Cryptocurrencies and the New Spaces of Finance

University Of Kentucky Research Foundation, Lexington KY

Investigators

Abstract

This project investigates the ways in which blockchain-based cryptocurrencies are reshaping the geographies and practices of valuation and financing within startup firms. Cryptocurrency-backed initial coin offerings (ICOs) represent a novel form of venture financing that changes the scale and scope of investment as well as encouraging firm structures that maximize hospitable regulatory locations. The outcomes of these processes have important implications for the location of economic growth and wealth formation, particularly within the finance sector. The project seeks to clarify how novel financing practices associated with cryptocurrencies impact new firm formation within the technology sector. Findings will be disseminated via a variety of publications (academic and more general and using open access publishing), the distribution of tools, code, and datasets developed for this project for gathering, cleaning and analyzing data via open-source tools and data such as GitHub, and through educational activities such as student training and classroom modules. The contribution of this research is to demonstrate how novel financing practices associated with cryptocurrencies impact new firm formation within the technology sector. The research will advance theory and understanding within economic geography by looking specifically at financialization and the ways financial institutions and logics exert power in economic systems within these new spaces of finance. The project has three specific objectives. The first is to determine the geographies of core cryptocurrency functions by asking: what factors contribute to the geographies of different cryptocurrency operations? How are locations integrated with downstream operations such as ICOs? These questions will be answered using data-scraping and geolocation methods drawn from geospatial science and digital geographies. The second objective is to assesses how cryptocurrencies' uses and networks contribute to value. This will be addressed by using social network analysis, machine learning, natural language processing, and deep neural nets from computational sociology and computer science to ask: how do networks of cryptocurrencies differ between use types? How does network interaction contribute to value? The third objective focuses on how cryptocurrencies affect financing and entrepreneurial practices within tech-based startups. The investigator will use interviews to gather data to answer: What are the motivations of investors/entrepreneurs in ICOs? and What additional functions are folded into the financing process? Together these objectives will fundamentally advance basic knowledge in economic geography. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.