From Niche to Necessity: Tax & Accounting for Web3 and Digital Assets

Hello and welcome to another niche to Necessity podcast

hosted by myself. My name is Taylor Zork. Today we have a very special guest.

We have Ben Roy. He's the CEO and founder of Noves, which

is attempting to simplify blockchain data. They have a tool that

helps you kind of compile the data on chain and have it in a more

readable, kind of more human,

have it shared in a nice more human light. Right. So thank you for

joining us, Ben. And, yeah, could you please introduce yourself

and kind of tell me a little bit more about how you got into the

space? Sure, yeah, thanks. Happy to

be here. So I've been

hanging around the crypto space since 2012, actually. I had a

friend who was a super early adopter of bitcoin

and was at an event, and he gave this talk and was talking about it,

and everybody thought he sounded a little bit crazy. I think at the time it

was probably like single digit prices

for bitcoin. Wow. Extremely early.

But enough of it stuck that I looked into it and

got involved. And I kind of been in and out of it over the years

through the ups and the downs. It wasn't

until really the previous cycle, like Defi

Summer, I had sold a web hosting company that I've

been running and was kind of looking for something to do. And at the same

time, everything just started going kind of nuts, especially in the Ethereum

space, which as a software guy was a lot more

exciting. I mean, bitcoin is cool and all, but it was much more exciting

when people were actually building things

that did something that had some kind of functionality to them.

And it was just kind of like once I opened that door, it was like

a one way trip. Yeah, I

had the same kind of aha. Moment. Like I'd heard about bitcoin. I thought it

was cool, but I didn't really have that kind of big flick until I

heard about smart contracts, Ethereum and all that stuff. So very.

So on that same note, what led you to start Nobez,

and how would you describe the product or the service that you guys.

Know? There's a couple of things that become really obvious

as problems when you start in the space. As soon as

you get off of exchanges and you start actually

transacting on chains, smart contract chains,

a few things are like, readily apparent, right? One of them is

we are all placing a lot of blind trust.

You open up metamask, you start running transactions, and it

asks you to confirm a thing, but you have no idea what it

is that you're doing. Because there's just like a wall of

hexadecimal data that you're supposed to somehow make a good decision about.

And there's like this hump you have to get over, where you just realize

you just can't make a good decision there. You just kind of have to trust

that what you expect to be done is what you're

signing. And if you don't get past that, you're not going to make it very

far, because there's just no way. Right? But it was

obvious, especially coming from a software perspective, that this is not

how we want it to be. We need this to be better. We need to

be able to understand what it is that we're doing. And then the second thing,

and this you're intimately familiar with, is if you try

to take your data from anything that you were doing

and do something useful with that data in the real world,

it's a complete non starter, especially if you rewind

two years, two and a half years ago, when we were first doing this,

there's no way. We were talking about some of the trading activities. We were

talking to service providers about them, and they basically

said, well, look, if what you want to do is buy some tokens and hold

them on an exchange, we've got you covered. We can definitely handle that.

But being off on other chains, off of

Ethereum, especially not on Ethereum, but like in these other edgy chains,

there's no way to get your data, there's no real way to interpret the data,

especially at scale. And

I think that my co founder Juan and I are both

problem solvers. We're both real believers in

the promise of blockchain and the efficiencies and the

benefits, transparency that we can get from

adoption and

being in the space is just like necessary for us to solve these

problems for ourselves, but for other people. And

that's really, I guess the mission for

November is to deliver better data

that makes it easier for people to build other cool

things. Right? Like everybody's got to, everybody's got to build the

same basic boring

infrastructural pieces so that they can get

to whatever cool thing it is that they actually want to build.

We just want to shortcut that and let them build cool things

on top of our boring infrastructural stuff

so they can do their thing. Yeah,

that's awesome. Yeah. The allure of smart contracts and all that

stuff originally was like, thinking about decentralized applications. So

like a decentralized version of Spotify or things like

that. And to hear you talk about kind of making that process of looking at

the data simpler so that you can get to the actual core of what we're

here for, which is building these apps that kind of are self sustaining ecosystems

where we can give back to the actual creators behind the actual

artwork and less towards the infrastructure of it is a really cool

kind of way that you're moving towards. Yeah, nothing more frustrating than

getting data off of polygon scan or ether scan,

having to sort through each and every single different tab that has different columns on

each tab and try to get all the

data together.

As technical people, it seems doubly ridiculous

because it's like the tech is somehow creating it a

problem that's worse than it needs to be. Right. Like we're

delivering this to you in a software tool. Why don't we just make the software

tool give it to you the way that you would want the data, in a

way that you work with it, but we're putting up

roadblocks that we don't need. Yeah,

I totally agree. What do

you see as some of the potential trends for the upcoming bull market for how

on chain tools are being designed and adopted?

Well, I do see definitely in the last

second half of this year, and I think kind of building steam, there

is definite recognition that we need better

tools, we need better data, we need better

kind of blockchain adjacent things.

Earlier, if you go back a couple of years, it was just like anything that

would do the job was good enough, and then people are building other

things. And now I think you're seeing a lot more people. Like if you look

at the number of new block explorers that have been released

in the second half of this year compared to the three

years before that, it's picking up steam,

which I think is great because just accepting that the one tool

that does the thing is good enough. It's not how the rest of

the world works. And if we're going to get real progress here, I think we

need to continue to push the boundary on things

that we just sort of have been accepting are the way that they are.

Right. And then querying data on changes the

sexiest thing. So it's hard to prioritize that when you're in a bull

market. So it's kind of a blessing in

disguise when we get these lulls in the bear markets where

we can just build and focus on a thing that makes it more user friendly,

that improves the UI, the UX and all that, so that we can

bring more people on board. Because biggest challenge that I come against

with educating people in this space is that the mystification

that they have or that they've placed on digital assets

and really doesn't have to be that mystifying. Right. If you kind

of bring them back to traditional assets and try to compare the two,

you can draw conclusions a lot more easily. And so

having data on chain that's readable, easily kind of

legible to the layman as well, is going to help further adoption in the long

run as well. Yeah, definitely.

Your tool is helping people to read

data on chain, right. And understand it better. And so obviously,

I think that it's, it's, it's a very nice function for organization, especially

when you may have some people who are less literate in blockchain as well, to

be using a tool like this. So kind of where overall do you see your

tool fitting in the web? Three finance stack within an organization?

The answer to that depends a little bit on what the rest of the stack

looks like. We sit at the bottom of the

stack, right? So ideally, we don't want to have,

organizations have to go get raw data

from the chain, because with that raw data,

you have all of the data and information that has meaning

completely commingled with all of this low

level protocol kind of stuff. Right.

All the Ethereum stuff is mixed in with

your meaningful financial data. And when you get the

raw data, you have to have like an extraction

process to pull the meaning out of that

base level data. And that's a real mess.

And it's a problem that's very technical and not

super financial. You got to get that done before you can get to the financial

part of it. I think for

us, we'd be happy to provide that data

directly to organizations that want to work with it themselves. To be able

to separate that out and just give them the data that

has the meaning that they can work with. But also,

for people who use dedicated crypto,

blockchain type accounting or tax tools or things like that,

we're working to build integrations with those so that we can bring better

data into those places, because in general, those tools are solving the same

problem. Like I said in the beginning, everybody's got to solve that base level

problem. Since it's the only thing that we

do, we think we're pretty good at it. And

providing a better, cleaner data stream into those

softwares or directly into the hands of CFOs, if they're working with it

themselves, is just setting them up for success by having

a better starting point. I think a really good example of what you're

describing with kind of like having to extract the important stuff out of the data

is something like having the block number included in the transactional

data, where it's important for validating that this

transaction actually happened. On chain, it is important, it's not

unimportant data. But to someone in a finance stack, do they really need

to know what block it came in? Not really. I mean, there may be

instances where they do, but

it just shows which batch it was processed within on chain.

As long as you have the timestamp or whatever like that, and you can kind

of do your accrual accounting around that, you may not need

the block number or things like that. I think another good example

is smart contracts that have enough

time on chain for it to be very well known what they are. Like

the ETH USDC pool on Uniswap, for example.

Having that as a name for

that contract address rather than the string of

alphanumeric code is more helpful because it actually tells

me more about what's going on, rather than just being able, having to guess at

what that contract is or whatever. Yeah,

definitely. I think for us, we have a very broad

kind of definition of human friendly data,

which is how we would term our data, and a lot of people kind

of throw that around. But for us, it means not only

producing something like what you just said, like tags and labels

for things, for a summary sentence that says, hey, this is what

this transaction was, which makes it literally easy for a human

to read, but we also mean the

structure of the data underneath is easy to

work with, whether that's in a spreadsheet, or bringing it into a software

tool, or reviewing it in an audit or whatever. Having

well structured, normalized

data makes for people to get their

jobs done who have to actually work with that data. Yeah, if you're

manipulating the data like I was Mike's previous example with Polygon

scan or ether scanner or whatever, when you have to pull it from the different

tabs, each tab has a different structure of how the data is laid out. And

so when you have that kind of uniformity, you can then run those analytics on

that data more easily because the compiling of the data is already

done, it's already clean.

Cool. So what do you see as

the main challenges for the average crypto CFO out there?

Wow. Well, bloated question. I

know. I think it's

fair to say that the crypto CFOs

sort of are the dumping grounds for a lot of the

problems. And it stems from the fact that unlike

a lot of other industries, so much of this is

driven by developers, by technical

people who are free to just innovate

at the pace that they can write code and they can shove

code out the door. Right. Like there are no constraints on

so many people just pumping things out, which is great and which is

breeding. A. Lot of innovation

and a lot of new ideas and a lot of testing and trying things.

But none of those people have one thought for the poor

people who have to deal with the data

streams that come out of this stuff that they're putting

together. Right? Yeah. I

am not envious of people who are in that position.

So I think for sure one challenge is just

keeping up with what is being done

in terms of even knowing, because there are new primitives and

new ideas. And I think that, like you said earlier, a lot of

those have an analog in

the web two world or the old world or the accounting world or whatever you

want to call it. But sometimes when there's a new web

three idea, figuring out

how that maps to the older

ideas is a bit of a challenge.

And there's new things like that coming out all the time. Right. So having to

just kind of figure out how X or Y or Z thing

applies into the books or how you're doing

things seems like a huge problem.

Yeah. I think that ultimately, at the end of the day,

these are all ledgers, right? So they're inherently accounting tools, but they're being

built by developers who don't always have an accounting background. Right. So

therein lies the major challenge, I think, and the major disconnect that we've seen in

the industry thus far. Because like you're saying these are built by developers

and they're going at their own pace, and then we as accounting professionals

or people that are looking at the data afterwards have to then figure out how

do we apply old antiquated rules to this

new stuff that's being developed by people who don't always have an

accounting mindset at art. Right. Ultimately, it's a ledger.

So we can see what happened on chain, but I think that a good

example of this is reflection tokens. So

on, like binance smart chain, there's a lot of tokens that now

automatically, every transaction, there's a piece of that that gets sent to as a

tax and as maybe a fee to the team, and

you don't even see that on chain. You see updated in the wallet balances of

everyone that is a holder of that token, but you don't see that happening on

chain. So I had to do that with one client

recently, and it's just a nightmare because you're having to basically take snapshots

of the wallet balances and then true that up with off chain

transactions to update those balance to

get them to plug, basically. And so it's a good

example of like, okay, let's innovate. But we're not thinking at all about the

accounting consequences of this.

No. I also think that it's

just trying to, especially as we see the

explosion and expansion in chains, and now

that we're moving to, people are building app

specific chains and micro roll ups and things like

this as a CFO, trying to keep your

arms around more and more and more sources of

data is going to be an expanding

problem as we go, because these things are going to pop up. People are

building development kits to make it easier and faster to launch your own

microchains and things like this. And that's going to present an additional

challenge. And then knowing whether you have, the further out you get,

the less mainstream something is, the

less good the tooling around those things

is. And so your certainty that you have all of the data,

or the right data is going to go down

closer to the edges. But the thing is, the edges are going to be more

and more where we are soon. And it's ever expanding,

too, right? Yeah,

very cool. Yeah, I think that it's interesting. It's one

of the reasons that keeps the industry interesting as well, from a professional

standpoint. That's why I love working in it. It's a challenge, but I like the

challenge. And coming from cannabis industry, the cannabis

industry was a cool niche to be a part of, because there's a nice culture

around. I think there's a nice culture around

cannabis, but outside

of R1 sentence in the internal revenue

goal, there's not a lot to learn about with regards to cannabis, but that's what

I love about crypto, is that you could spend a lifetime learning

this stuff, and you'll continue to learn more, and you'll continue to

be presented with new challenges. Very cool.

So I'd love to get into kind of like what's also in your roadmap. What

are you guys looking to add as functionality for your

tools, and where do you see the project going in the

future? Yeah, so we've got a

lot of stuff, actually. One thing is

we're working hard to expand our perspective on

chains, or where our coverage is on chains. We're currently pushing

30 chains, but like I mentioned, we have this whole thing coming

where the number of chains is just going to get really big, really

fast. And so we're engineering hard

for how we can cover those and the way that our tool is

built. We designed from the ground up to

be able to run in a very kind of, like, just in time mode, as

opposed to data tools, which require that you start by

indexing everything and then you can go from there. We can kind of deploy and

just go live, which I think is going to be increasingly

valuable as time goes on here.

We're working on a product that we're calling a data room, which is

basically kind of sits above where our current data

tools are to help you organize

all of your data and make sure you have all of your data

together in one place, that it's at a very

basic level reconciled, and it's not like an accounting tool or anything like

that, but just to make sure that everything on the

chain ties so that, you know, you have all of the answers. So if there

were reflection tokens that you weren't accounting for, the

balance wouldn't match, so you wouldn't think there was missing, and you needed to

get. And that really puts your

data kind of in your control, so that your

organization's data or your customers data in one place that

you can bring wherever you want to go with it.

We're also ramping up our efforts to try to get involved

with chains early on, because when new chains

are coming out or when they're watching roll ups and

stuff like that, they all have the same basic problems that

they're dealing with on the data side, which is they need to be able to

get their data off for accounting, for their own accounting, and for their ecosystem

partners accounting. They need to put up a block explorer. They need to

have wallets with functionality. And so

we're working to try to get more involved with the chain so that

we can help them get a data stack set up that

starts them off in a great place instead of trying to solve those in sort

of like a lagging way. Yeah, because that's

a big challenge for new chains and is having reliable data,

and especially without the funding, to

have people build that again, obviously, it's an

incredible. You couldn't have blockbands without the explorers because you

need to be able to validate what's happening on chain. Right. But also,

again, it's often lower on the totem level because people don't find it as

sexy. It doesn't pump the price like an announcement

of a partnership or something like that, where people aren't going to

rave about how we got a new blockchain explorer, but it's

fundamental to how this stuff works. We're the

forgotten heroes, often the accountants and the data

compilers and the query software and all that stuff. But we're important,

I swear.

Great. Well, thank you so much for your time today. I would love to kind

of just finish off by asking, how can people learn more about you

or get in contact with you regarding nobes?

Yeah, so you can check our website out is

at noves fi.

You can find us on Twitter or LinkedIn.

I'm on there, obviously. You can ping me there or if you want

to shoot me an email. I'm Ben at novas Fi. I'm happy to hear

from you. Awesome. Well, thank you so much, Ben, and really great

to have you on the up. Yeah, thanks a lot. It was nice chatting with

you. And one last thing. We're using Nova's data for our

upcoming or we actually just launched the trip around the crypto verse, so we're

using the data that Nova's provides to help download the data off

chain and compile things. So check that course out as well and you'll get

a firsthand look at tool. So anyways, thanks again, Ben, and we'll see you

later. Bye.