A debt instrument is an agreement between two parties, one that loans the money and another that borrows it. There have been recent discussions regarding the potential use of blockchain and tokenization instead of traditional debt instrumentation. Blockchain technology would essentially eliminate the need for legacy banking channels, thus avoiding commissions otherwise paid to banks. Instead, governments overseeing the entire process would provide their own national tokens to the lenders as debt-tokens and a separate national cryptocurrency to loan beneficiaries. This would increase potential for direct peer-to-peer (p2p) investment between parties. The transparent nature of blockchain would also provide clarity as to the amount lent, the number of tokens issued and the beneficiaries of the funding. Tokens could be programmed to execute other parts of the contract as well, such as extending a loan or paying the taxes owed under the contract. Investors who wanted to leave their investment could even trade and sell their tokens on the open market. Ideally, blockchain and tokenization could be the tools necessary to reduce, even eliminate, wealth inequality stemming from pay to play lobbyism and other forms of political corruption.
