- by Fueng Lee, bsvdata.com, Oct. 2022
Blockchain analytics is a process of on-chain data collecting, classifying, and monitoring blockchain addresses, transactions and scripts to detect various activities and actors on the blockchain.
As the blockchain, metaverse and crypto related digital assets trading and speculation continues to dominate the blockchain market, this has created a huge market for blockchain data analysis. There are three major types of business on blockchain data analysis:
- Data classification, indexing and distribution
- Money tracing for financial investigation and compliance
- Economic analysis on businesses, tokens and trading activities
Obviously, this market highly depends on the speculative bubble of the crypto-world. But as the boom fades and regulation comes to play, the market share will slowly be diminished and transited to a utility/real-world centric market. Meanwhile, BSV Blockchain is the only proof of work system prepared for industrial and commercial usage.
Data Indexing & Delivery
For all blockchain analytics companies, data indexing is the first thing to be built or to be introduced from a third-party.
Applications store essential data or equivalent hash on the blockchain for the integrity, publicity and authenticity of the original records. Transactions with data from various applications are processed in time-stamped order and put into a block every 10 minutes. However there is no built-in mechanism to identify, classify and query the data. So that creates huge demand for data indexing, streaming, and query tools and third-party services, which play multiple roles to fit different types of business needs.
Blockchain data indexers have already been widely adopted by the industry. The benefits are obvious :
- Reduce cost and complexity to access blockchain
- Enable real-time data sharing and tracking
- Join on-chain and off-chain data
- Enable traceability and authenticity of data
- Allow fast access to data upon geographic location
Technically, there are mainly three levels of indexing:
- Basic structure indexing: such as blocks, transactions, addresses
- Sub protocols indexing: such as tokens, contracts, structured content
- Applications in-depth indexing: such as app or specific type of tx in app
Chain analytics service providers out there built their products upon different levels, mostly on level 1 and 2, and rarely reached level 3 because of the complexity and a lack of standards. But in BsvData we put applications first. The result of indexing would be to serve the data and deliver to any clients who need it, or to build more higher level services such as business analytics.
Top companies provide services around blockchain data indexing and delivery :
On BitcoinSV, the only scalable blockchain on proof of work, the indexing would be a different story. Though technically it shares some similarities with other blockchains, the great scalability and capacity of bsv blockchain would make it much more sophisticated. Importantly the focus of the market would not be just around digital virtual tokens that have no connections to the real world, rather it would be utility centric such as property trading, logistics and supply chain tracing, energy bills…etc.
Blockchain analysis technology is used by financial institutions, crypto exchanges and businesses, and law enforcement authorities to prevent and investigate cryptocurrency crimes worldwide, the core technique is money tracing. I summarized major types of usage for fund tracing on blockchain.
- Exchange/Wallet hacking investigation
- Tracing activities of money laundering and Illicit transactions
- Compliance and risk-management of Crypto businesses
Address Recognition: One of the main applications of Crypto-Blockchain analysis software is to associate addresses with real-world identities by applying multiple techniques.
Transaction monitoring and Risk analysis : Monitor every transaction related to businesses and assess risk based on the fund’s origin, money flow, and the history of sender or recipient wallets, etc…
Companies: Some big names in the blockchain analysis market for money tracing
The scenario would be different in the bsv blockchain system as the following reasons:
- Bsv is not designed for anonymity and the path is to integrate identity.
- Bsv is not like BTC and other coins using coin-mixing which facilitate legal tx
- In bsv systems, usually an address would not be re-used because of privacy and security
- The level of scalability in bsv is much higher, making tracing much harder.
So the market paradigm would be very different for bsv as it’s not a friendly place for illicit activities, whether it’s money laundering, wallet hacking or financial fraud. The major use cases for money tracing on Bsv would be compliance, taxation, auditing and trials for business and individuals, which all require the connection between a key and an identity.
Economic analysis on business
The growth of the blockchain market created demand for more sophisticated blockchain analytics softwares and services and attacked mainstream financial institutions to invest in all sorts of companies focusing purely on blockchain analytics.
This type of company provides tools and services to analyze the performance of blockchain networks and smart contracts protocols, give insights into these networks and helps people understand the economics and user behaviors and thus make better decisions.
Currently there are three types of businesses on economic analysis of blockchain:
- Macro blockchain network analysis
- Cryptocurrency assets trading market tracking and monitoring
- Token/NFT market analysis
However, currently the most significant use case is for investment analysis on the price/volume movement of digital assets. Such as crypto-exchange trading volume, money flow or OpenSea NFT trading volume. Besides, there are multiple types of entities participating in the network for economic incentives, such as miners and exchanges.
Top companies for economic analysis on blockchain:
Compared with Ethereum and other blockchains, analytics on BSV can do so much more because of the turing completeness of Bitcoin script and the ability to process massive transactions and store big data. Not just NFT and Defi, but EDIs, contracts, IoT, logistics, business entities...etc
From my observation and analysis, the blockchain data analytics and data solutions are already a multi-billion dollar industry. More and more tech giants and venture capitals have realized the importance of blockchain for data integrity. Big data analytics plays a key role in this ecosystem and builds the foundation for blockchain data distribution.
The scalability, integrity and traceability of the Bsv Blockchain are perfect conditions for business analytics which the conventional internet cannot be compared with. When BSV becomes more and more adopted in the tech and blockchain space, the ledger will be the center for publishing data and trading goods and services. To me there is little doubt this will come true because of the economical and the technological advantages of Bitcoin, but it would take several years for the market to evolve. It would bring new paradigms of business-market relations. I expect the overall market would shift from virtual assets speculations to the utilization and tokenization of the real world trades and transactions in a few years.
At BsvData, we focus on the technology and scalability that would grow with the network. We’re a major source of statistics and performance for the bsv ecosystem and we aim to become a major source for blockchain data analytics and delivery.