Decentralized Futures: ClearDotTax - One click tax computation for Polkadot

Ecosystem
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Substrate/Dotsama is an extremely challenging ecosystem to track transactions and estimate tax liability using existing crypto tax tools. While solutions like subscan track all transactions across parachains, they don’t track claimable/accrued income such as lending/staking/yield farm rewards; and none of the products provide a no-brainer tax report based on the user’s jurisdiction.

ClearDotTax aims to build one-click tax computation for Polkadot, Kusama, and their parachains.

polkadot tax tools
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Despite having a discussion about Polkadot Tax Tools about one year back in the forum, we don’t have a dedicated product that computes taxes for users in the ecosystem yet.

Ecosystem Fit

polkadot tax tool needs
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The above discussions in the Polkadot Discord server indicate a dire need of a dedicated tax tool for the ecosystem.

Past attempts at building similar tools

Tax Tools on other chains/ecosystems

However, these tools don’t have support for Polkadot/Kusama and their Parachains (except some EVM based ones).

Product Details

Designs/User Flow

Screenshot 2024-05-07 at 9.38.00 AM
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Preliminary designs can be viewed here: ClearDotTax - Figma

Key Deliverables

Transactions Dashboard

To view and filter all transactions/income.

Advanced transactions module

To track users’ claimable income (fees/rewards) across the supported protocols:

  1. Lending Protocols
    a. Moonwell
  2. Staking Protocols
    a. Native DOT/KSM
    b. Manta
    c. Astar
    d. Hydradx
    e. Acala & Karura
  3. Yield Farms
    a. Stellaswap
  4. Liquidity Pools
    a. Stellaswap
    b. Acala & Karura
Wallet Dashboard

To add and track your wallet(s).

One-click Tax Report Dashboard

To view your tax report for your jurisdiction (starting with the US, UK, Germany, and Switzerland) in a selected time period.

GraphQL API
  • To fetch users’ transactions across Polkadot and Kusama relay chains; and all major parachains of Polkadot & Kusama (ones supported by Subscan).
  • To compute and fetch advanced transactions (claimable income) from the supported protocols.
  • To compute and return users’ tax report based on their transactions, and the laws in their selected jurisdiction.

Team

Experience

We’ve been building within the Polkadot ecosystem since 2020:

  • YieldScan - Staking dashboard for Polkadot and Kusama
    • 118 whale wallets natively staking $39M with $40k TTM revenue
    • 9 figures in transaction volume
    • backed by Web3 Foundation Grants
  • YieldBay - Yield farming hub for Dotsama

Team Members

  • Team Lead/Researcher: Raj
    • Building in the Polkadot ecosystem since ~2.5 years - led engineering at YieldBay
    • Web3 Researcher/Rust Engineer
    • Prev built products to solve for blockchain information asymmetry in the Filecoin ecosystem
  • Lead Engineer: 0xDeep
    • Rust/Full-Stack Engineer
    • Smart contract Auditor
    • Prev wrote systems to process real-time data at a HFT firm
  • Product Designer: Axshay

Future Plans

Financing

We plan to charge a small fee for helping users compute their taxes. It would follow a freemium model - free up to a fixed number of transactions (eg. 100), and tax computation for the remaining transactions would require a subscription to our platform. This will help cover our infrastructure costs and reduce our reliance on grants.

Growth & User Onboarding

We plan to create a discord/telegram community dedicated to helping people do their Dotsama taxes.

Long-term Plans

  • Add support for more jurisdictions.
  • Make adapters like DefiLlama to make it easy for anyone to add support for new protocols/chains.
  • Add features in the product to help users reduce their tax liability legally.

PS. Would love your feedback.

10 Likes
2

Seems like a great product! Can you please add support for Singapore as well?

2 Likes
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Would be awesome if we could export a cvs to import into Koinly. Other than that maybe add Parallel support. There’s probably enough liquidity there for you to get a few hundred more per month.

I’d vote in support.

2 Likes
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@Harveybirdman

export a cvs to import into Koinly

Yes, we should be able to easily allow exporting a csv since we would have a transactions API returning data with tags/categories and other details.

add Parallel support

Thanks for suggesting this. We’d definitely want to support the protocols with high on-chain activity.

1 Like
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Can you please add support for Singapore as well

Yes, happy to do this.

NB. you’d still be able to use the transactions dashboard since it’s location-independent.

1 Like
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This looks great! Can you consider adding support for Andorra?

1 Like
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Looking great! Is this all still a mockup or do you already have something working?

Not sure what you status with decentralized futures is, but maybe you could just apply to the BD fund or similar? (Not 100% sure this is the right pot, but maybe @nico_a can give a better answer)

1 Like
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Thanks for the tag, @bkchr.

Hey @rajgoesout - as Basti pointed out, we do have a DeFi Infra & Tooling Bounty. You can read more about it on that post and find the application link at the end.

During my time at Parity, we did have a couple of Tax teams reach out, but we always faced challenges with funding, often needing to push the teams to the Treasury, which not all were willing to do. Depending on the financial ask you had in mind, the bounty could be a good option to get your project off the ground with a milestone based structure.

I would say that “tax software” wasn’t included within the scope of the bounty but I would still encourage you to apply, and we can take a closer look with the Velocity team and the Bounty curators who ultimately decide how the funds are allocated. This is, of course, if DF isn’t a viable route at the moment.

3 Likes
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Not sure what you status with decentralized futures is, but maybe you could just apply to the BD fund or similar?

Hey @bkchr thanks a lot for suggesting this!

Is this all still a mockup or do you already have something working?

Yes, at the moment this is still a mockup.

we do have a DeFi Infra & Tooling Bounty 3. You can read more about it on that post and find the application link at the end.

Hey @nico_a, really appreciate the heads-up and the encouragement. Love this initiative! Having built DeFi tools for Polkadot, we’re excited about the possibilities this bounty presents.

We’re currently waiting on our DF application review, but this bounty looks like a great opportunity to get our project off the ground. Thanks again for the support!

2 Likes
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Good tax software would be great, but it needs to support every parachain, and many have custom extrinsics, so the work scope is huge.

I spent somewhere around 80 hours earlier this year combing through Subscan, getting CSVs, and manually adding all of my transactions with multiple wallets on multiple parachains to Cointracker.

If some parachains are not supported, users will still need to do that to some extent, and then the value proposition of this decreases dramatically.

1 Like
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@rajgoesout any update on your proposal?

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Desperately in need of this solution. Koinly still doesn’t support generic substrate addresses. It’s getting to the point where I am going to get in trouble from the tax man.

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I use https://polkatax.com for tax calculations. It’s good for calculating taxes on staking rewards. However, it does require manual steps for managing taxation related to trading or yield farming gains.

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Thank you. It looks like I can export my transfers and swaps from there and move to Koinly. Thanks again.

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It sorta comes in useful, but it is missing KAR and the transfers made on the app which makes this really difficult. Do you have any suggestions? I have vaults that were also liquidated too with acala/karura.

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You could open an issue on github: GitHub - loanMaster/polkatax: Website to summarize and export staking rewards for substrate chains
If it’s a small thing it might be fixed quickly.