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Initially, everything seemed to be going well in terms ofmomentum for this crypto startup.
NovaX Labs—a fictional startup—hadestablished itself quite well in the realm of Web3. Token sales, DeFiinvolvement, and collaboration across different ecosystems made for fastgrowth. However, one of the common trends amongst crypto-native businesses isslow development of their financial operations relative to their otheroperations.
Two wallets on one blockchainbecame, in one year, an extensive collection of 12 wallets across 5 differentblockchains, including Ethereum, Polygon, Solana, Avalanche, and BNB Chain. Atsome point during this expansion, something was lost in the shuffle, creatingearly Treasury Blind Spots.
It was not a problem of not having enough money. It wassomething different-it was how unclear things were.
Every blockchain has its ownequivalent of explorers. Every wallet, including those structured as aMulti-Signature Wallet, has its own historical record of transactions. DeFiactivities such as staking, providing liquidity, and bridging make these recordseven more complicated to keep track of, but most of the time you cannot seesome of those records unless you have actively searched for them.
The finance staff travels fromplatform to platform, copying and pasting data into various spreadsheets andtrying to reconcile the balances between them that are very different at thefirst instance.
Minor inconsistencies werediscovered at the end of each month; there were no staking rewards and bridgetransactions that weren't accounted for. Although they were not major, they didseem to raise some alarms. Because in treasury management, Treasury Blind Spotscan quickly compound.
The actual epiphany came during a quarterly internal review.
The management team found treasurynumbers that, at face value, appeared to be precise. However, upon furtherinvestigation, inconsistencies emerged; assets were double-counted, whileothers were undercounted. This was not due to carelessness. Instead, it was aresult of division.
Information was available, but itwas scattered. Activities were taking place, but they were not properlyunderstood. The problem was not that the system failed. Rather, it was thatthere was no system at all.
It became clear for the first timethat the founders of this venture faced a tough truth:
They did not have full oversight of their treasury.
In an industry as fickle and brutalas cryptocurrency, this is not a space that any business can occupy, especiallywhen crypto tax reporting depends on accuracy.
NovaX Labs didn't find the solution quickly. Their firststep was to begin with the questions, asking what real-time visibility could belike, could they monitor all wallets, all chains, all transactions inreal-time, would they be able to automate reconciliation without losingmeasurement? And maybe most importantly — could they trust their financial datainstead of repeatedly having to perform verification for Accounting andReporting and crypto tax services?
The answer for their search led themto Kryptos.io.
What impressed them was that notonly did Kryptos promise to aggregate data, but the amount of intelligenceinvolved in doing so. Kryptos didn’t just pull the data — they took the time tostructure, interpret and present the results in a manner that aligns with themanner in which finance teams actually think about things, similar to bestcrypto tax software solutions.
This process did not have the feeling of implementing apiece of software. Instead, it felt like turning on a feature that was alreadyavailable.
Just within a couple of days, NovaXLabs gained access to their full treasury portfolio. The balances of theirwallets, including each Multi-Signature Wallet, and the transactions on thevarious chains were finally in line with one another.
Yet this is not what brought thechange. This was just the beginning.
The transactions previouslyconsidered complex blocks of data were now labeled according to their nature.Any staking rewards were recognized as income. Any liquidity movement wasmarked appropriately. The mismatch between the outflow and inflow related tobridge transactions was no more; they were seen as a whole process.Finally, thenumbers made sense, even for crypto tax calculations.
The DeFi smart contract ecosystem has made it possible totransform many common blind spots into usable and tangible resources. The teamdiscovered that DeFi activity was previously untraceable. Rewards maintained byvarious traders were previously only calculated at the end of a trade and nevercommunicated to participants. Trading positions were often indexed incorrectlyby most platforms and, therefore, were often not easily located withoutcontinuous scrutiny.
Now all activities, rewards, andpositions are easily tracked via the use of Kryptos.io; Yields/wrds/protocolsare recorded and instantly visible. The modern-day treasury is now a dynamic,fluid organism that is perpetually being updated in real time, eliminatingTreasury Blind Spots. Most importantly, by implementing kryptos.io, we now havean invaluable level of trust with our clients.
From Reactionary to Proactive Financial Decisions
Prior to the change, financial decision-making at NovaX Labs tended to be latenot because of any lack of knowledge, but because of lack of clarity.
Everything needed to be validated,everything had to be double-checked until the situation became clear. At thatpoint, it was too late. Not anymore.
With live intelligence and factualinformation, decisions could be made much faster. Reallocation of assets,liquidity decisions, and other decisions related to risk were no longerreactionary—instead, they became strategic actions.
Financials went from a reportingexercise to decision-making, supported by better Accounting and Reporting.
One of the most understated changes in operationalefficiency is how much more streamlined operations have become.
The finance team spent an excessiveamount of time on reconciliations. They spent hours—often days—matchingtransactions, validating balances, and compiling reports.
Automation has cut that work downtremendously.
However, the best thing isn’t justthe amount of time saved; it’s what that time is now being used for.
Instead of pursuing data, thefinance team uses their time to analyze data. Instead of correcting errors,they identify opportunities. The focus of this group is now on strategicoversight versus manually executing tasks.
And it has occurred withoutincreasing headcount for the growing crypto startup.
Audit prep was always a source of stress at NovaX Labs.
Getting transaction histories,verifying entries, and making sure everything was done accurately on chain wasdifficult and daunting. It was always a worry that something could beoverlooked, especially for crypto tax services.
But this time around, things weredifferent.
Reports came out flawlessly. Datawas pristine, organized, and uniform. A process that used to take days toprepare was accomplished effortlessly.
But what really made a differencewas that nothing was a surprise, similar to workflows enabled by the bestcrypto tax software.
NovaX Labs grew their business, and with that expansion camethe addition of new wallets, new chains, and new strategies to complete theirDeFi plans. The great thing is that the addition of these new assets to theirnetwork didn't create any chaos like it had in the past. The network adjustedseamlessly; new data sources, including each Multi-Signature Wallet, were addedto the system, without interrupting the existing ones.
The clarity of the treasury remainedthe same regardless of the growing number of different sources to resolve thoseassets. This is perhaps the biggest transformation of all; the ability of thecloud to not only solve previous issues, but also to stop the introduction ofadditional issues from occurring.
Reflecting on the change, it becomes evident that it was notonly about the use of technology. It was also about reimagining the approach totreasury management in multi-chain conditions.
While fragmentation was seen as aninevitable side of working with the Web3 economy, it became clear that thingscould be different. Through the implementation of Kryptos.io, NovaX Labs showedthat simplicity and sophistication can coexist in finance.
That management can actually work.And, most importantly, that finance can become a major advantage when combinedwith the right tech stack.
In the world of crypto, things are moving rapidly and newideas are being created every day; however, if you do not have control thenneither speed nor innovation can have long-lasting effects, especially incrypto tax compliance.
At NovaX Labs, we were able to solveour treasury problem by developing a new way of doing business - where there iscomplete transparency into the assets we hold as well as our transactions sothat all of our decisions are made based on real-time data.
The transition from disorder toorder was not only a remarkable journey, but it was absolutely necessary. In anenvironment with rapidly increasing levels of financial complexity, successfulorganizations will be those that can identify activity rather than merelyaccumulate it.
Discover how portfolio analytics, P&L insights, and tax reporting tools like Kryptos improve decisions.
US crypto tax deadline is April 15. Still confused about 1099-DA, cost basis, DeFi, and staking? Get every answer and file in minutes free with Kryptos.