Please describe your proposed solution.
There are a few tools that help you value what’s in your wallet. However, they’re not complete yet and aren’t updating in real-time.
The first step is to calculate the value of a wallet. We need a tool that’s combining:
- NFTs
- Coins/tokens
- Assets directly owned or “inside your wallet”
- Assets indirectly owned, e.g. assets listed and offers made on a marketplace, and liquidity provided via a DEX
- Assets from all addresses from an account (stake key), e.g. to support Eternl
The second step is to calculate the profit of each transaction and wallet or number of wallets. To do this, we need to:
- Calculate mint prices of NFTs
- Calculate floor prices of NFTs (valuation methodology A)
- Calculate trait floor prices of NFTs (valuation methodology B)
- Calculate average sale prices of NFTs (valuation methodology C)
- Calculate exchange rates of coins/tokens
- Calculate transfers, deposits & withdrawals (from/to exchanges)
- Calculate ROI
- Sync all these rates & prices continuously
The third step is to be able to calculate the value of each wallet historically:
- Floor prices of NFTs
- Trait floor prices of NFTs
- Average prices of NFTs
- Exchange rates of coins/tokens
Steps 1, 2, and 3 will be done by directly querying the information on the blockchain as much as possible.
The fourth step is to translate this into fiat, also historically. For this, a sync with (an) external API(s) will be set up.
The fifth and final step is to export all this for a date or a period into a report that can be used for anyone to comply with tax regulations, e.g. for the IRS in the United States.
Please describe how your proposed solution will address the Challenge that you have submitted it in.
This tool will help people be compliant with their country’s tax regulations while providing a great insight into their wallet’s value and profit/loss. It’s absolutely necessary for more adoption of the Cardano blockchain to have such a tool since once it will be available we will have jumped a big hurdle for people to come over to our blockchain. It will help adoption, but potentially also increase the activity of people already in the ecosystem, since they’ll be more confident to know how to report their profits (or losses) into their taxes.
What are the main risks that could prevent you from delivering the project successfully and please explain how you will mitigate each risk?
The hard part is to support all types of transactions out-of-the-box and then combine all these data streams from minting services, marketplaces, DEXes, trading platforms, and more into a single number that needs to be as accurate as possible. Also, calculating the wallet’s value historically hasn’t been done before and is tricky due to the standards that only have been introduced recently (and are still in the making, since a lot is happening). After tests and experiments, we’re confident we can do this with our current team. In the end, the biggest risk for Cardano is not having a valuation and tax reporting tool like this at all.