Coin-Operated Capitalism
Coin-Operated Capitalism


	
	
		
	

	
	
		
		
	

	
	

	
	
	
	
	
    
        
    
	

	
	
		
		
			104 Pages
		
		

		Posted: 18 Jul 2018
		
			Last revised: 31 May 2019
		
		
	
	
		
			
			




	Shaanan CohneyUniversity of Pennsylvania Law School; Princeton University - Center for Information Technology PolicyDavid A. HoffmanUniversity of Pennsylvania Carey Law SchoolJeremy SklaroffUniversity of Pennsylvania Carey Law School - Student/Alumni/AdjunctDavid A. WishnickGeorgetown University Law Center; University of Pennsylvania - Center for Technology, Innovation & Competition

		
	
	
	
	
	



	
	
	
	
		
	
	
		
			Date Written: 2019
		
	

	
	
		
		
	

	
	
		
	
	
		Abstract
		This Article presents the legal literature’s first detailed analysis of the inner workings of Initial Coin Offerings. We characterize the ICO as an example of financial innovation, placing it in kinship with venture capital contracting, asset securitization, and (obviously) the IPO. We also take the form seriously as an example of technological innovation, where promoters are beginning to effectuate their promises to investors through computer code, rather than traditional contract. To understand the dynamics of this shift, we first collect contracts, “white papers,” and other contract-like documents for the fifty top-grossing ICOs of 2017. We then analyze how such projects’ software code reflected (or failed to reflect) their contractual promises. Our inquiry reveals that many ICOs failed even to promise that they would protect investors against insider self-dealing. Fewer still manifested such contracts in code. Surprisingly, in a community known for espousing a technolibertarian belief in the power of “trustless trust” built with carefully designed code, a significant fraction of issuers retained centralized control through previously undisclosed code permitting modification of the entities’ governing structures. These findings offer valuable lessons to legal scholars, economists, and policymakers about the roles played by gatekeepers; about the value of regulation; and the possibilities for socially valuable private ordering in a relatively anonymous, decentralized environment. 
	
	

	
		
		


	

	
	

		
		

	
	


	

	
	
	
		
	
	
	

	
	
		
		
			
				
			
		
		Keywords: ICO, blockchain, fintech, smart contract, IPO, bitcoin, initial coin offering, venture capital
	
	

	
    
    
	

	
	
		JEL Classification: G1, G18, G2, G24, G3, K12, K22, M13
	
	

	
	

























    	
	
				
	
	
	
   	
	
	
	
	
	            
	















	












   
  











    
    
    
    
















	



    




	
		Suggested Citation:
		Suggested Citation
	
	
		
			Cohney,  Shaanan and Cohney,  Shaanan and Hoffman,  David A. and Sklaroff,  Jeremy and Wishnick,  David and Wishnick,  David, Coin-Operated Capitalism (2019). Columbia Law Review, Vol. 119, p. 591, 2019, U of Penn, Inst for Law & Econ Research Paper No. 18-37,  Available at SSRN: https://ssrn.com/abstract=3215345 or http://dx.doi.org/10.2139/ssrn.3215345 
		
	
	

	
	
	

	
	

	
	
		
	

	
	
	
