An IOU token is a type of digital asset that represents a debt or obligation. Essentially, it’s a promise that one party will pay back another party a certain amount of value in the future. IOU tokens are often issued by platforms or exchanges to facilitate transactions without the immediate transfer of actual currency or assets. For example, if you lend Bitcoin to a friend, they might give you an IOU token that represents the amount they owe you, allowing you to track the debt. This helps in scenarios where the actual transfer of assets is delayed or when participants want to simplify accounting.IOU tokens can also be used within decentralized finance (DeFi) applications, enabling users to engage in lending and borrowing efficiently. They can represent various types of assets, including stablecoins, crypto, or other financial instruments, allowing flexibility in transactions while maintaining trust between parties involved.