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 blockchain is an electronic distributed ledger that we can use to record ownership of just about anything. It has attracted so much attention because it’s a much better way of tracking ownership than the way we do it today. It makes the entire system easier, faster, more accurate, completely transparent, easily audited, less expensive and impossible to cheat (but not to steal). Buyers and sellers can transact directly with each other without the need to involve anyone else who might extract a fee or commission for their intervention. Some blockchains also provide smart contracts that document the agreement between sellers and buyers and decentralized applications (dApps) that automate transactions so they occur without human intervention at exactly the right time based on a set of verifiable criteria.
During the Initial Coin Offering (ICO) free-for-all of 2017 and 2018, investors spent more than $20 billion of cryptocurrency buying tokens to fund startup companies. It was a process with little quality control or regulation. For investors, the end result was devastating. According to the Wall Street Journal, fewer than 15 percent of ICO tokens during that period are trading at or above their initial price, and the collective value of the tokens today is around $5 billion.
The world of cryptocurrency can be a confusing place, especially in the startup arena. This asset class is still relatively new, but there is already a great deal of interest in using cryptocurrencies as a source of startup funding.
The use of cryptocurrency to fund startup endeavors has introduced a new level of complexity - and a new set of terms for investors to understand. Some startups are issuing utility tokens to fund their new enterprises, while others are sticking with asset-based tokens. So what is the difference, and what are the pros and cons of each approach? Whether you are a would-be investor or an entrepreneur, it is important to understand the benefits and drawbacks of utility tokens and their asset-based equivalents.
Most people know blockchain as the technology behind Bitcoin, Ethereum, Litecoin and other popular cryptocurrencies, but there is much more to the blockchain revolution. In fact, many experts predict that the transformative power of the blockchain will be far more important, and much more long-lasting, than the virtual coins it originally enabled.
To understand the transformative power of the blockchain and why it is already disrupting entire industries, it helps to know what the technology is and how it works. Explaining the technical details of the blockchain would take many pages, but in simple terms, blockchain is a type of ledger, one that holds a permanent record of every transaction.
If you have been on the Bitcoin bandwagon for years, you are probably very happy with your decision. When this virtual currency first hit the market, its value was expressed in mere pennies. Less than a decade later, the price of a single Bitcoin was nearing $20,000.
Even though the price of Bitcoin has settled down from those stratospheric highs, there is still a great deal of optimism in the cryptocurrency community. Bitcoin, Ethereum, Litecoin and the like still have their fans, and they point to the enormous returns these virtual currencies have produced over the years.
