Blockchain economics and decentralized finance

Speaker: Valerie Laturnus

Venue: Room 530, Chengjun Building 7, Zijingang Campus

Abstract: On digital platforms, investors often extract profits at the expense of users, while users can do little about it. We study what happens when this structure is reversed and users themselves control the platform. Using detailed user-transaction data from 10 online lending platforms where users both borrow funds and control platform rules, we show that borrowers are generally less likely to participate in governance unless their money is at risk. Participation in governance then increases substantially, but mostly to benefit themselves at the expense of the broader user community. Governance decisions become more short-term oriented, and after liquidation, participation drops significantly and many affected users disengage from governance. Overall, our results show that giving users formal control can reduce the traditional conflict between investors and users. At the same time, when control is closely linked to platform use, platform stability declines.