Cardano Accounting Fundamentals - Developing standards and reference contracts for on-chain accounting records

[GENERAL] Name and surname of main applicant

Randall Harmon

[GENERAL] Email address of main applicant

randall@inator.biz

Additional applicants

Treasury Guild

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

5

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language.

No

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

Yes

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.”

We make Stellar Contracts, which depends on Helios. However, Helios has worked well and stably, and we see no signals to suggest we would be impaired by its continued development.

[GENERAL] Will your project’s output/s be fully open source?

Yes

[GENERAL] If NO, please describe which outputs are not going to be open source. If YES, please write “Project will be fully open source.”

Project will be fully open source

[METADATA] Category of proposal

Data tools

[IMPACT] Please describe your proposed solution.

In this proposal, we'll co-develop metadata standards with community consent, with CIP documents and community workshops, for a set of on-chain open accounting standards.

We'll work on open-source reference smart contracts with Javascript API's, that applications can use to directly insert accounting details from their dApps into their accounting system using those open standards.

What are on-chain accounting fundamentals?

Qipu were some of the world's first physical devices for accounting. The abacus was great for realtime computations, but qipu were viable prototypes of immutable semantics for interpersonal finance records, easily a thousand years before the first blockchain.

The fundamentals of on-chain accounting include categories and details for all kinds of assets, money received or paid, for money that is owed (receivables) or owing (payables), and for income and expenses.

Those fundamentals should include the standards-conformant structures of on-chain activity for setup (i.e. category-creation / chart-of-accounts maintenance), and the essential records of accounting transactions.

With solid baseline data on the state of finance in an organization, many kinds of reports can provide insight and knowledge about that organization and its operations.

Accounting Fundamentals for Cardano

Immutable record-keeping systems like Cardano are a great fit for accounting. The native UTxO model is also a close fit for the way information systems (like paper books, for example) grow and evolve.

We're making smart contracts for on-chain accounting records. We expect these will be operational on side-chains in future cases, but for today, we'll be focused on serving our open community's organizations with open accounting records.

Backstory

In 2022, the Treasury Guild conducted a collaborative collection of metadata schema to use for contribution-record-keeping. They've been applying that standard mechanism to their payout process, showing consistent contributor records, including task-level tags indicating different types of contributions.

Those on-chain records can now be queried and aggregated for a great reporting view - a staple of information-age accounting.

We're extending contribution-accounting to cover a more complete set of financial transactions to serve all kinds of organizations with great record-keeping.

We're working with organizations and individuals in the Cardano community with both knowledge and needs around accounting. We're developing data schemas for all kinds of transactions beyond contributor expenses.

Building Out with the Community

Open standards make a bunch of things easier. Let's do it together.

Some of our member organizations will also be developing various UI's interfacing into some of these same accounting contracts, each serving particular segments in ways unique for their applications.

Our engineering approach for accounting on Cardano is centered on the use of tokens and contract Datum (not transaction metadata, because on-chain contracts can't access transactions metadata).

At the application level, we will plan to leverage the patterns and infrastructure of Stellar Contracts, in which the low-level mechanisms of transaction-building are reframed as APIs that application developers and end-users would recognize as being closely related to the application domain. Within each of those meaningful APIs would be found some of the low-level transaction-building details.

[IMPACT] How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?

These accounting-related standards are not yet well-developed (hence, not a fit for other challenge categories) but can be valuable building blocks for future application software.

By developing these standards, we can open next-adjacent-possibilities to create accounting records automatically during various transactions done by customers, prospects, contributors, vendors, etc.

The work products we create, ranging from standards (CIP) to whitepaper to transaction-building dAPI's, will be open-sourced and available for the community's further development.

We will seek to work together with Treasury Guild and other accounting-focused community members & orgs, distributing rewards for meaningful participation and contribution to the project's purpose.

[IMPACT] How do you intend to measure the success of your project?

Participation in open community sessions (number of contributors)

Number of distinct elements identified having a meaningful on-chain accounting representation

Progressive creation and delivery of a lightpaper or CIP-in-progress draft

Submit CIP for review and adoption

Created smart contract dAPI's for building transactions having accounting metadata

Identified any areas of needs unmet by our in-budget design efforts

[IMPACT] Please describe your plans to share the outputs and results of your project?

We will host open community sessions to do most of the work in this proposal in public.

We will post news and notes of community sessions on our website.

As we develop a CIP or light-paper, we will post updates to our website.

Developed smart-contract dAPIs will be posted on Github.

[CAPABILITY/ FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability?

Randall has worked with, and on, software accounting systems off and on for 25 years, with first exposure to accounting principles circa 1985. Accounts receivable, general ledger, billing and integrations, etc have been active engineering areas. Enabling blockchain-based applications is a next logical step.

We seek to work with Treasury Guild and others with active accounting-adjacent practices to develop these standards - not just in theory, but in practice with community.

By building openly and publishing our results as open-source, we will let the results speak for themselves to the Challenge Team.

[CAPABILITY/ FEASIBILITY] What are the main goals for the project and how will you validate if your approach is feasible?

Research, draft and validate potential standards for recording on-chain accounting details

Develop and test these standards with one or more projects

Create and publish open-source smart-contract components implementing these standards.

Identify any difficult design challenges learned as a result of the project

Active community contribution: will count and report on contributor counts from each session

[CAPABILITY/ FEASIBILITY] Please provide a detailed breakdown of your project’s milestones and each of the main tasks or activities to reach the milestone plus the expected timeline for the delivery.

M1: Survey (1 month): 22.5k ADA (30%)

• Team building - gather contributors and "client" orgs
• Community Session: Explore the landscape of accounting practices: GL, AR/AP, Chart of Accounts, etc, to establish shared knowledge
• Acknowledge and inventory community use-cases connecting to these patterns
• Analyze and organize input from community sessions
• Draft prototype data structures to fit representative use-cases
• Begin drafting lite paper
• Deliverable: Meeting notes, lite paper in progress, payout report, contributor counts
• Success Criteria: per deliverables

M2: Early Designs & Prototypes (1 month): 20.6k (27.5%)

• Additional community sessions
• Prototype smart-contract transaction-building code matched to use-cases
• Validate prototyped designs in test-harness
• Refine CIP and/or lite paper
• Deliverable: Meeting notes, lite paper, payout report, contributor counts
• Deliverable: Updated draft paper
• Success Criteria: per deliverables

M2: Complete Prototyping (2 months): 20.6k ADA (27.5%)

• Identify any discovered challenges for further research
• Followup sessions with community
• Deliverable: code for reference smart contracts
• Deliverable: published lite paper and if applicable, a draft CIP submitted
• Success Criteria: per deliverables.

M3: Wrapup: 11k ADA (15%)

• reporting of results including summary of contributor counts and rewards paid to community.
• Tools license (Miro, Zoom)
• Demo video

[CAPABILITY/ FEASIBILITY] Please describe the deliverables, outputs and intended outcomes of each milestone.

see prior section. This is primarily a "working in public" proposal.

[RESOURCES & VALUE FOR MONEY] Please provide a detailed budget breakdown of the proposed work and resources.

45k ADA: 10 weeks of community sessions, analysis and capture of key results from analysis:

1.5h leading community sessions + preparation

4h analysis weekly

1500 ADA per week allocated for community contributors

~30k ADA: ~3 weeks of software/smart contract development

300 ADA: 4 months of miro + zoom

[RESOURCES & VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

Cardano really needs more practical, real world utility. Attracting businesses to get operating on Cardano infrastructure (main-chain or, in future, on side-chains) will provide a massive driver of transaction volume, velocity, attention and demand; thus improving our economy.

We are support community contributors (15k budget allocation) while also contributing results to the community.

Using consulting rates (US / west coast) for high-skill contribution.

[IMPORTANT NOTE] The Applicant agreed to Fund10 rules and also that data in the Submission Form and other data provided by the project team during the course of the project will be publicly available.

I Accept