Why DeFi breaks the clean mental model
Everything covered so far — disposals, cost basis, income versus capital gains — assumes it's usually clear what happened in a transaction: you sold X for Y, you received a reward, and so on. DeFi protocols were not designed with tax categorization in mind, and many common DeFi actions don't map cleanly onto the disposal-or-not framework that tax authorities generally use. This is the lesson to read carefully if you're building or using DeFi products, because the honest answer to several of the most common questions is 'it's genuinely unsettled in many jurisdictions,' not 'here's the clean rule.'
Consider providing liquidity to an automated market maker pool. You deposit two tokens and receive an LP token representing your share of the pool. Is depositing those two tokens a disposal — did you just trade them for a new asset (the LP token), potentially realizing a gain or loss on each? Or is the LP token better understood as a receipt that doesn't itself constitute a taxable exchange, since you retain an economic claim on essentially the same underlying value? Different tax advisors and different jurisdictions have taken different positions on this exact question, and a definitive, universally agreed answer doesn't currently exist. That's not a gap in this course's explanation — it's an accurate reflection of where the guidance actually stands.