ERCs Add ERC: Transparent Financial Statements

Complete Reference Implementation and Source code HERE. title: Transparent Financial Statements description: A.P.I. for Protocols to Ensure Open Transparent Financial Data for all Investors. author: Ignacio Ceaglio (@Nachoxt17) [email protected] discussions-to: https://ethereum-magicians.org/t/erc-xxxx-transparent-financial-statements/21191 status: Review type: Standards Track category: Interface created: 2024-09-20 requires: 20

Abstract

This proposal defines a standard A.P.I. that enables E.V.M. Blockchain-based companies (or also called "Protocols") to publish their financial information, specifically Income Statements and Balance Sheets, on-chain in a transparent and accessible manner through Solidity Smart Contracts. This standard aims to emulate the reporting structure used by publicly traded companies in traditional stocks markets, like the S.E.C. 10-Q filings. The financial statements include key information, namely as Revenue, Cost of Goods Sold, Operating Expenses, Operating Income, Earnings before Interest, Taxes, Depreciation, and Amortization (E.B.I.T.D.A.) and Earnings Per Token (E.P.Share-Token), allowing investors to assess the financial health of blockchain-based companies in a standardized, transparent, clear and reliable format.

Motivation

The motivation of this E.I.P. is to Bring Seriousness to the CryptoCurrencies Investments Market. Currently, the situation is as follows:

Most ERC-20 Tokens representing E.V.M. Blockchain-based companies (or also called "Protocols"), DO NOT work the same way as a Publicly Traded Stock that represents a Share of ownership of the equity of that such company (so the user who buys a Protocol's ERC-20, is also now a share-holder and co-owner of the business, its profits and/or its dividends), but rather function as "Commodities" such as oil; they are consumable items created by said E.V.M. Blockchain-based company (or "Protocol") to be spent in their platform. They are Publicly Traded and advertised to be representing the underlying Protocol like a Share, working in practice the same way as a Commodity and without any Public, Transparent and Clear Financial Information as publicly traded stocks have.

Added to that, most token research analysis reports that can be currently found on the internet are informal Substack or Twitter posts, with lots of abstract explanations about the features of the said Protocol to invest in, that lack of transparent financial numbers and factual financial information, that are made by anonymous users without real exposed reputations to affect.

This E.I.P. will improve that by giving users and investors transparent, clear and factual financial information to work with when analyzing as a potential investment the such E.V.M. Blockchain-based company that implements this E.I.P. in their Solidity Smart Contracts, and that will generate Trust, Transparency and Seriousness in the CryptoCurrencies Investments Market long term.

Specification

The key words "MUST", "MUST NOT", "REQUIRED", "SHALL", "SHALL NOT", "SHOULD", "SHOULD NOT", "RECOMMENDED", "NOT RECOMMENDED", "MAY", and "OPTIONAL" in this document are to be interpreted as described in RFC 2119 and RFC 8174.

All Transparent Financial Statements Standard implementations MUST implement ERC-20 to represent shares, and the financial numbers displayed in a StableCoin's value.

All Transparent Financial Statements MUST implement ERC-20's optional metadata extensions. The name and symbol functions SHOULD reflect the underlying token's name and symbol in some way.

All methods MUST be of visibility public.

All methods MUST return the stablecoin.

Timestamp Constraint: For all methods, startTimestamp MUST be less than or equal to endTimestamp. If startTimestamp is equal to endTimestamp, the method returns a balance sheet snapshot. If startTimestamp is less than endTimestamp, the method returns an income statement for that period.

Output Structs: Instead of a single uint256 value, each method returns a Struct with one or OPTIONAL more uint256 entries to allow for detailed financial data, each one with their own customized entry name.

Definitions:

Currency: The individual StableCoin used to value the publicly displayed financial numbers.
Revenue: Total earnings from selling products or services before expenses.
Cost of Goods Sold (C.O.G.S.): Direct costs for producing goods/services, including labor and materials.
Operating Expenses: Expenses like Selling, General, and Administrative, Research and Development, and other operational costs.
Operating Income: Revenue minus operating expenses.
E.B.I.T.D.A.: Earnings Before Interest, Taxes, Depreciation, and Amortization.
Other Income and Expenses: Non-operating income, such as interest, investment gains or losses.
Net Income: Profit after all expenses, taxes, and deductions.
E.P.S.: Earnings per Share Token (ERC-20), showing profit allocated per share.

Methods

currency

Returns the address of the individual StableCoin used to value the publicly displayed financial numbers.

- name: address
  type: function
  visibility: public
  stateMutability: view
  inputs:
    /none/
  outputs:
    - name: currencyAddress
      type: address

revenue

Returns total revenue generated by the protocol within a time period.

- name: revenue
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: RevenueStruct
      type: struct
      fields:
        - name: grossRevenue
          type: uint256
        - name: optionalAdditionalRevenueDetail1
          type: uint256
        - name: optionalAdditionalRevenueDetailN
          type: uint256

cogs

Returns the cost of goods sold within a specified period.

- name: cogs
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: COGSStruct
      type: struct
      fields:
        - name: totalCOGS
          type: uint256
        - name: optionalAdditionalCOGSDetail1
          type: uint256
        - name: optionalAdditionalCOGSDetailN
          type: uint256

operatingExpenses

Returns the total operating expenses within a specified period.

- name: operatingExpenses
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: OperatingExpensesStruct
      type: struct
      fields:
        - name: totalOperatingExpenses
          type: uint256
        - name: optionalAdditionalExpenseDetail1
          type: uint256
        - name: optionalAdditionalExpenseDetailN
          type: uint256

operatingIncome

Returns operating income for the specified period (Revenue - COGS - Operating Expenses).

- name: operatingIncome
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: OperatingIncomeStruct
      type: struct
      fields:
        - name: totalOperatingIncome
          type: uint256
        - name: optionalAdditionalIncomeDetail1
          type: uint256
        - name: optionalAdditionalIncomeDetailN
          type: uint256

ebitda

Returns EBITDA for the given period.

- name: ebitda
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: EBITDAstruct
      type: struct
      fields:
        - name: totalEBITDA
          type: uint256
        - name: optionalAdditionalEBITDADetail1
          type: uint256
        - name: optionalAdditionalEBITDADetailN
          type: uint256

otherIncomeExpenses

Returns non-operating income and expenses, such as interest and investment gains or losses, for the specified period.

- name: otherIncomeExpenses
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: OtherIncomeExpensesStruct
      type: struct
      fields:
        - name: totalOtherIncome
          type: uint256
        - name: totalOtherExpenses
          type: uint256
        - name: totalOtherIncomeDetail1
          type: uint256
        - name: totalOtherExpensesDetail1
          type: uint256
        - name: totalOtherIncomeDetailN
          type: uint256
        - name: totalOtherExpensesDetailN
          type: uint256

netIncome

Returns net income for the period (Operating Income + Other Income/Expenses - Taxes - Depreciation).

- name: netIncome
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: NetIncomeStruct
      type: struct
      fields:
        - name: totalNetIncome
          type: uint256
        - name: optionalAdditionalNetIncomeDetail1
          type: uint256
        - name: optionalAdditionalNetIncomeDetailN
          type: uint256

earningsPerShare

Returns Earnings Per Share Token (EPS) for the period.

- name: earningsPerShare
  type: function
  visibility: public
  stateMutability: view
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: EPSstruct
      type: struct
      fields:
        - name: basicEPS
          type: uint256
        - name: dilutedEPS
          type: uint256
        - name: EPSDetail1
          type: uint256
        - name: EPSDetailN
          type: uint256

fullFinancialReport

Returns a comprehensive struct that includes all the prior financial details of the Protocol combined: Revenue, COGS, Operating Expenses, Operating Income, EBITDA, Other Incomes and Expenses, Net income, and EPS into a unified Struct.

- name: fullFinancialReport
  type: function
  stateMutability: view
  visibility: public
  inputs:
    - name: startTimestamp
      type: uint256
    - name: endTimestamp
      type: uint256
  outputs:
    - name: FullFinancialsStruct
      type: struct
      fields:
        - name: RevenueStruct
          type: struct
        - name: COGSStruct
          type: struct
        - name: OperatingExpensesStruct
          type: struct
        - name: OperatingIncomeStruct
          type: struct
        - name: EBITDAstruct
          type: struct
        - name: OtherIncomeExpensesStruct
          type: struct
        - name: NetIncomeStruct
          type: struct
        - name: EPSstruct
          type: struct

Sep 29 '24 21:09 Nachoxt17

✅ All reviewers have approved.

Sep 29 '24 21:09 eip-review-bot

The commit 4597eb99bfd1ed1c2dfb6406b43cf409fb286789 (as a parent of 2ffba9e0c073673bde856149ecd1b570ba7900d4) contains errors. Please inspect the Run Summary for details.

Sep 29 '24 23:09 github-actions[bot]

All Format checks passed :white_check_mark:. @Mc01 , @axic, @lightclient and @SamWilsn, you are invited to review :D

@abcoathup please also let me know if the formatting is correct here. In the .md file, I used as a file name erc-659.md because before I tried with eip-review_t_financial_statements_s.md, erc-review_t_financial_statements_s.md, eip-XXXX.md and erc-XXXX.md but in all cases the eth-bot reverted, and inside the file in the header I specified eip: 659, because if I left it blank the eth-bot will revert.

If I wrote something wrong regarding the E.I.P./E.R.C. number or .md file name, please tell me exactly for what to replace it instead.

Sep 29 '24 23:09 Nachoxt17

All Conversations Resolved :white_check_mark:(except from one with @SamWilsn in which I'm awaiting for further feedback). @Mc01 , @axic, @lightclient and @SamWilsn, you are invited to re-review and offer further and deeper feedback! :D

After I have taken care of all of your further and deeper feedback, I will remove the 2  present in the document.

Oct 10 '24 22:10 Nachoxt17

All Conversations Resolved ✅(except from one with @SamWilsn in which I'm awaiting for further feedback). @Mc01 , @axic, @lightclient and @SamWilsn, you are invited to re-review and offer further and deeper feedback! :D

After I have taken care of all of your further and deeper feedback, I will remove the 2  present in the document.

X2 I insist in having updates since it has been 2 weeks since the last comments were resolved.

Oct 21 '24 16:10 Nachoxt17

All Conversations Resolved ✅(except from one with @SamWilsn in which I'm awaiting for further feedback). @Mc01 , @axic, @lightclient and @SamWilsn, you are invited to re-review and offer further and deeper feedback! :D

After I have taken care of all of your further and deeper feedback, I will remove the 2  present in the document.

X3 I insist in having updates since it has been 2 weeks since the last comments were resolved.

Oct 22 '24 15:10 Nachoxt17

All Conversations Resolved ✅(except from one with @SamWilsn in which I'm awaiting for further feedback). @Mc01 , @axic, @lightclient and @SamWilsn, you are invited to re-review and offer further and deeper feedback! :D

After I have taken care of all of your further and deeper feedback, I will remove the 2  present in the document.

X4 I insist in having updates since it has been 2 weeks since the last comments were resolved.

Oct 23 '24 20:10 Nachoxt17

@Nachoxt17 please note there is only a small number of ERC editors. (I am not an editor) You can try attending office hours: https://github.com/ethcatherders/EIPIP/issues/363

Oct 24 '24 07:10 abcoathup

@Nachoxt17 please note there is only a small number of ERC editors. (I am not an editor) You can try attending office hours: https://github.com/ethcatherders/EIPIP/issues/363

Thanks! This is useful.

Oct 24 '24 07:10 Nachoxt17

@Nachoxt17 please note there is only a small number of ERC editors. (I am not an editor) You can try attending office hours: ethcatherders/EIPIP#363

Hello @poojaranjan , Can this ERC be reviewed in the next office hours?

Oct 26 '24 21:10 Nachoxt17

Take a look at fixing these while you're in draft.

Done @SamWilsn .

Nov 03 '24 19:11 Nachoxt17