In this interview, we catch up with Gilded CEO Gil Hildebrand to discuss the strategic insights behind Gilded and the future of crypto accounting and payments. Gil offers a glimpse of crypto's benefits to society as adoption grows, the ways blockchain is already transforming accounting beyond just improving payments — and how Gilded plans to lead the market for a new era of accountability.
Where did Gilded come from?
After 20 years of building software, including almost a decade as technical co-founder of Seth Godin’s Squidoo, I discovered cryptocurrency in 2017. I immediately realized the implications it would have on collaboration. The internet made it easy to connect, but not to transfer value. The world is digital, but still segregated by country and we don’t have a global workforce yet. Gilded came out of looking for ways to use this breakthrough technology to make the world a more abundant place.
What’s the problem you're trying to solve — giving more people better access to digital assets?
Too many people are still not part of the global economy. They don't have access to a bank account or credit cards or liquidity. But wealth doesn't have to be a zero sum game. If I help you make money, I shouldn't have to lose money in the process. Cryptocurrency enables people all over the world not only to collaborate but also to reward and pay each other. That was the initial genesis for Gilded, because there are significant challenges for a business to be able to use cryptocurrency.
One of the biggest challenges is accounting. If you’re a real business you have to answer questions like How much money did we make last month? Which of our products is the most profitable? Did we stick to our budget? How much do we owe in taxes?
Without the answers to these questions, businesses can't make smart business decisions. So accounting is a critical piece of the puzzle that has to be solved before cryptocurrency reaches a mainstream audience.
But isn’t blockchain already an accounting system — a system of ledgers and smart contracts? Why do we need software that duplicates what's already in the ledger?
Blockchain is an accountability system — not an accounting system. It lets you see a public record of every transaction, but it does not provide insight into what the transaction was for — what parties are associated with it, anything else that would give you context about the transaction. You still need an accounting layer on top of any blockchain.
Now some people refer to blockchain as a triple entry accounting system. That’s more of a marketing term than an accounting term. Basically, it means you could theoretically connect one company's double entry accounting system to another company's double entry accounting system so there's a permanent record of a transaction that links the accounting systems of both parties.
Once this is in place, all kinds of interesting things become possible. If you want to audit a company to verify that its transactions are legitimate, you can analyze these records on the blockchain to confirm who a payment was sent to and what it was for, make sure that there's no fraud going on. That’s just one example. Anytime you’re fighting fraud, many industries are affected — insurance, lending, credit — it's going to have a huge impact beyond how we do accounting in our business.
What’s the deal with QuickBooks?
When we started working on Gilded, we thought about creating our own accounting system for crypto. But after talking to hundreds of businesses, we discovered that no business really wants to manage an entirely separate accounting system just for digital assets.
Our next step was to look at existing accounting solutions like QuickBooks and Xero, and we discovered that these solutions don't support cryptocurrencies. There’s no easy remedy for integrating with dozens of blockchains and exchanges, calculating spot prices, cost basis and tax requirements, and a thousand other little details.
How do you take this new asset class and represent it in these accounting systems that don't support it today? We decided to put our effort into representing those crypto transactions in QuickBooks to generate complete and accurate financial reports.
That's a pretty big goal for a small startup. How are you going to build that market?
There are over 2 million businesses today with access to QuickBooks Online. Xero has over a million businesses. We are one of the only solutions that offers any sort of cryptocurrency integration and assistance. But we’re more than just a product, we see ourselves as educators. We believe it's important to educate bookkeepers and CPAs on how to properly account for crypto assets so that it becomes one less barrier to adoption.
But aren't regulations and compliance antithetical to crypto?
There are two aspects of this.
There is a cryptocurrency like Bitcoin — a decentralized, deflationary currency neither owned nor controlled by any one country, business, or person. Then there's the underlying blockchain technology that powers it, probably the greatest technological innovation since the internet. Bitcoin gives people another option. If they want to take control of their funds, if they want to be their own bank, they should have the option to do that.
But that doesn't mean we can't have regulated, controlled, stable use of blockchain technology that businesses can trust and depend on and is compliant with government regulations. This regulated space can co-exist and even interplay with the magic of Bitcoin.
Are we going to see digital assets get programmed by companies using AI techniques the same way we’ve seen advertising get disrupted by programmatic advertising and AI?
There’s a convergence of different technology innovations that are leading to exponential increases in the pace of technology innovation. If you have a smart machine operated through AI, that machine becomes a trackable asset. Blockchain makes it possible for virtual machines to be ownable and capable of owning other assets. Imagine a self-driving car that uses AI technology to navigate the road. If that car has a wallet in it that can act as the car's transfer of monetary value., it could drive through a toll, park in a parking spot, it could pick someone up and drive them to another location. In short, your car could spend money and earn money. Without blockchain, that wouldn't be possible. The convergence of these technologies will bring about so many interesting concepts we're only just starting to grasp.
Do stablecoins help us in this context? Or are they the on-road to nationalized digital currencies?
Stablecoins represent a bridge to this new asset class. People say that Bitcoin will never become a currency because it's too volatile. That may be true in the short term, when the market is relatively small. As we see more adoption, I expect it will be less volatile and will be easier to use as a currency. Until then, stablecoins present an interesting bridge in technology solutions to get us to the point where we can look at increasingly decentralized forms of currency that are not associated with a specific country.
There are many, many different stablecoin projects out there, but only a handful that have seen real adoption, and most of them come primarily from traders looking for a way to keep their assets stable while they're trading.
With the right tools, stablecoins could become integrated into payment and accounting systems, and this work is only just getting started. Gilded offers an invoicing solution that allows someone to invoice using stablecoins, and we're offering this solution for free to anyone who would like to become part of this new global economy powered by cryptocurrency.
Let’s talk about the longer term future of Gilded. What kinds of insights can an accounting platform dedicated to crypto provide that traditional accounting platforms can’t?
Traditional accounting systems don't offer a layer of accountability. If a bookkeeper logs a transaction into an accounting system, there's no automated way to prove that a payment was made and that revenue has been received. Auditors can do it manually, but only for a subset of transactions at a time. And it's really time-intensive.
Blockchain offers the ability to link accounting records directly to those transactions. This enables lots of really interesting use cases. As soon as you minimize the risk of fraud, you make it much easier to provide insurance services, credit services, loan services, and those will drive new efficiencies — reduce the cost of credit and the cost of insurance, and allow businesses to gain more insights about their own finances with less effort than previously required..
Presumably that would work for any company that wants to slice and dice its transactional data?
And not just cryptocurrency, but any form of currency that has a blockchain-based record associated with it to help verify its authenticity. So, for example, in our partnership with Request Network, we've created a triple entry accounting system that allows for invoices to be created and mapped directly to the transactions used to pay them. We can do this for crypto transactions, but we can also do it for traditional fiat currency transactions, and this means that the innovation that blockchain enables in the accounting industry is something that can be applied to traditional fiat currencies even as the adoption of crypto grows.
Does that mean Gilded might one day function in the context of traditional currencies as well as digital currencies?
That's right. If we want to give businesses a full picture of their financial health, and if we want their investors to feel that that information is accurate, complete, and valid, then we can't just look at cryptocurrency, because no business is fully operating in cryptocurrency yet. We need to look one level beyond that and apply this technology more broadly in order to give businesses a complete solution. That’s where we’re headed.