IOU is an acronym for “I Owe You”.
IOUs are tokens issued on the XRP Ledger platform that are redeemable for a fungible asset such as EUR, USD, gold or cryptocurrencies on their native networks.
Anyone can issue IOUs, however, in order for someone to accept payment in IOUs they must trust that the person or organization who issued them will be able to redeem the IOU for the underlying asset.
GateHub is an example of such an organization.
- Person A deposits 10 $ via a bank transaction to his GateHub XRP Ledger wallet.
- GateHub credits Person A’s XRP Ledger wallet with 10 GateHub USD IOUs.
- If Person A then decides to withdraw these same funds back to his bank account, he sends them to GateHub (issuing address) and we send 10 $ to his bank account.
Most exchanges operate in this way. Some exchanges run their own internal ledgers for keeping track of user balances.
GateHub provides the opportunity to interact directly with the public XRP Ledger via your XRP Ledger wallet.