A document noting that one party is indebted to the other.

Phonetically spelled as “I owe you,” IOU is a popularized term that informally acknowledges that some form of debt exists between two parties. It draws its origin from the 18th century, as a precursor to a formal, legally binding agreement.

IOU's informal nature suggests that it happens during business meetings, when something is agreed upon but still needs to be fine-tuned so that it becomes a legal contract that is binding in the court of law. As such, IOUs consist of:

  • Debt agreement date
  • The amount of debt agreed upon
  • The full names of involved parties, optionally with addresses
  • The date when the debt needs to be repaid
  • The signatures of both borrower and lender

IOU can cover any type of that, whether it involves a sum of money or an exchange of assets — real estate or some physical commodities. However, although IOUs are usually written down, it can also be verbal agreements, especially if given in the presence of witnesses or audio-recording devices.

In the age of blockchains capable of embedding smart contracts to execute agreements, IOUs have attained new forms and usability. Because of the automated and chargeback-resistant nature of smart contracts, blockchain-derived IOUs make it possible for trading parties to create tokens.

These tokens would then represent debt, tradeable across blockchains. In other words, IOU tokens become as valuable as the debt they carry. For instance, if one were to lend Solana (SOL) tokens to another party, the lender would need a certificate, or proof, of that debt agreement. By creating an IOU token, the lender could store it in their wallet.

Then, when the lender wants the debt repaid, as per the previous agreement, they would just send the IOU token to the borrower, requesting the payment. Specifically, you could mint such tokens running on the Graphene blockchain, issuing BLOCKBASIS.BTC IOU crypto tokens equal to BTC value in 1:1 ratio.