Protocol Interaction Mapping

Protocol interaction mapping is the process of documenting how a user's assets move through various decentralized protocols over time. In a complex DeFi ecosystem, a single asset might be staked, used as collateral, and then leveraged, creating a chain of interactions.

Mapping these events is necessary to maintain a clear record of asset ownership and tax liability. It involves tracing the lineage of tokens from the initial deposit to the final withdrawal or liquidation.

This map provides the context needed to apply the correct tax rules to each stage of the asset's lifecycle. By maintaining this map, users can provide clear evidence to tax authorities regarding the nature of their decentralized financial activities.