Motivation

Debt instruments represent one of the biggest asset classes (along with equities, commodities, and real estate). Debt instruments are investment contracts between borrowers and lenders, used to raise capital with binding obligations between the parties, who agree on the payoff and the cash flows (payments schedule, interest rates, maturity, etc.).

The definition of a comprehensive specification for the tokenization of debt instruments benefits several players of the traditional value chain, such as issuers, arrangers, asset managers, risk managers, lenders, payment agents, transfer agents, etc.

The Debt Algorand Standard Application turns a traditional debt instrument into a deterministic financial contract, executed on the Algorand Virtual Machine (AVM). The machine-readable and executable contract removes existing frictions over the debt instruments lifecycle and reconciliation, enabling use cases such as truly atomic delivery-vs-payment (with instant finality and no counterparty risk), deterministic cash flows analysis (when, how much, to whom), and easier quantitative risk management.