Reflecting a Business’ Real-World Interactions
The biggest challenge with blockchain is producing an audit trail of cryptocurrency transactions. All companies have various levels of financial accountability. Companies in the blockchain space must face the added burden of treating every transaction as an exchange of property. We address this problem by translating blockchain transactions into a fiat denominated ledger that can be easily understood.
The ledger can be modified to reflect a business’ real-world interactions on the blockchain. A full audit history is produced using specific identification that is in-line with existing IRS guidance on how to treat cryptocurrency as property.
The simple explanation for what Balance does is that it takes something that isn’t a standard asset for tax reporting purposes and tracks and transcribes this information into a document that accurately lists crypto gains and losses as a standard tax form that a CPA can understand. The solution has only a few simple steps required of the users who can select the ledger type they wish to create, including an exchange (Gemini, Bittrex or Coinbase), a wallet, or specific cryptocurrency blockchain.
Sharing transaction details or wallet addresses with Balance does not put the digital currency at risk
Balance provides both a high level and detailed summary of the transaction history, including date, time, transaction type, short-term or long-term gains, and the price differential between the transaction. After the user identifies transactions that might be exempt, the software transfers this information into a worksheet that closely resembles a traditional tax form. These key features ensure that a user is tax-compliant with minimal effort required.
Delivering to the Market Needs
The development of regulations in tandem with continued market growth is inevitable. One of the earliest regulations that Balance is already built to simplify is around taxes. In early 2014, the IRS released tax guidelines on cryptocurrencies and stated that they would consider them to be property, not currencies. Since then, many countries and governing bodies like the European Union have followed suit. Treating it as a property has some merit.
The blockchain is completely open to all, and every coin can be traced back from its creation through the transaction history. This allows the application of existing property laws to even a tiny fraction of every coin as it makes its way through the blockchain from wallet to wallet. Given that bookkeeping is onerous, Balance can simplify the process. To maintain compliance, the accounting process must track and follow the coin’s lifecycle, ensuring to account for any taxable events. Right now, Balance automatically tracks the gains and losses if you’re on the Coinbase, Bittrex or Gemini exchanges—wallet to wallet—or on the coin-specific blockchains themselves, and places them into a tax-friendly worksheet to share as a traditional tax form.
A Cut above the Rest, Digitally
As a company, our most important differentiator is that we use specific identification, whereas other companies attempt to apply FIFO, LIFO or other accounting principles after the fact. This is important because if you are going to use FIFO or LIFO, it must be used at the time the transaction is created. Attempting to apply FIFO or LIFO leads to ambiguity as you aren’t tracking the actual asset, which is the specific identification. We track an asset through its lifecycle in a wallet. We then apply a cost basis to each unique asset within the wallet and can, therefore, calculate an exact gain or loss for that asset.
We also have two other important differentiators: ease of use and security. First, we have a system in place that imports wallet transactions, manages the digital ledger, allows users to view income and gains all in one place, and keeps records up-to-date as investments change. The platform is meant to elevate efficiency and the user experience so that nothing falls through the cracks. It is also retroactive in nature. Secondly, we pride ourselves on the security of our solution; there are extensive procedures in place to ensure that user data is protected. Sharing transaction details or wallet addresses with Balance does not put the digital currency at risk.
Having carved a unique niche, we are committed to expanding our global reach to provide investors with the highest returns in the market in the future, whether through cryptocurrency mining, the tax solution, or the Masternode hosting service.