Basic accounting principles haven't changed much in the last several hundred years, but the way we account for our finances has changed a lot. With the rise of the internet and Web 3.0 technologies, tracking our financial activity has become more complex and chaotic.
Let's consider payroll. At first blush, it might not seem like payroll would be all that different in a Web 3.0 world. After all, employees still need to get paid, and employers still need to track how much they're spending on salaries.
However, things start to get complicated when you consider all the different ways employees can be paid in a Web 3.0 world. For example, an employee might be paid in cryptocurrency, or they might be paid in a token that's used on a specific platform.
This also means that you're making payments to wallet addresses, which can change from one payday to the next. In a traditional payroll system, you might simply integrate with a few popular banks. In a Web 3.0 world, you could have dozens, if not hundreds, of wallet addresses that you need to keep track of.
And there are no "take-backs" with blockchain. Once a transaction is made, it's final. This means you need to be very careful when making payroll payments, as there's no way to cancel or reverse a payment if you make a mistake.
Not to mention, employees also need to track any taxes that are owed on cryptocurrency salaries. In the United States, for example, employees who are paid in cryptocurrency are subject to capital gains taxes. That means they need to track the cost basis of the cryptocurrency they receive, as well as any gains or losses when they convert it to cash.
All of this complexity means that traditional payroll systems simply aren't up to the task of managing Web 3.
Traditional invoices are simple PDFs that list the products or services being billed, the quantity, the price, and the total amount due.
It doesn't make sense to use the same kind of invoice in a Web 3.0 world. First of all, you're dealing with crypto addresses, so a static PDF wouldn't be very useful. Second, you might be dealing with a variety of different tokens, each with its own price. And finally, the total amount due might fluctuate depending on the market price of the token at the time of payment.
This means that you need a new way to generate invoices that are directly connected to the blockchain, so that when an invoice gets paid, the payment is automatically registered. ERC-721, the standard for non-fungible tokens (NFTs), is well-suited for this task.
With ERC-721 invoices, you can embed all the relevant information about the invoice into the token itself. This includes the items being billed, the prices, the addresses of the payer and payee, and more. Plus, because ERC-721 invoices are stored on the blockchain, they're tamper-proof and can't be lost or misplaced.
Batch payment challenges
In a Web3 world, making payroll often means manually verifying individual wallet addresses, ensuring that the right amount is being paid, and then making payments one-by-one. This doesn't even include recording the payments in your accounting system.
This process is slow, error-prone, and inefficient. It's also completely unnecessary, as there are now tools that can automate the entire process.
Bulla Network let you pull up last month's payments and pay everyone in one go. The payments are automatically registered in the blockchain, and you can automate the recording of the payments. At any time, you can export a report of all the payments made, which is perfect for tax time.
Accounting for web3 activity
In a traditional business, the accounting department might use a combination of invoices, bank statements, and ledgers to track income and expenses.
In a Web 3.0 world, there's a whole new range of activity that needs to be accounted for. This includes things like decentralized exchanges (DEXes), decentralized finance (DeFi) protocols, and non-fungible tokens (NFTs).
With Bulla Network, you can track all your web3 activity in one place. Bulla Network is a decentralized accounting tool that's designed to manage the finances of DAOs, DeFi apps, metaverses, and other web3 projects.
Book a free demo of Bulla Network or join our Discord to learn more.