Collateralized Debt Obligation (CDO)
Collateralized Debt Obligation (CDO) is a financial product for the financial world as we know it, that acts as collateral if loans go unpaid and default. Supported by the loan pool and other assets, this financial product helps the borrower by acting as collateral in case of need. While not a suitable financial instrument for all investors, Collateralized Debt Obligation (CDO) is a useful financial tool for investors who want to change risk and free up capital.
Collateralized Debt Obligation (CDO) for Cryptocurrencies
It is said that the complex aspects of such complex financial instruments will be rasped and the use of such complex financial instruments will become easier for investors due to the transparency feature that creates the biggest difference of cryptocurrencies that emerged thanks to blockchain technology. These financial instruments, which are also less likely to fail, become very useful and important for some investors.
How Does Collateralized Debt Obligation (CDO) Work?
A protocol using smart contracts provides a representative token that indicates and correlates the amount of funds invested or locked in this financial product. These tokens are usually cryptocurrencies or tokens. Thanks to these tokens, users enable their deposits to be used in other markets and to take risks. At the same time, the vast majority of investors using this financial instrument want these debt tokens to remain idle in their wallets. They also want it to be used as collateral for other loans and to lead to new investments. The problem seen here is that the directions of the investments in question are generally the same.
What awaits Collateralized Debt Obligation (CDO) in the Future?
The number of companies that provide loans to decentralized investment vehicles, namely cryptocurrencies using blockchain technology, is increasing day by day. At the same time, the speed and quality of new initiatives in this field is constantly growing. Every day, new protocols and new companies enter this financial product. In this way, the world of crypto money can appeal to new audiences and investors.
Learn also: Collateralization in Crypto
