Accounting in Metaverse
What is Metaverse?
The metaverse concept isn't new. It was first described in the 1992 novel Snow Crash. Several companies later developed online communities based on the concept, most notably Second Life, released in 2003. In the metaverse, people use avatars to represent themselves, communicate with each other and virtually build out the community. In the metaverse, digital currency is used to buy and sell items. Users can also virtually travel through the metaverse for fun with no goal in mind using a virtual reality headset and controllers.
What currency will be used in Metaverse?
A cryptocurrency is a digital currency, which is an alternative form of payment created using encryption algorithms. The use of encryption technologies means that cryptocurrencies function both as a currency and as a virtual accounting system, it is a digital payment system that doesn't rely on banks to verify transactions. It's a peer-to-peer system that can enable anyone anywhere to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.
How does cryptocurrency work?
Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins. Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets.
If you own cryptocurrency, you don't own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future. Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.
The impact on Accountants:
The metaverse will mark a new era for accountants and auditors, just as the internet did. It will allow people to do things virtually that they can’t in real life — such as teleport and fly. But the virtual world will still rely on traditional business principles.
There will be some reality that will remain in the metaverse no matter what it looks like, and part of that will be the reality of business, The reality of accounting with debit and credit is not going away. So accountants will play a huge role in this new reality.
Possessing some technical knowledge will be important for accountants working in the metaverse. They should have a basic understanding of how key metaverse technologies such as blockchain and non-fungible tokens (NFTs) work.
But they'll also need good social skills to help sell their services to the entrepreneurs setting up shop in the metaverse.
The human side of accounting will become more important than ever. Robotic process automation, artificial intelligence and machine learning are taking over some of the more manual tasks accountants have done in the past. This frees up accountants to be much more creative and forward-thinking than in the past.
Some important questions that arise are how will the conversion of traditional money into digital currency be accounted? How purchase of NFTs will be shown in books of accounts? How profit or loss incurred in metaverse recorded in traditional PNL?
No matter what form the metaverse ultimately takes, there will be an important place for accountants in it.
Accountants need to focus on what they do best, which is to apply the rigor, independence and objectivity that no other profession has. “Accountant — it's all in the name. They have a higher calling to investors, to shareholders and to stakeholders.”