Just as the name suggests, a blockchain bridge connects two different chains and allows assets to move from one to the other. Bridging is a transaction type that has been born out of necessity as more blockchains are created, and DeFi users wish to move their assets from chain to chain to take advantage of different opportunities.
Bridging often consists of many different transactions and can even result in the change of the underlying asset to a pegged or wrapped derivative (depending on the bridge and source/destination chain). Crypto Tax Calculator can handle these complex transactions, allowing you to reconcile any cross-chain transactions and report your tax obligations correctly.
Handling Bridging in the Platform
To handle bridging in the platform, follow these simple steps:
1. After both wallets are imported, go to the Transactions page. Usually, they are imported from two different wallets (as they are on different chains) as an ‘outgoing’ component (sending to the bridge) and an ‘incoming’ component (receiving the asset on the other chain). The example below shows 0.5 WETH being bridged from Ethereum to Avalanche.
2. Select both transactions, you will see a bulk edit bar shown at the bottom of the page. Click 'Categorize'.
3. Select 'Bridge In & Bridge Out'.
4. If the incoming and outgoing transactions you select meet the criteria, they will be grouped as a 'Bridge'.
The cost basis from the original asset will be moved across to the asset on the destination chain, even if it is a pegged or wrapped version of the original asset (e.g. ETH -> WETH).
Criteria for Grouping 'Bridge' Transactions
Both the ‘Bridge Out’ and ‘Bridge In’ components must occur within a 24-hour timeframe for them to be grouped together.
A ‘Bridge Out’ will match with the next ‘Bridge In’ in chronological order if the following criteria are fulfilled:
The two components are within 24 hours.
The amount that is received is similar to the amount that was sent (5% tolerance accepted).
If multiple bridges of the same amount are done in the same 24 hours, ensure that the corresponding ‘Bridge Out’ and ‘Bridge In’ are chronologically one after the other.
Bridging transactions are not auto-categorized. They require manual selection due to the complex nature of the transaction.
'Bridge in' and 'bridge out' do not group
Please check if the transactions meet the above criteria. In some scenarios, there might be an issue that your 'bridge out' asset is less than your 'bridge in' asset by more than 5% due to the slippage. Since CTC fetches the market prices automatically when you import your wallet and treats the transactions independently, you might see the below scenario:
Bridge out 100 $XYZ from Ethereum at a market price of $10. The value is $1000.
Bridge in 70 $XYZ to Arbitrum at a market price of $10. The value is $700.
The difference of $300 is more than 5%. They will not be grouped. You can click the value of the 'bridge in' transaction and edit the value to be the same as the 'bridge out' transaction to ensure the cost base is tracked correctly. The transactions should be then grouped automatically after you update the value.