frictionless financial market. In all equilibria of the game, in each post-ICO period there is a positive probability that the developer sells all of his tokens on the market and, as a consequence, no development occurs.

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