Debt is a certain amount of money loaned for a specific time at a designated interest rate. Debt securities include real estate mortgages and corporate bonds that pay dividends. Debt tokens are the digital representation of debt instruments on the blockchain, called the collateralized debt obligation (CDO).

The nature of debt makes it an ideal candidate for the blockchain that will provide real benefits to those involved in trading the securities. Because debt is well-defined and treated very similarly around the world, it’s much easier to tokenize debt than other asset classes. Ideally, the debt token could lead to a global standard of transportable debt. Debt securities pay dividends regularly, and much of the debt trading today takes place on over-the-counter markets. The blockchain would help streamline and automate these processes to improve their efficiency and to evaluate the value that third parties currently provide. The ability to fractionalize debt might also open the market to a new group of investors.