How Blockchain Data Is Used to Save on Taxes | Lukka Co-CEO Explains

There are now over 6,000 different cryptocurrencies across which Luka has mapped more than 27,000 different trading pairs. How do you make sense of all that data? What is a unique identifier or a vwap? Can blockchain data save money on taxes? Robert Materazzi, co CEO of luca, presents his keynote speech on the importance of blockchain data from the cointelegraph Crypto Traders Live event. Here's what you missed.

I'm the co CEO at LUCA and we're going to overview today a couple of the challenges that we're helping our customers solve. Specific around data challenges for post trade operations. Just a little bit about us. So we are a data company and we are focused on blockchain and tokenized asset data and cleaning it up to help support normal typical business operations. So we collect data from all the various exchanges or trading venues that people are used to receiving. Often it's privately held data and not off of an actual blockchain, although we do accommodate actual blockchain data as well. And we pull it in, we normalize all the data so that if Kraken uses XBT to represent Bitcoin and and Coinbase uses BTC and now you multiply that times the thousands of assets and all the different sources that are out there. We have data products that help to clean all that up so that when our customers, which are a lot of the big exchanges and institutions that are serving this industry are solving their financial requirements, we cater to those needs and help them close their books if their funds strike navigation, pass audits and do all of the other post trade operations that businesses require. And so we have a suite of products. I'll just touch on this really quickly. We have our LUCA crypto office product which is really our main enterprise institutional software. It's very feature rich, it collects all the data and that's the one that we offer to a lot of the businesses that are out there. And then we have two reference or rather two data products that we created to support the software. The first is LUCA reference data and the second is LUCA prime and those are the two topics that we'll cover in today's presentation. And then additionally we have some tax specific products that are catering to 1040 filing our LUCA tax DIY which is a retail similar to a TurboTax except for your crypto side of things. And then we have LUCA tax for professionals which were partnered with CPA.com, which is for tax professionals that are servicing their clients. And then we have A thought leadership subscription that talks a lot of the unique intricacies and such as tax treatments, but it's a lot more comprehensive than that. So accounting data challenges and a lot of the other things. And it's a content based subscription. So those are some of our retail products at the bottom. Today's focus though, we thought most relevant. We wanted to cover our reference data and LUCA prime products and the importance of the challenges that they're solving. And so the first one, you know, why is reference data needed? And for those of you that aren't familiar, you know, I mentioned this a little bit, but there's thousands of crypto assets, as everyone are aware, some a lot more common than others. These are offered on various different exchanges or OTC desks or other businesses that are offering them to all the traders that are out there. But all those exchanges, those exchanges or trading venues get to pick their own tickers and their own ticker symbols. So that creates a lot of complexity when you're combining this, particularly when individuals, in order to acquire some smaller coin, might need to purchase Bitcoin on a large exchange like coinbase that they bought for US Dollars, transfer it to somewhere like Binance to trade for some other coins, and then do the reverse all the way back to turn it out to cash. And when you multiply that times all these different exchanges, all the different assets, it creates a lot of complexities when people are trying to do things that should be very simple like pay their taxes or what. A lot of the businesses are accommodating in financial statements and passing their audits. And today there are no unique identifiers that are specific across the board. So there's no standard setters that are driving this currently. There's exchanges obviously all over the world that people have access to. And so all of these unique challenges really forced us to create a data product so that we could make our software work. And that's when reference data was created. We were our first customer at first and now it's very popular among a lot of the large institutions. And so our reference data is the golden standard of digital asset data. So we create this master listing of tickers and really it has. So we have over 80 entities. So an example of an entity would be Coinbase. A second one would be Kraken. An entity could also be a pricing source like CoinMarketCap. And we've mapped over 26,000 assets that create the 5,000 plus unique assets across all those exchanges over, you know, over 10,000 unique trading pairs we have. Additionally, we've recently added over 27,000 derivative ticker symbols to our reference data as well to accommodate that. And then we can. So we incorporate this into our software, but also institutions or businesses can license it to us as a direct data feed through something like an API or flat files are all depending on their requirements. And if we. Here's an example of some of the tickers that are out there. So we create a unique ID for each of those assets and then in the background we're mapping it to all those various exchanges so that from the customer's perspective, they're just using a single ticker for each one of their assets. And they know Bitcoin is Bitcoin. And this is incredibly important when creating tax lots, particularly with higher volumes of activities where you can take advantage of tax strategies by matching your acquisitions, potentially that you're trading or acquiring on various exchanges. The next product is our LUCA pricing product. So this one is when you say pricing, we mean for valuation purposes. So when you have a crypto, crypto trade, so bitcoin for ether and often you're charged a fee that's also in a cryptocurrency. It creates some unique situations where for tax or compliance or financial reporting purposes, we need to determine your cost basis or proceeds, so the value of that transaction at that point in time so that we can do normal tax or financial calculations. And so what we do is we will bring in a pricing source. It's very often that services will provide pricing sources such as vwaps or average prices, but for tax compliance purposes, that's not considered a best practice. And if you're a business and you're complying with GAAP or ifrs, if you're overseas, it explicitly says that you should utilize actual executed exchange prices and avoid things like vwaps or averages. So those are usually for the pre trade side of things. And so what we have done is we've created LUCA prime and a number of other pricing products to create flexibility for these businesses. So they can select from a menu of different pricing sources. They can bring in a vwap if it's appropriate for what they need. We also have a LUCA prime product. LUCA prime uses a unique methodology that's designed to be aligned to GAAP and IFRS guidelines. And what it does is using a bunch of qualitative and quantitative factors, it selects a actual executed exchange price based on those factors. So for every point in time you're using an actual exchange at price, so it's selecting one of them from many exchanges that are out there and that supports all of these tax or audit use cases. We also do custom pricing so we can create an average based on parameters if a customer needs it or we can feed in third party pricing data on a case by case as well just to create flexibility. So that's the end of the presentation. Happy to answer any questions or dive into anything. Great.

We have an immediate question from Roger Brown who asks why is the LUCA pricing product superior to those offered by a vwap?

Sure. And you know, and I wouldn't necessarily use the word superior to be tactful, I would say that it's more appropriate for, for audit and tax use cases. So specifically if you're post trade and you're a financial controller and you're going through your first audit as a business and you need to value your assets for books and record keeping purposes, using an executed exchange price aligns to accounting standards. In short, it's also, you know, not formal guidance. But in the FAQs the IRS is stating that you should utilize executed exchange prices. That can be very challenging to do, particularly when you're trading across a bunch of different exchanges. And so these are satisfying all of those requirements where the vwaps are very logical for other use cases, you know, and in market data and other pre trade. Pre trade operations. So it's just two very different separate uses which both required. Thanks. Thanks Robert. I also have a question from my side. Since you are dealing with taxations, I was wondering, are your customers all US companies or also companies based in other countries, other jurisdictions? No, we absolutely do service globally. I'd say we are US based, so we've, we have. The majority of our customers are US based but we absolutely have many customers overseas and are happy to work with them. This pricing product for example, we did design to accommodate ifrs, which is an international accounting standard, opposed to US gaap. So we absolutely cater to companies overseas. Great.

We've got another question from the audience. This one is coming from Wook Chewy who asks. There are not many trustworthy data oracles which are widely accepted at this time. And how do you plan to keep the competitive advantage?

Sure, I mean I guess with any business competition is usually good for the industry. So I'd say anyone that's operating a business should encourage that. It helps the consumers, it helps the customers that are out there. We have, I'd say for our own competitive advantage we have a special emphasis in catering to what our customers are asking for and that's part of our culture. And so I'd say that keeps our customers happy, which keeps our business profitable. Thanks. We also have another question. What kind of target market does LUCA have? Target market, sure. So all businesses that have financial transactions in digital assets. So anyone that's trying to solve those pricing. Pricing and reference data are only two of the challenges. But ultimately managing all of that data for post trade operations is very challenging, can be very costly. So our goal is to reduce those costs for businesses that are out there. Great.

We've got another question from Roger Brown as well. He says, does or will LUCA support thinly traded crypto assets?

Yeah, that's a great question. So our LUCA prime today covers the more, more liquid assets that have higher volume. And we're absolutely in the process of rolling out. It's not available yet, but it will be very soon. Within months we will be adding a number of assets to our pricing data in order to accommodate the more thinly traded assets that are out there. And we'll have white papers and thought leadership and would love to discuss that with anyone that would, that would like to reach out to us.

Yeah. So I think it's a great time to wrap up.

Yeah.

Thank you so much for that presentation. I hope you guys out there listening to this learned a lot about LUCA and their, their, their products. And thanks for sharing your presentation with us.

Yeah, thanks for having me. Cointelegraph, like subscribe and HOD. Sam.