If you're someone who interacts with blockchain technology on a regular basis, there's a good chance you've bridged between two different blockchains in the past. There's also a good chance that you've bought, sold or traded crypto on an exchange which exports incomplete transaction data to apps like CoinLedger. Fortunately, we have solution to both these issues-read more about how to merge transactions in CoinLedger below!
In the context of cryptocurrency and blockchain technology, "bridging" refers to the process of transferring assets between different blockchain networks. Multi-chain bridges are designed to help investors move their assets from one blockchain to another. For example, an investor who holds ERC-20 tokens who wishes to move their assets to the Avalanche blockchain can use the Avalanche Bridge.
When to enter a bridge trade transaction into CoinLedger
You may have a Missing Cost Basis Warning caused by incomplete data on your account, and in some cases, unmarked bridge transactions are the culprit. Here's an example:
Let's say someone bought ETH on Coinbase, and then sent it to their Arbitrum address on 1Inch.
There, they subsequently wrapped their ETH, where it became Arbitrum ETH (a wrapped version of Ethereum).
Now, CoinLedger is showing a Missing Cost Basis Warning for their Arbitrum ETH. This isn't due to an issue with CoinLedger, but its due to flaws with the way exchanges and protocols send transaction data to apps like CoinLedger.
In the situation above, there were three transactions that occurred:
A purchase of ETH on Coinbase
A withdrawal of that ETH from Coinbase and a subsequent deposit of that ETH into their 1Inch account (these two transactions occurred at the same time)
Finally, the customer wrapping their ETH and it becoming Arbitrum ETH
Without telling CoinLedger that this was a bridge transaction, our app would not know that these transactions were related-and thus, a Missing Cost Basis Warning would appear in this customer's account. Here's the solution:
Head to the CoinLedger app, and navigate to the Review stage.
Filter for the assets and/or platforms in question. Using the above example, the customer would filter their account for the assets ETH and Arbitrum ETH, as well as the platforms Coinbase and 1Inch.
Then, identify each Withdrawal and Deposit transaction that show how you bridged the asset - that is, withdrawing the original asset and depositing the new version of the asset on the new chain. The amount and timestamp for this withdrawal and deposit should be similar, if not equivalent.
Once you've located each transaction, select them as shown below.
Finally, at the bottom of your screen select Merge and then Bridge. This will create a bridge transaction between the two assets. In the example from earlier, this action would create a bridge trade of ETH for Arbitrum ETH, and would resolve the Missing Cost Basis Warning on that customer's account.
NOTE: This is the conservative approach that treats the bridge as a taxable token swap and makes the fair market value of those bridged/wrapped assets at the time you received them your new cost basis moving forward. If you're interested in learning more about how bridges are taxed, check out this walkthrough.
How to tell a transaction was not a bridge
Some transaction types can't be marked as a bridge. These include:
Transactions between assets on the same blockchain. Trying to merge transactions whose assets belong to the same blockchain will result in an error. Instead, you can mark these as a trade, as shown below.
Token updates. Token updates are not bridges and can't be marked as a bridge within CoinLedger.
Merging Other Transaction Types
If a trade was incorrectly imported into CoinLedger as two separate transactions, such as a deposit and withdrawal, you can merge those transactions to apply the correct cost basis to that asset on your account.
Let's say you purchased ETH using USD via PayPal in your MetaMask wallet.
However, this transaction was imported into CoinLedger as two separate transactions:
A withdrawal of USD from PayPal
A deposit of ETH into your MetaMask account
This isn't a fault with CoinLedger, but is due to the complexity of importing transactions from services such as MetaMask which use fiat on-ramps to allow customers to purchase crypto using fiat.
Here's the solution:
First, head to the Review step of the CoinLedger app. Then, locate the withdrawal and deposit transactions in question.
Mark the two transactions as shown below, and then select Merge.
Finally, select Trade. This will create one trade transaction.
💡 Tip: You may have to add fees to the transaction if they aren't already included.