People should not do the work that software can do — Jeff Bezos
In early August, I soft-launched Path. Crypto Tax Manager. It is yet another product in the crowded ‘coin tracker’ space. So why?
My first encounter with cryptocurrency was in mid-2013 when a friend told me about it over coffee. A bitcoin was worth ~$200!. At first, I thought it was just another virtual currency. Similar to those that proliferated in the late 2000s during the social gaming craze (Zynga, Facebook Games etc). So I put it to the back of my mind, did some traveling and did not revisit it till later that year (bitcoin was now ~$400 each). I started reading the various whitepapers and was intrigued by the concept, especially the blockchain. I did not fully understood it at the time — but got enough of the concept to see some of the possibilities.
In Nov 2013, I bought my first bitcoins. (And did my first ‘send’ to a wallet a week later. Naively, sending a whole coin without testing with a small amount first). The coins were not bought for investment or speculation. It was to allow me to play with the technology. Not only bitcoins, but there was also litecoins, colored coins, and many others.
I was never a strong believer that bitcoin will replace fiat as the dominant currency.
However, at the time, I saw it as a potential transport protocol for money and started to explore ideas around cross-border payment/lending. I was moving coins around different wallets and exchanges to test the various hypothesis. New exchanges were appearing almost on a weekly basis and KYC (Know Your Customer) was not fully enforced — so it was relatively easy to ‘play and explore’. Confirmations were relatively quick too, as the block size and proof of work were simpler. An earlier proof of concept was abandoned, not because of technology, but due to local policy for money transmission. The time and resource needed to be state compliant were just too great.
It was not until late 2014 that I started to track my coins. Due to the divisibility of cryptocurrency, and later, the collapse of the many startups (btcjam, cryptsy, kointify, bitlendingclub and the infamous mtgox) I had lost track of most of my initial coins.
Like many, I started with a simple spreadsheet that grew into a complex jumble of rows and columns. Diligently making entries when I can. Missing a single entry, meant hours spent later finding the right place to make the correction. As altcoins (and later ICO tokens) grew in popularity and volume, the task got more complicated.
Although each exchange did an adequate job of tracking its own portfolio and trading history, this was a very narrow view. Any crypto movement in/out of the exchange (or wallet) meant intensive manual record keeping. Even for popular exchanges Coinbase and Coinbase Pro (formerly GDAX), owned and operated by the same company, there was disjointed tracking between the two exchanges.
There’s got to be a better solution.
Why are there no Quicken or Mint for cryptos? Others agreed and many coin trackers started to appear on the market (over 25+ by my recent research). These range from simple market price tracking to more complex ones like gain/loss calculations for tax reporting.
Finally, I can get rid of my spreadsheets (which are seriously out of date by now). However, things were not what I had expected. Most of these trackers claimed to support many exchanges (some even falsely claim to support defunct exchanges). In practice, they were simply importing the data (CSV in many cases) and expect the user to manually make the relationships for coin movement. No more than a ‘glorified’ spreadsheet. A lazy approach to solving the actual problem. Manual work was moved from the spreadsheet to manual work on someone’s platform (and in some cases, paying for the privilege!!). To me, for a forward-looking technology like cryptocurrency, this primitive and manual approach is just wrong.
Some will argue that this is the beauty of cryptocurrency. The limited traceability. I believe the perception of cryptocurrency anonymity is misunderstood (and overstated by the press). Even with the advent of DEX (decentralized exchanges), as the owner of assets, some form of personal ledger (paper or digital) is still required. At the fundamental level, it is still a peer-to-peer system. At any given time, every owner should have easy access to the value and the whereabouts of their assets. It should be clear and simple. With minimal manual intervention. Let technology and software make the relationships and calculations.
Hence, Path. was created out of my own frustration tracking cryptocurrency assets and the lack of existing suitable tools out there. I wrote it to solve issues that I’ve personally encountered. A classic case of scratching my own itch. Tracking is not just about gain/loss. Spending the time to understand each exchange’s data flow and presenting a consistent view. For example, the difference between ‘transfer’ vs ‘withdrawal’? Depending on context, each exchange (and the IRS) may apply multiple meanings. In Coinbase, a ‘send’ may also mean a ‘receive’, actual context is based on the direction. Small things that trip up some existing trackers. (Currently, I am not aware of any official auditing standards to ensure trackers are producing correct reports.)
Path. is not meant to be THE solution. I wrote it so that I have full visibility into my assets. (I found out that I owned Bitcoin Diamond, via a fork, that I never knew I owned.) It also gave me insights on how primitive some of the exchanges are. (One well-known trusted exchange is still having scaling issues after a recent rebuild — with some obvious missing data.)
I do hope in the near future (either via Path. or some other tools) that managing crypto asserts is as simple as using Quicken for finances.
“People should not do the work that software can do.”
PS: Although I was in the crypto space early-ish, I am no crypto millionaire (but I was a DOGE millionaire — “much rich”). I was not a HODL’er and played around with the technology — loosing many coins along the way. If I was not intrigued by the tech and just kept it, I would be writing a very different story here.
(This post was first published on Medium)