Blockchain tokens have seen widespread adoption by users. Although there has been a focus on the impact of various approaches to making them available to the public—e.g., via ICOs, airdrops, ITOs—our understanding of their diffusion remains limited. This poses a challenge for both blockchain token creators (e.g., startups) and regulators (e.g., the U.S. Securities and Exchange Commission [SEC]), who seek to understand diffusion to inform strategic decisions and regulatory policy, respectively. Extant diffusion theory—e.g., innovation diffusion theory, informational cascades—misses key elements of this diffusion phenomenon in two noteworthy regards.

First, it overlooks the orientation of tokens toward financial value versus use value. Second, it omits the mechanisms through which these forms of value shape the diffusion patterns of such tokens. In this research, we address this theoretical and empirical gap by leveraging an exchange-versus-utility value lens to understand the diffusion of blockchain tokens. Specifically, by conceptualizing blockchain tokens as financial tokens versus utility tokens, we theorize that they facilitate exchange value and use value respectively, manifesting in distinct diffusion patterns based on the portfolio size of their users, the actions of lead users, and their availability through transaction platforms.

We employ a series of panel vector autoregressions (PVARs) analyzing over 200 million transactions associated with 24,430 public Ethereum-based tokens, and provide empirical evidence regarding how some tokens realize more of their exchange value, while other tokens realize more of their utility value, leading to markedly distinct diffusion patterns. We find that increases in the portfolio size of the userbase and decreased adoption by lead users foster the diffusion of financial tokens. In sharp contrast, we provide evidence that decreases in the portfolio size of the userbase, increased adoption by lead users, as well as increased facilitation of user interactions through transaction platforms foster the diffusion of utility tokens.

We conclude by discussing how this work advances broader conversations in information systems, technology management, and innovation diffusion, offering a novel perspective on the diffusion of blockchain tokens, and informing policy discussions on blockchain tokens and their regulation as securities or commodities.