Initial Coin Offerings, Blockchain Technology, and White Paper Disclosures

We examine voluntary disclosures made by issuers of initial coin offerings (ICOs) in their “white papers” and use them to rate the blockchain technology being developed by the ICO issuers. First, we find that most ICOs receive a low rating. In fact, over 80% of the ICOs do not need to use a blockchain. Second, ICO projects with a higher rating raised more funds than their counterparts, after controlling for other project-, issuer-, and token-related features. Third, ICOs with a high rating are more likely to have their digital coins/tokens listed on a cryptocurrency exchange within 180 days after their ICO end dates. Finally, results indicate that providing technical details in the white paper can be an effective way to signal the quality of an ICO project. Overall, 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 the ICO as a capital-raising tool for blockchain-based ventures.