True or False Prosperity? The Effect of Token Incentives in Decentralized Autonomous Organizations

Decentralized autonomous organizations (DAO) received many discussions and attempts recently with the rapid development of blockchain. Token incentive is one of its most important features and owns multiple attributes of equity, property, and currency. To explore its unknown effect, we utilize a quasi-experiment setting in the NFT marketplaces. We find that the token incentives with DAO implementation in Rarible can significantly motivate users’ participation compared with SuperRare at the platform level. At the seller level, by the comparison of cross-platform users and only-OpenSea users, we find it significantly changes users’ trading behavior which reflects in the increment in transactions number and average prices. However, through the equilibrium analysis based on the supply and demand model, the growth rate of the average prices is far beyond the magnitude it should be at the equilibrium state. Therefore, we argue that buyers’ purchase decision is driven by the high expectations of token value.