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What is Blockchain Analytics?
Blockchain analytics is the study of data generated and stored on a blockchain. A blockchain is a digital ledger that records transactions in a secure and transparent manner. Think of it like a digital notebook that is shared among many people, where everyone can see what’s written in it but no one can change or delete anything after it’s recorded.
If you are new to it blockchain analytics is like using a magnifying glass to look closely at the information stored in this digital notebook. Thus it can be said as a process of collecting, analyzing and interpreting data from a blockchain in order to gain insights and make informed decisions.
This can include tracking transactions and identifying patterns, tracing the flow of funds, and identifying suspicious or illegal activity. Blockchain analytics can be used for a variety of purposes, including risk management, fraud detection, compliance, and intelligence gathering.
Some applications of this are:
1) Let’s say a consumer who wants to make sure that the diamond they are purchasing is not a blood diamond and has been mined ethically can use blockchain analytics to trace the origin of the diamond from the mine to the final consumer. Ensuring that the diamond is ethically mined and not involved in any illegal activity.
2) With all the ransomware attacks, hacks to steal funds from users and the recent FTX fiasco blockchain analytics’ widespread adoption has become apparent because if all the transactions were done in blockchain it would have been much easier to trace these crimes and punish the real culprit sooner.
3) Financial institutions can use blockchain analytics to comply with anti-money laundering (AML) regulations by adopting blockchain for their transactions processing and developing an analytics solution which tracks these transactions, detect any suspicious activity and report them in real-time. This also helps them to prevent financial crimes like money laundering, terrorist financing, and fraud and pay hefty fines for failure to report or track them.
Why is Blockchain Analytics Important?
Blockchain analytics has become increasingly important in today’s world due to the growing use and benefits of blockchain technology in various industries. It is important for a wide range of its user some of which are given here with an example.
From a regulator’s perspective, it can help them identify and track the illegal activity on a blockchain. For example, by analyzing transactions on a blockchain, regulators can trace the flow of funds and identify patterns of suspicious or illegal activity, such as money laundering or terrorist financing. This can help regulators to better understand the risks associated with blockchain technology and develop appropriate regulations to mitigate these risks.
In the Supply Chain management industry, Blockchain Analytics can be used to trace the origin of goods, ensuring that they are not counterfeit and meets industry standards. This can be used by businesses to supply original products and protect their brand image and also by a consumer to ensure that the product they are buying is not counterfeit and meets industry standards.
Furthermore, in the field of smart contracts, blockchain analytics can help to ensure that smart contracts are functioning correctly and that they are not being used for illegal activities. This can help to improve the overall security and reliability of smart contracts, which is important for businesses and regulators alike.
In conclusion, blockchain analytics is an important tool that can help regulators and businesses to detect and prevent financial crimes, improve efficiency, reduce costs, and increase transparency. As the use of blockchain technology continues to grow and expand, the importance of blockchain analytics will also continue to increase.
How Does Blockchain Analytics Work?
Blockchain analytics work similarly to any other data analytics technique which typically involves several steps, including data collection, data processing, and data analysis. We have broken down these into simple and easy-to-follow steps.
The first step in blockchain analytics is the collection of data. This is done by using specialized software to scrape data or APIs provided by software companies to extract data from a blockchain, such as transaction data, block data, or smart contract data. The collected data is typically stored in a database, such as a relational database or a NoSQL database, for further processing and analysis.
Once the step to collect data is completed the next step is to process and prepare it for analysis. This involves cleaning and normalizing the data, as well as converting it into a format that is suitable for analysis. For example, the data can be converted into a format that can be analyzed using a visualization tool, such as a graph or a chart or any other form of visualization which is easier for its user to understand.
After this, the final step in blockchain analytics is data analysis. This can involve using various popular techniques and tools like excel, tableau, powerBI or python to analyze the data and extract insights for which purpose the analysis is done.
For example, data visualization can be used to create relational diagrams that provide a visual representation of the flow of transactions from one person or business to another, this makes it easier to identify the flow of transactions. You can also use Machine learning to identify patterns or anomalies, such as suspicious transactions. And statistical analysis can also be used to quantify the significance of the data and make predictions about future trends that these types of transactions might follow.
In summary, Blockchain analytics can be performed in several steps, as discussed above. To get into blockchain analytics, one should have a strong knowledge of data science and programming, as well as a good understanding of blockchain technology and its underlying principles.
Blockchain Data Analytics Tools
Blockchain data analytics though is a new concept there are various tools that are already developed by different companies which help users to process and analyze data from a blockchain. These tools can be used for diverse purposes, including tracking transactions, identifying patterns, tracing the flow of funds, and identifying suspicious or illegal activity. Some of the players whose blockchain data analytics tools are being widely used include:
It is a leading blockchain data analytics company that provides tools for law enforcement, government agencies, and businesses to track and investigate illegal activity that might be happening on the blockchain.
The various solutions it offers are Chainalysis KYT(Know Your Transaction) which is used to monitor high-risk transactions in real-time, Chainalysis Reactor to investigate historical transactions and Chainalysis Kryptos which helps in functions related to research and uncover illicit activities.
The company works with various organizations, including government agencies, financial institutions, and cryptocurrency exchanges, and its pricing plans are based on the number of transactions and the type of service.
This is also another company working on blockchain data analytics. Its various solutions include tools like Elliptic Discovery used to find illicit activity on the blockchain, Elliptic Nexus helping to monitor transaction activity in real-time, and Elliptic Navigator to conduct investigations. Similar to chain analysis it works with various organizations, including financial institutions, cryptocurrency exchanges, and government agencies. Its pricing plans are based on the number of transactions and the type of service one uses.
It is one of the well-known players in this industry and provides its users with various solutions such as Glassnode Studio which allows for monitoring, analysing and visualising on-chain data, Glassnode Alerts is the one that provides real-time alerts for on-chain events and Glassnode Insights is their market intelligence platform. They furnish data on various blockchain networks such as Bitcoin, Ethereum, Litecoin and more.
They work with various organizations such as financial institutions, crypto-funds, exchanges, and blockchain startups. Its pricing plans are also based on the number of requests and the type of access one needs.
It supplies a transparent and reliable source of on-chain data, including market data, network activity, and on-chain metrics, allowing users to gain a deeper understanding of the crypto assets and the underlying blockchain networks.
Chain Intelligence is another name in blockchain data analytics company that has a plethora of solutions such as Chain Intelligence Explorer, Chain Intelligence Reports and Chain Intelligence Dashboard which helps its user to monitor and analyze blockchain transactions in real-time. It works with various organizations such as financial institutions, cryptocurrency exchanges, and government agencies.
Above we presented some paid solutions if you are planning to start a blockchain analytics startup and need little hastle in terms of developing these solutions. There are some free and open-source solutions as well if you are an ethusiast and ready to put extra effort in developing soulutions by yourself, here are some examples.
Transactions on the Bitcoin blockchain can be tracked and analysed using BitIodine, an open-source blockchain data analytics tool. Though being open-source It offers a number of functions, including network analysis, address clustering, and transaction tracing all in the bitcoin blockchain.
OXT (OpenExplorer) is another open-source blockchain data analytics tool that can be used to explore and analyze the Bitcoin blockchain. It also provides diverse features like transaction tracking, address clustering, and network visualization to name some.
Another open-source blockchain data analytics tool is BlockSci, irrespective of other tools stated above, it can also be used to analyze other blockchain networks like Ethereum, and Litecoin along with bitcoin. Its feature includes transaction tracking, address clustering, and network visualization.
It is possible to study many blockchain networks, including Bitcoin, Ethereum, and Litecoin, using the open-source blockchain data analytics application GraphSense. Similar to many other open-source blockchain analytics tools It offers functions like network visualization, address clustering, and transaction tracking.
Blockchain Data Analytics Course
If you are serious about starting your career in this field here are list of some courses which will immensly help you in developing your career.
- ETH Data Science Course: This is a free course by Omni Analytics Group which will help you a lot if you are planning to learn blockchain analytics.
- Blockchain And Smart Contract Security by SANS Institute: This course covers the fundamentals of blockchain forensics and how to investigate blockchain-based crimes.
- Blockchain Courses By Chainanalysis: You can find the resources here very helpful if you are starting out in blockchain.
- Bitcoin and Cryptocurrency Forensic Investigation(OSINT): This course teaches you to Investigate Bitcoin and Ethereum Cryptocurrency, Unmask wallet, Txn, Solve real cases and more… using Open Source Tool
- Blockchain Analytics Course By MetricsDAO: This is free course you can find in youtube which helps you get started in blockchain analytics.
These are some of the popular blockchain analytics courses available online in the present time, with a variety of features and focuses from the technology, business and data analysis perspective. Some of them are paid courses, and some of them are free. It’s always good to check the reviews of the course before you start, and also make sure to check the prerequisites and the level of the course.
In conclusion, the subject of blockchain analytics is expanding quickly and is becoming more and more significant as more businesses utilize the technology. Blockchain data analysis and interpretation capabilities can offer insightful information and support enterprises and related parties in making wise decisions. There are many tools accessible, both paid and free options. Each of them has unique features and abilities that may be applied to a variety of tasks, including tracking the movement of money, spotting patterns, and spotting suspicious or unlawful activities.