NFTs, or non-fungible tokens, experienced a tulip mania-esque moment in 2021. Prices for NFTs, which are digital assets that can represent anything from works of art to tweets, surged as people began buying them up en masse. The frenzy was driven in part by a belief that NFTs are the wave of the future and will someday revolutionize how we interact with and value digital information.
The NFT crash in 2022 was disappointing for many, but it didn't dissuade those who believe in the potential of this technology. After all, all risk assets, from stocks and venture capital to cryptocurrencies, fell similarly during that time. And while the value of NFTs was inflated during the hype cycle, there are underlying fundamentals that suggest this technology could still change the way we account for digital assets.
The true promise of NFTs has nothing to do with tokenizing cartoon cats or memes. Rather, it lies in the fact that NFTs are unique, immutable, and verifiable – qualities that make them well suited for accounting and bookkeeping.
The Benefits of Tokenized Invoices
Invoicing can be a headache for businesses of all sizes. Late or unpaid invoices can disrupt cash flow and put a strain on working capital. Even worse, missed or duplicate invoices can create accounting problems that are difficult to untangle.
These issues are only scratching the surface. With the current system, businesses have to rely on paper records or spreadsheets to track invoices – both of which are easy to lose or tamper with. And if an invoice is lost, there's often no way to verify that it ever existed in the first place. Worst of all, fraudsters can exploit these weaknesses to commit invoice fraud, which costs businesses billions of dollars each year.
Tokenized invoices, enabled by firms like
Additionally, tokenized invoices are stored on a blockchain – making them highly secure. Blockchains are distributed ledger systems that are resistant to tampering and fraud. This means that businesses can be sure that their tokenized invoices haven't been altered or falsified in any way.
Upgrading Digital Receipts
A traditional digital receipt is simply a PDF or image file that's emailed to a customer after they've made a purchase. These receipts are easy to lose and there's no way to verify their authenticity. This can be problematic for businesses, as lost receipts can lead to accounting inconsistencies.
When receipts are tokenized, they become much more than simple PDFs. Tokenized receipts are stored on a blockchain and contain a unique identifier that can be used to verify their authenticity. This means businesses can be sure that their receipts are valid and have not been tampered with.
What's more, tokenized receipts can't be lost or misplaced. Because they're stored on a blockchain, they can always be accessed – even if the original copy is lost. This makes it easy for businesses to track their spending and ensure that their accounting is accurate.
The Future of Factoring Marketplaces
Factoring, or the sale of receivables, is a common financing method for businesses. It allows businesses to sell their invoices at a discount in order to receive immediate cash. While this can be helpful in a pinch, it's not a very efficient way to finance a business in the long run.
The problem with current factoring marketplaces is that they're opaque and often involve middlemen who take a cut of the proceeds. This makes it difficult for businesses to get the best possible price for their receivables.
Tokenized receivables offer a more efficient and transparent way to factor invoices. Because they're stored on a blockchain, businesses can quickly and easily sell their receivables to the highest bidder. This means businesses can get the cash they need without having to worry about being taken advantage of by middlemen.
Composability: The Future of NFTs
One of the most exciting aspects of NFTs is their composability. This means that NFTs can be combined to create new, more complex NFTs. For example, a business could use invoice NFTs to create a digital contract that's automatically enforceable, or an NFT invoice could go on to create a tokenized receipt or loan NFT.
The possibilities are endless. And while composability is still in its early stages, it has the potential to completely revolutionize the way we interact with digital information.
As the world becomes increasingly digitized, NFTs could play a crucial role in accounting and bookkeeping. Their unique qualities make them well suited for storing and managing digital assets. And as composability evolves, NFTs will become even more powerful and versatile. The future of accounting is tokenized – and there's no going back.