Table of content
Intro
Nowadays, when transactions surge, the need for transparency and security is more pressing than ever. Enter the world of blockchain analytics—the ultimate technology to enhance accountability, security, and insights into transactions.
Read our article to learn more about blockchain analytics, its key aspects, and how it works. We also explain its benefits for businesses and explore its real-world applications.
What is Blockchain Analytics in Simple Words?
Blockchain analytics is like detective work for the digital world. It’s the process of investigating and making sense of the data stored on a blockchain. Imagine a ledger that records every transaction in a digital form, where each block represents a set of transactions. However, the recorded data is rather complex and difficult to understand at first glance. That’s where analytics comes in.
Blockchain analytics involves analyzing these blocks to understand how people are using the blockchain, what they’re using it for, and who is involved in those transactions.
Blockchain analytics involves using special techniques and tools to collect crypto data, interpret all that data, and analyze it. This information helps us understand how people are using the blockchain, what they’re using it for, and who is involved in those transactions. It also sheds light on key patterns and helps to detect suspicious activities like fraud or money laundering.
How Does Blockchain Analytics Work?
Blockchain analytics begins with collecting data from various networks. This data typically includes information about transactions, addresses, timestamps, transaction amounts, and more.
Once the data is collected, the next step is analyzing the data to identify patterns, trends, and anomalies. Analytics tools analyze individual transactions to identify potentially suspicious or fraudulent activity. This can include large transactions, frequent transactions between certain addresses, or transactions involving known illicit activities.
Besides individual transactions, blockchain analytics also involves analyzing the network as a whole – transaction flows, network topology, and the interactions between different entities within the network.
Companies may benefit from heuristic analysis, which implies using predefined rules and algorithms to detect suspicious activity within blockchain transactions. Another useful technology is machine learning (ML) – ML algorithms can help you detect trends and patterns that otherwise aren’t apparent to humans.
Special blockchain explorer tools allow users to explore and analyze data, getting important insights into all activities within networks, transactions, addresses, etc. Examples include Etherscan for Ethereum and Blockchain.com for Bitcoin.
For the best results, organizations may also hire development companies like Broscorp to create custom analytics solutions that are based on exclusive data sources and analysis techniques tailored to their specific needs.
Blockchain Analytics in Numbers
Since the release of Bitcoin in 2009, the Bitcoin blockchain size has grown exponentially nearly 1GB every few days. As of May 2024, it’s close to reaching 5570 gigabytes.
The global blockchain market is predicted to grow up to $163.83B by 2029, at a CAGR of 56.3%. As blockchain and data analytics go hand in hand, the global data analytics market size is expected to increase up to $329.8 billion by 2030 with a CAGR of 29.9% (from 2022 to 2030). And these numbers seem to be true as more than half of businesses are already using blockchain data analytics in some form.
Businesses operating with cryptocurrency use blockchain analytics the most as they leverage big data analytics in blockchain to go beyond the real-time screening of crypto transactions.
Yet, this is just one application of blockchain analytics. Let’s discover more.
Why Analyzing Blockchain Data Is So Important?
Analytics can help businesses in numerous ways, from unlocking new opportunities and building trust with stakeholders to mitigating risks and driving growth.
Informed decision-making
Just like data is the new oil, blockchain data holds immense value for informed decision-making. If you analyze this data thoroughly, you’ll get valuable insights into market trends, the preferences of your customers, and ideas on operational optimization. Consequently, you’ll be able to make the right decisions with confidence.
Transparency
Blockchains provide a transparent and immutable record of transactions, offering insights into supply chain movements, customer behavior, and more. By analyzing blockchain data, you can track product origins in real time, ensure authenticity, and identify potential bottlenecks.
Enhanced security
Blockchain analysis is crucial for identifying and mitigating security threats. When analyzing transaction patterns, businesses can detect suspicious activity and prevent fraudulent actions on the network, which is crucial for companies dealing with sensitive data or financial transactions.
Competitive edge
For businesses of all sizes, staying ahead of the competition is essential. Analytics offers a significant edge by providing important info that your competitors might easily overlook. Thanks to these data-driven insights, you can make better strategic decisions compared to your rivals.
Increased trust
Trust is the cornerstone of blockchain technology, and blockchain data may further strengthen trust with your stakeholders. By providing verifiable data about operations, businesses can build stronger relationships with customers, partners, and investors, fostering trust and credibility.
Moreover, analytics can help you with:
- Transaction accountability. By leveraging analytics, you can ensure transparency and accountability within networks.
- Fraud detection and prevention. Blockchain analytics can help you identify malicious activities. As a result, you can prevent illicit transactions such as money laundering.
- Regulatory compliance. As blockchain analytics can help you provide audit trails and track fund sources and destinations, you can achieve compliance with financial regulations more easily.
- Investigation. You can support forensic investigations in case of security events, enabling law enforcement agencies to trace funds and gather evidence.
Overall, blockchain analytics is indispensable for businesses of all sizes that strive for valuable insights, enhanced security, and regulatory compliance. Using blockchain analytics, you can increase transparency and trust within blockchain ecosystems, thus, getting a competitive edge within your industry.
How to Analyze Data on Blockchain?
Analyzing data involves several techniques and tools, which mostly depend on your specific goals and the blockchain network you’re working with. At Broscorp, we typically follow these key steps:
- Blockchain network selection. We determine which network needs to be analyzed. Popular options typically include Bitcoin, Ethereum, and some others.
- Data access. We access the data through APIs provided by blockchain explorers or directly by running a node. Depending on the use case, we use historical or real-time/streaming APIs of node providers like QuickNode or Alchemy.
- Data extraction/indexing. If we deal with core data like blocks or traces, we don’t need any special processing. For smart contract data, we use different indexing technologies like Subgraphs, Subsquid, and Substreams. These technologies allow us to process smart contract transaction logs/parsed events and make additional web3 calls to the historical nodes to retrieve missing info in events
- Data analysis. For blockchain data analysis, we apply various analytical techniques to derive insights from the data. Depending on the requirements, we can use a datalake and query engine approach or storage optimized for real-time data access.
Tools commonly used for block chain analysis include Python libraries and special blockchain analytics platforms.
Nevertheless, to understand how blockchain analytics work in action, let’s discover some real-life use cases in the next section.
Real Applications of Blockchain Analytics
Blockchain analytics offers a wide array of use cases across various sectors, catering to the needs of regulators, law enforcement agencies, companies, individual investors, financial institutions, and cryptocurrency businesses.
Regulators and law enforcement
Regulators and law enforcement agencies utilize analytics to gain comprehensive visibility into illicit transactions, leveraging the inherent transparency of blockchain networks to track movements and identify criminals. Different companies assist government agencies in detecting fraudulent activities, thereby enhancing regulatory compliance and security measures.
Crypto entrepreneurs
For cryptocurrency teams and businesses, blockchain analytics provides invaluable insights into user behavior, transaction patterns, and market trends. By analyzing on-chain activity, these entities can develop a deeper understanding of their users, driving product decisions and ecosystem growth.
Investors and traders
Investors and traders can leverage analytics to monitor market activities, analyze capital flows, and, again, make informed decisions on investments. When tracking on-chain transactions, they can identify trends and assess market sentiment. Blockchain analytics tools can also allow investors and traders to monitor what other market participants are doing and analyze capital flows to make more informed investment decisions.
Financial institutions
Analytics also plays a vital role in ensuring compliance within financial institutions, enabling banks and other entities to monitor cryptocurrency transactions, mitigate potential threats, and adhere to anti-money laundering and know-your-customer regulations.
Supply chain management
Blockchain analytics also finds application in supply chain management, helping companies improve transparency and accountability. Blockchain technology allows for the creation of a transparent ledger where each transaction or event in the supply chain is recorded as a block. Blockchain analytics can be further used to analyze this data, providing detailed insights into the movement of goods from their origin to the end consumer. This level of traceability enables stakeholders to track the journey of products and verify their authenticity
Government and regulatory bodies
Governments and regulatory bodies widely use blockchain analytics to monitor cryptocurrency transactions for tax purposes and ensure compliance with tax regulations.
Web3 development
Last but not least noteworthy example of blockchain analytics use cases is Web3 development. Web3 developers utilize different analytics tools to ensure the functionality of decentralized applications (Dapps) and smart contracts.
As you can see, blockchain analytics is now indispensable for companies across various industries. What’s next?
The Future of Blockchain Analytics
The future of blockchain analytics appears to be very promising. The methods and capabilities of blockchain analytics are expected to evolve and become more sophisticated.
One of the key aspects of a blockchain-powered future is transparency and inclusivity. With blockchain providing a transparent ledger of transactions, more data becomes available for analysis and experimentation. This democratizes access to data, shifting power away from institutions and corporations towards individuals. The result? Blockchain analytics will empower more people to make the right decisions based on data insights.
Moreover, as global crypto regulations become increasingly stringent, there will be a growing need for blockchain monitoring tools to ensure compliance with anti-money laundering (AML) regulations. Regulatory bodies are going to place even greater emphasis on analytics for tracking virtual assets and detecting illegal activities. So, cryptocurrency businesses will need to implement robust blockchain analytics solutions.
In addition to regulatory compliance, analytics will play a crucial role in mitigating risks associated with crypto-related activities, such as de-risking by banks. By leveraging analytics tools, banks can better manage crypto risk exposure and foster a closer relationship with crypto markets, leading to increased confidence and alignment with regulatory requirements.
Furthermore, blockchain analytics will contribute to promoting financial equity and access, particularly in less economically developed countries. Cryptocurrency and blockchain technology offer a decentralized financial system accessible to just anyone with internet access.
Conclusion
Overall, the future of blockchain analytics looks bright. As transactions surge and the demand for transparency and security grows, blockchain analytics is the ultimate solution for businesses looking for transparency, accountability, and security of their digital transactions.
By using blockchain analytics tools, businesses can set above the competition, meet regulatory compliance, and enhance trust with stakeholders. So, if you want to stay ahead of the curve, it’s time to act. Embrace our blockchain analytics tools and move your business to a whole new level with Broscorp.
Our team of experienced developers can help you create a unique crypto analytics platform based on your specific needs. In addition, we can also help you test your business idea, define the product-market fit, and identify the scope of your product’s MVP. Contact us to bring your idea to life!
