Accounting and DAOs Organizations

Almost all cryptocurrency projects and decentralized autonomous organizations (DAOs) that have appeared in our world from the beginning until the present time do not have any financial or accounting systems.

Very few DAOs have financial and accounting systems, and even among those DAOs that have financial and accounting systems, none of them have an integrated and ideal system.

And in these DAO communities that have financial and accounting systems, we can find just a few reports focused only on Treasury and may be some simple reports about profits and revenues, very simple budgets for the expenses of the various departments, and maybe very simple other reports, and that is all we can find.

Even if we find financial statements such as the income statement and the balance sheet, which are very rare to find in any DAO, we find them prepared in a way that avoids any accounting problems. We find some tricks to prepare them without solving the accounting and financial problems facing any accountant working in the field of crypto and decentralization.

There is nothing else published in any forum related to DAO, according to my information.

Also, if we search everywhere, we will never find accounting standards, fixed models, or anything written in a scientific manner that can help organize accounting and financial work in DAOs.

Financial and accounting work in DAOs has not had clear, well-known, and fixed rules until now.
Maybe this will change in the future, and standards and rules will emerge regulating financial and accounting work.

But currently all we have is personal appreciation and individual opinions for organizing financial and accounting work in DAOs

There are several important points that should be taken into consideration related to accounting for DAO organizations.

Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Cryptocurrencies

Cryptocurrencies, NFT, and other concepts of the crypto world are new to the world.
maybe the theory and concepts known from long time but emergence of applications based on this concept just from few years

Bitcoin was registered as a domain, and the first version of the coin was released in January 2009.

With the emergence of cryptocurrency, a new form of money appeared that will change the world and the future, and this change can never be stopped.

However, there are many countries that still consider cryptocurrency illegal.
Because of this, when dealing with cryptocurrencies, this accountant faces many problems.

Cryptocurrency is something unique that has never existed before; it combines several qualities. It has the attributes of money, inventory, and investment, and sometimes, like stocks, when you own it, you have the right to vote in the companies that issue it.

and when looking at Financial Reporting Standards (IFRS) and International Accounting Standards (IAS), we didn’t find a standard for cryptocurrency until now, so when we look at this criteria

IAS 8: Accounting Policies, Changes in Accounting Estimates, and Errors
“In the absence of an IFRS standard that specifically applies to a transaction, other event, or condition, management uses its judgment in developing and applying an accounting policy that results in information that is relevant and reliable.” In making that judgment, management refers to the following sources in descending order:
the requirements and guidance in IFRS Standards dealing with similar and related issues; and
the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the conceptual framework

This means that there is room for multiple opinions as long as they don’t break the standards. The topic is complicated, and there are many opinions, but here I will summarize it.

Most opinions say that cryptocurrencies should not be considered money.
Some opinions say to consider it an inventory. Therefore, it is under the criteria of inventory (IAS 2), but most of the opinions consider it to be intangible assets. Therefore, under the criteria for intangible assets (IAS 38), there are also other opinions.
and the matter is not completely specified because there is no specific standard for dealing with cryptocurrencies.

What does the DAO want from the accounting department?

1.Preparation of financial reports for DAO: It wants financial reports Periodically, maybe every week, month, quarterly, or year

2.They also want to be next to the specialized financial reports—another version of them.
which is simplified and easy to understand for everyone; not all DAO members are specialists in accounting and understand accounting terminology.

3.The accounting department should be patient, have high communication capabilities, and have a great ability to simplify information because there will certainly be many discussions and inquiries.

4.In DAO’s view, the accounting department is responsible for financial transparency and the accuracy and validity of financial transactions, is fulfilling the rules, conditions, and interests of DAO, and reports anything that violates the interests or laws of the organization from a financial point of view.
In fact, this task is subject to many discussions because, for the accounting department to perform this task and be worthy of the organization’s trust, it requires some degree of independence that allows it to do that.

5.DAO does not want numbers and reports that they do not understand their meaning but wants them to be accompanied by an explanation and simplification that explains exactly what the numbers mean, along with a description of financial problems and proposed solutions.

Accounting department with cryptocurrency tools

There are many tools.

1.Cryptocurrency wallets
There are many types, and choosing the appropriate wallet depends on several factors, such as what cryptocurrencies we own and which blockchain network it works on. Examples of crypto wallets include Metamask, Trust Wallet, Exodus, and many other wallets. There are also cold wallets like Ledger: Hardware Wallet, and there are other types of cold wallets.

2.Of the different types of blockchain networks, the most famous is Ethereum.
There are other types, such as Solana, Polygon, Binance Smart Chain, and others.

3.Blockchain browsers like etherscan-io, bscscan, explorer.solana, polygonscan, and others

4.Centralized cryptocurrency exchanges like Binance, KuCoin, Gate-io, and others

5.Decentralized cryptocurrency exchanges like Uniswap, Sushiswap, Pancakeswap, and others

6.Websites like CoinMarketCap, CoinGecko, DappRadar, and others

7.Platforms for dealing with taxes in the area of cryptocurrency and digital assets
like TaxBit, Koinly, CoinTracker, and other
There are also accounting programs specialized in the field of crypto, like SoftLedger, Crypto, Cryptoworth, and others, but they may not be useful.

8.Decentralized insurance such as InsurAce Protocol, Nexus Mutual, Opium Insurance, and Unslashed Finance
This is if the organization wants to insure the risks of smart contracts or any other risks.

If the organization invests part of its cryptocurrency, it may use the following tools:

9.If the DAO deals with NFT, for example, and invests part of its money in NFT, it will need to deal with websites such as OpenSea and Rarible. In fact, the field of NFT is a very diverse one, and there are many NFT sites, some of which specialize in certain types of NFT.,

In fact, there are a lot of tools for investing in cryptocurrencies in futures , lending, Staking and many other things it has a wide variety of tools it need multiple separate topics explaining the options available for cryptocurrency investment it would be hard to mention all of this here

I think that these are the basic tools that the accounting department deals with in the field of cryptography. There are many other tools, but these are the main ones.

One of the biggest problems facing the accounting department in dealing with the field of blockchain is the need for automation and making the accounting process and data collection doable in an automated manner.

So we need to use tools to do that if we do not find tools that are able to implement it as we want, so we build software tools that help us in the automation process.

We should have a background in web scraping and APIs.

1 Like