Grant Application: Simplifying DeFi Accounting with Cartera Tax

CoW Grants Program Rejected Grants
1

Author: Elias Zenkich

Category: CoWmunity Growth

Contact: elias@cartera.io

About

Cartera is a crypto accounting tool that provides a streamlined, accurate solution to maintain tax compliance. Our tool is the first to automate the analysis of transaction data as an indicator of tax treatment in order to maintain total coverage of transactions on chains we support. Through our integration with Ethereum, we have achieved complete coverage of Ethereum protocols in our tax calculator in under 6 months of development time with a single developer, far exceeding the capabilities of any existing tax calculation platform.

Our initial release will feature everything you need to get a comprehensive view of your portfolio and associated tax obligations, including capital gains and losses calculations, transaction history reporting, and data aggregation from both wallets and exchanges.

Team

Elias Zenkich: CEO - Product, Growth
Michael Pauls: CTO - Solution Architecture

Elias has a Bachelor of Science degree in Economics with a concentration in Finance and Legal Studies from the Wharton School. He previously worked as an Associate Investment Professional at Oaktree Capital Management. Today, Elias is a cryptocurrency investor and trader who has amassed over $20M in transaction volume across 30k+ transactions, giving him first-hand experience with the broken tax accounting system in crypto.

Michael holds a Master of Engineering in Computer Engineering and a Bachelor of Engineering in Computer Engineering, both from the University of Illinois at Urbana-Champaign. He has worked as a Software Engineer III for Machine Learning Development at Ziprecruiter and as a Software Engineer II for Machine Learning Development at Workday.

Purpose

Demand for crypto tax software increased 33x from 2018 to 2022, indicating that tax filing may be one of the primary anxieties of new users and institutions jumping into DeFi. Cartera provides a comprehensive solution for tax compliance in the DeFi space. As DeFi continues to gain traction, our tool can provide a much-needed solution for the tax compliance needs of DeFi traders. By reducing the barriers to adoption for retail and sophisticated users participating in DeFi, we hope to help bring more users into the Web3 ecosystem.

Integration with Cartera means no more manual tax calculation, no more egregious errors, and no more dedicated tax accounting departments for users in your ecosystem. Whenever possible, we plan to offer free trials and incentive programs to communities with large retail user bases to further reduce barriers to adoption.

Grant Request

We are applying for $10,000 in grant funding, to be used in two ways:

  • $2,000 USD to compensate a developer who will run a light audit to ensure Cartera is properly integrated with CoW; this will ensure that any potential issues are captured upfront by our team
  • $8,000 USD will be paid out to new customers of Cartera who made transactions on CoW. We’ll payout redemptions based on a simple off-chain confirmation method to ensure new customers must be users of CoW to receive the discount.

Milestones

Timely rollout of Cartera in preparation for the 2023 tax season and confirmation that our platform works seamlessly with all transaction types on CoW. A key part of our goal is also to facilitate onboarding of DeFi users onto Cartera in our covered regions (starting with the US).

We will measure success based on our ability to carry out the above, and so far have gotten great feedback from prospective users and in assessing accuracy of our tool against incumbents.

Detailed timeline:

  • [DONE] Discord bot (May) - a discord bot that feeds back transaction summary data when sent a transaction ID; this transaction summary data is the basis of DeFi accounting and tax calculation

  • MVP (June) - MVP for reporting transaction summary data for a wallet’s end of year tx history

  • Protocol accuracy testing (July) - validating that MVP is 100% accurate on CoW

  • Analytics dashboard (September) - expanded portfolio analytics features incl. daily capital gains & losses

  • Final front-end (November) - usable Cartera app

  • Setup apply for a refund / discount code flow (Dec) - redemptions from customers who provide evidence that they use CoW

  • Launch and marketing (Jan) - official launch of Cartera for tax season 2023

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2

Very functional QoL integration; would have my support!

3

I would be a fan of supporting the integration of CoW Protocol reporting into an established tax-compliant reporting system. Note that rotki has recently just implemented CoW Protocol within their system for portfolio reporting / analysis.

Show stoppers that I can see for this grant are:

  1. Need to demonstrate more clearly how this benefits CoW Protocol.
  2. Break-down of funding just seems like a free money give away with minimal protocol buy-in (ie. request for USD, as opposed to $COW tokens etc).

If the above can be re-worked with a better alignment with the ethos of CoW Protocol, this may be something that can be supported.

1 Like
4

I mirror @mfw78 comments. Cartera should differentiate itself from Rotki and show the community how this grant will provide ROI back to the community.

1 Like
5

Hi @mfw78 @netrunner.eth -

Thanks for the reply on our application! Addressing some of the feedback below:

  • ROI for the CoWswap community comes primarily from reduced accounting burden when filing taxes. In certain jurisdictions like the US, every DeFi trade must be reported in most circumstances. Cartera makes reporting per requirements easy and captures all potential write-offs like protocol and txn fees.
  • Cartera takes a different approach to DeFi accounting than most tools out there. Rather than integrate with most protocols, we’re already indexing transaction data across every protocol (today only on EVM chains) with the exception of certain tx types that span across two or more transactions from initiation to settlement (e.g., CoW). We’d love to work with you to ensure that CoW users from day 1 of the Cartera launch have access to accurate tax reporting not just for CoW, but for their entire portfolio.
  • Our team is very established in the Web3 space. We’re traders (~30,000 txns, $10mm trading volume / year) and are CoW users ourselves. We’ve validated platform accuracy as part of our MVP build.
  • Makes complete sense to provide redemptions to early CoW users with $CoW. Our primary motivation in applying to the grant is to get buy-in from the community, spread awareness, and work with your team to ensure the integration is 100% accurate. We do not need integration partnerships with the majority of protocols, so we’re very bought into getting this one right!
6

Generally I think accurate and easy tax tools for CoW users are welcome!
CoW Swap has worked in the past with Coinledger (link) with similar goal.

Recently there was also grant for rotki to add CoW Swap support.

With those two examples in mind, what in your view is additional value this grant can provide, and whether it will be develop as open source project that can be freely used by ecosystem participants.