Totem launches Decentralized Daily Reference Rate for crypto and tradfi.
The Totem Live Accounting Protocol is the first project to decentrally calculate and automate a Daily Reference Exchange Rate for accounting and finance purposes
Daily Reference Exchange Rates are a widely adopted tool used by accountants, auditors, companies, financial institutions and government to determine many important aspects of accounting. They differ from Market Prices, because they are statistical in nature and more suited to use cases such as valuing assets held on the books at the end of an accounting period, recognizing expenses in foreign currency, contracts, and sales tax reporting.
Initially, Totem’s reference rates cover 700+ assets such as $DOT, $ETH, $BTC, $USD, $TSLA, $AAPL and other fiat, crypto, stock issue equivalent (suffix “.sie”) currencies. Over time, the coverage will extend to Totem’s on-chain corporate currencies using the same protocol. The mechanism also provides data to calculate a highly stable deterministic price for Totem’s own token $TOTEM.
In contrast to the well-known Market Rate, Reference Rates establish a benchmark daily exchange rate used in accounting. A single published daily reference rate for a given asset represents the exchange rate for that day, whilst the market rate is a continuously moving rate changing throughout the day — every hour, every second or faster.
Using the market rate is also not practical for accounting purposes due to the lack of overall consensus on values leading auditability problems and potentially fraud.
The fiat daily reference exchange rate provides a standardized measure of the value of exchange between any two currencies for a certain date but of course not at weekends or holidays.
Crypto filling in the gaps
What has been missing from the crypto sphere is a 24/7 globally available consensus-driven benchmark daily exchange rate. Services like Chainlink provide market rates for traders, and we have joined forces to calculate a daily rate from Chainlink’s data for accountants around the world. It would make it easier for accountants and auditors to verify the accuracy of financial statements if they were given a common point of reference between crypto and fiat and so that’s why we built it.
The work is part of the larger architectural design behind Totem, built upon the idea that accounting ledgers should be able to communicate directly with each other, anywhere in the world, in real-time.
Using a standard crypto-asset reference rate that is completely verifiable on-chain brings credibility, automation, and standardisation to crypto-accounting. Auditors or investors can refer back to the reference rate when auditing or reviewing the project’s financials and it gives peace of mind that no currency exchange rate manipulation occurred in the reporting process.
Why is it needed?
Currently reference exchange rates for fiat currencies are provided by central banks, but at the risk of stating the obvious, in the crypto world there are no central banks, but there are accounts that need filing. Totem’s Daily Reference Exchange Rate provides a decentralised and improved version that supports the Web 3.0 vision.
