I recently had a chat with a prominent character in the Web3 space who said doing proper accounting is difficult.
- Paying hundreds of members of a DAO for participation in crypto currency?
- Keeping track of contributions or selling fractional ownership of NFTs?
- Uncounted cashflow from unknown addresses?
While cashflow is great these are literal nightmare scenarios for any accountant — even for the ones specializing in Blockchain startups. An additional hurdle is legal challenges — who do these addresses belong to? Are they human or corporate entities? And in either case — where, in what jurisdictions are they situated? These questions determine the VAT-level and KYC requirements.
Blockchain transaction invoicing
Let’s design a minimum viable product — what can we do to address all these issues while implementing a Web3 native solution which ‘gets out of the way’ from focusing on your cool DApp?
The first component would be invoice generation. Talk to any accountant — what they expect as the input for their work are the invoices. Perhaps a monthly report, especially aggregated by counterparty, would suffice, but ideally we are talking about oldskool invoicing. In the context of a smart contract or a DApp it could very well be a “micro-invoice” — think, a JSON file containing the recipient, the article and the sum. It would be generated whenever there is a successful transaction, perhaps even from inside the smart contract as a ERC- standardized event.
Second component is fiat. The poor accountant, living in an ordinary world, needs to report data in normal currency. So if the transaction was conducted in some obscure ERC20 token there needs to be, on the invoice, information about the FX rate. Ideally the micro-invoice contains the amount in USD (or USDT) — this can even be fetched from within the smart-contract through an oracle.
The third component is KYC. While the laws on that differ greatly from jurisdiction to jurisdiction, whether you are dealing with a company or a private individual and the invoiced amount, the safe approach would be to register all entities you are dealing with. This means keeping a list of companies and their jurisdiction (country) in a separate repository. It makes sense to also think about rejecting or refunding transactions from unknown addresses or at least lock the amount until it is clear what are the missing pieces (article, amount, recipient type, recipient info).
For the sake of GDPR and similar requirements, it makes sense to obfuscate counterparty information. We should be able to tie invoices together with recipients but not inform everyone about these details. Companies can decide themselves whether they wish to broadcast and claim a wallet address as their own. So, a key component is a public private key pair to encrypt and decrypt this information at the right junctions. The access to the key can then be provided to the accountant.
As for integration, the difficulty is that due to legal and cultural differences each country has their own favorite accounting software. Also, while the tax authorities might have API endpoints for submitting tax information the overlap is not complete and standards not universal. The solution could be to integrate with software automation products such as Zapier — thinking being that these products are already used by enterprises, known by digitalization consultants and have connectors for accounting products already developed.
What about payment providers?
Using payment providers/processors to accept crypto on your web page and then immediately have them wire you fiat is an anti-pattern. Yes, there are many organizations providing exactly this service but ultimately it is unnecessary. It is just another leech for the Web2 world — yet another service provider among 110 SaaS products enterprises use on-average.
Blockchain provides the full stack: data, logic and payments. It already enables receiving funds, you can use logic (DeFi) to swap currencies, accept stablecoins directly or hold assets in your wallet as long as needed. Accountants care about the transaction but after the fact it is a separate exercise to value the company’s assets. These two activities can be split: for the monthly/quarterly valuation of assets it is not necessary to receive fiat in the first place.
Secondly, by having a payment provider accept crypto on one's behalf makes it impossible to really capture the value provided by blockchain. By owning your own smart-contract the business could issue NFTs or utility tokens to increase their retention. The next step would be to engage users and partners with more options besides payment — record data points using smart contracts, show information from the supply chain to further transparency or offer new business models entirely. Some of these use-cases can be seen in our gallery at List of flows (toolblox.net). None of these options would be available if companies obfuscate blockchain by using payment providers.
In the course of last few months we set out to create exactly this — a simple invoicing engine for blockchain businesses. Ada is a tool which helps any smart contracts generate and send invoices. It monitors the chain, registers incoming invoices, generates PDFs of them and sends them out. It also provides a neat dashboard to review them and conduct reporting. More details soon!
Beta version of Ada is available TODAY at https://ada.toolblox.net.
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Toolblox™ offers the flexibility traditionally found in custom development combined with the ease of no-code platforms.
Smart-contract templates, while seemingly convenient, often don't cater to all asset classes or jurisdictions, can stifle business process innovation, and become costly when adapting to specific needs due to re-audit requirements. Custom smart-contract development, on the other hand, is a lengthy and expensive process, requiring specialized skills, and the auditing phase is both costly and time-consuming.
Our smart contracts provide tailored solutions for specific assets, jurisdictions, or business nuances, all while being cost-effective to audit and easy to understand through visual workflows. This ensures you get a precise solution without the associated overheads or limitations.
Tokenization transforms traditional business protocols into self-executing smart contracts, streamlining operations and ensuring clarity.
- Efficiency in Operations: Self-executing contracts automate processes, speeding up operations like reconciliation, administration and settlement.
- Reduced Miscommunication: With every term and condition explicitly coded, there's less room for misunderstandings or disputes.
- Clarity in Business Protocols: Tokenized assets come with predefined rules and protocols, making business operations clearer and reducing ambiguities.
- Liquidity: Assets, even traditionally illiquid ones like art or real estate, become easily tradable, enhancing their accessibility.
- Fractional Ownership: Tokenization divides assets into smaller units, allowing more investors to partake in high-value asset ownership.
- Transparency: Every transaction is transparently recorded on the blockchain, ensuring verifiability by all stakeholders.
- Security: Blockchain's robustness safeguards tokenized assets, minimizing fraud risks.
- Global Market Access: Tokenized assets on Toolblox™ can be traded internationally, expanding market reach and opportunities.
- Supply Chain: Tokenize individual products for transparent tracking from manufacturing to sale.
- ESG Reporting: Ensure verifiable and trusted environmental, social, and governance data points.
- Financial Settlement: Streamline the trade and settlement of financial securities.
- Certified Credentials: Authenticate jewelry certificates, diplomas, and other achievements.
- NFT Marketplaces: Facilitate the creation, listing, and sale of unique digital art.
- DAO Governance: Automate company by-laws and decision-making within decentralized organizations.
- Asset Monetization: Tokenize real estate, land, or data sets for easy trading and verification.
- Ticketing Systems: Secure event ticket sales, verification, and anti-fraud measures.
- Insurance Operations: Simplify the insurance claim process, from filing to settlement.
- Document Timestamping: Verify the existence and integrity of documents with a secure timestamp.
- One-Time Smart Contracts: Create custom contracts for specific buy/sell/service agreements.
- Business Model Innovation: Develop new token-based business models for diverse industries.
- Smart Contract Auditing: Tokenize the auditing process, ensuring transparency and accountability in smart contract reviews.
- Proof of Physical Work Contracts: Manage contractor tasks, milestones, and handovers with tokenized contracts that verify completed work.
- Consultation Services: Tokenize consultation hours or packages, allowing clients to purchase and redeem services seamlessly.
- Subscription Services: Implement token-based subscriptions for content, software, or other services, ensuring automated renewals and access control.
Think of Toolblox™ as a hammer. We help you build your digital house (the smart-contract), but once it's built, the house stands on its own.
While we provide an auto-generated user interface and offer hosting solutions, the ownership and operation of the smart-contract and its data are entirely yours. This ensures seamless integration with any external system and guarantees robustness and adaptability for the future.
Additionally, for those who prefer no-code platforms, we provide an open API and plugins, including compatibility with popular platforms like Bubble. This ensures a seamless integration tailored to your business needs.
Absolutely. Toolblox™ is primarily designed for no-code solution developers who understand business needs, are familiar with no-code tools, and aim to craft an MVP for a web3 solution.
However, we also cater to business owners and analysts with a feature that employs AI to generate visual workflows. This can then be handed over to technical teams for further refinement.
For those with a technical background, we offer advanced features like source code extraction and GitHub export, ensuring a comprehensive experience for teams of all sizes.
Cross-workflow calling is baked into the builder. This means that any workflow can call any other workflow.
No, we use AI to generate the workflow of an asset or service. We then compose the smart-contract out of standardised components without using any AI generation. This process (for which we have filed a patent for) offers predictability and dependability while allowing you to use AI generation to kick-off the development process. It also makes the smart-contract easier and more cost-effective to audit.