Design and valuation of cryptocurrencies

Abstract

We analyze whether the design of cryptocurrencies helps to explain the Huge cross-sectional variation in the market values of cryptocurrencies. We propose a taxonomy of design features and Hand-collect data on these features for a sample of 79 cryptocurrencies. Using a two-stage regression approach and LASSO regressions, we find, inter alia, that forks and deviations from the design of Bitcoin are associated with lower valuation. In contrast, non-anonymous cryptocurrencies and cryptocurrencies that do not pass on any transaction fees and/or tips to agents who maintain the integrity of the network have, on average, higher market values. These results are robust to variations in the way we measure market valuation.