Blockchain Analytics: The ultimate tool to understanding crypto

Blockchain Analytics: The ultimate tool to understanding crypto

The importance of blockchain analytics increases alongside the increase in real world usage of blockchains. In this article, we explain what blockchain analytics is and how it can help you make better investing decisions.

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A new paradigm

Data is the new oil in the digital world we live in. The largest companies possess the most amount of data, and their business models are largely predicated on their ability to amass large amounts of data and utilize it well. Users have little control over what data is collected and used and have almost no way to access the sea of data that large institutions keep private for their own benefit. The rise of blockchain technology offers an alternative future – a future where information and data are more open and accessible, not built behind the walled gardens of a few conglomerates, and where the information gap between an individual and an institution is marginal at best. While blockchains are transparent and their data available to anyone, fully utilizing it is challenging for most. Analytics platforms make it more accessible for the masses to gain insights from blockchain data.

What is blockchain analytics?

Let’s begin by explaining what a blockchain is.

Blockchains are cryptographic ledgers that are immutable, distributed and typically decentralized. They are made up of blocks of data that are chained together in chronological sequence.  Due to their decentralized and open nature, a public blockchain is transparent. Anyone can take a look at the transactions that are occurring in real time and understand what’s happening on the blockchain. 

Blockchain analytics is the process of analyzing and interpreting data that is stored on a blockchain. It involves using specialized softwares and techniques to extract information from the blockchain and gain insights into the behavior of users, transactions, and other aspects of the blockchain ecosystem. Doing so allows users to gain valuable insights that would otherwise be hidden in traditional systems.

This has tremendous value to regulators, law enforcement, companies and even individuals like you and I. Regulators and law enforcement have the ability to have full visibility on illicit transactions and track the movement, allowing them to uncover the identities of the criminals over time. Companies are able to have full visibility over transactions made by vendors or third parties and ensure legitimacy of those claims. Individuals are able to have visibility on what the best investors are doing, the inner workings and activity of the companies they've invested in to make more informed decisions, leveling the playing field. 

How does it work?

To make data stored on a blockchain usable, it needs to be extracted and processed into convenient formats. Raw blockchain data would need to be extracted from nodes and decoded to ensure accuracy and coverage of all events and transactions. Ethereum ETL an open source project, whose main contributor is a co-founder of Nansen, allows users to convert blockchain data into convenient formats such as CSV. Google's BigQuery is another publicly available source of blockchain data.

Nansen enhances blockchain data processing by enriching the data sets, with wallet labeling being a key enrichment. Crypto wallets are digital wallets used to store cryptocurrencies, and each wallet has a unique address that serves as a unique identifier during transactions. Nansen provides two types of wallet labels: activity categorization for individually owned wallets and entity naming for companies and institutions. For example, an individually owned wallet that actively trades on DEXes would have the label 'Heavy DEX trader', while a wallet owned by Jump Trading would have the label 'Jump Trading'.

Having wallet addresses labeled allows us to know who is carrying out transactions on top of having visibility of the transactions that are occurring. This gives users of Nansen's analytics platform the ability to track specific entities and be aware of what transactions they are executing at any given time. Knowing who and what kinds of transactions are happening gives users additional clarity and the ability to make better investment decisions.

An example of the benefit of tracking entities is tracking centralized exchange holdings. In the traditional finance world, the public has limited visibility on the real-time holdings and assets of the banks that are holding their deposits, leading to massive speculation and fear whenever rumors are spread. On the other hand, crypto exchanges can offer their users ways to verify that their current holdings are backed and give the public a view of the current liquidity that the exchange has. Many exchanges have partnered with Nansen to provide the public with a real-time view of their holdings.

Source: Nansen Portfolio's Binance Entity Dashboard

Labeling exchange wallets allows us to track their token flows

Source: Nansen Pro

Use cases of blockchain analytics

Individual and professional investors

In the noisy crypto markets, finding true alpha is invaluable. Nansen enables you to identify emerging trends, conduct due diligence on tokens and NFTs, and monitor risks on your existing positions. If you notice many funds accumulating a token, it might be a good time to buy. If notable NFT holders start selling a project's NFTs, reducing your exposure could be wise. We expand more on the use cases for crypto traders and NFT traders in their respective articles.

Constant monitoring of on-chain activity provides a significant advantage. Our users have avoided losses during the UST de-peg by setting alerts on the Curve pool and receiving notifications on large outflows via Nansen's Smart Alerts. You can customize these alerts based on your parameters and receive them on your preferred platform, such as Telegram, Discord, or Slack.

Professional investors can leverage blockchain data to do due diligence on potential investments, monitor the growth of their current portfolio projects, and minimize risk by keeping an eye on key points of failure. Leading funds such as a16z and Pantera, are already using Nansen Query to improve their performance. 

Tracking activity of crypto funds gives us insight into their strategy and holdings

Source: Nansen Pro

Crypto teams and businesses

Crypto businesses and teams can use blockchain data for business intelligence, user and product analytics and even to grow their ecosystem. This can be done by studying the activity of both current and potential users to gain insights into their habits and needs.

The best teams such as, OpenSea and MakerDAO, are already using Nansen Query to get programmatic access to the highest quality blockchain datasets to stay ahead of their competition.

Regulators and compliance teams

Such teams and organizations are able to observe transactions on the blockchain in real-time and spot illicit activity or fraud. Regulators are able to follow the transactions and track the flow of capital involved in such activity. Situations like the FTX saga could have been uncovered much earlier and stopped by keeping a keen eye on the on-chain activity that Alameda and FTX were doing and requesting more transparency on the intent behind some of the moves.

Future of blockchain analytics?

At its core, a blockchain-powered future is one that’s transparent and inclusive. Having more data transparency allows for more analysis and experimentation to occur. It democratizes the power that comes along with ownership of data and creates a more inclusive future. Power is no longer limited to institutions or large corporations but instead in the hands of everyone with an internet connection and a computer. 

Having business transactions and financial records of a company on an open ledger allows for the same amount of scrutiny in the private markets as the public markets. Analytics can help uncover fraudulent activity and reduce the chance that we get another FTX-like situation. 

Blockchain analytics can empower better predictive modeling to be done. By analyzing the transaction data of users of the blockchain, you are able to come up with predictions on future trends. This can have interesting use cases such as using on-chain data in algorithmic trading. Exchanges can analyze users' buying behavior and recommend new tokens that the user has never bought before but might be interested in. 

Perhaps the most powerful thing that blockchain analytics enables is that the average person gets more data savvy and is empowered by analytics. Over time, more people will understand that data is now available to them and get more familiar with leveraging it to make better and more informed decisions. Blockchain analytic tools become invaluable in their daily lives. 


The importance of blockchain analytics increases alongside the increase in real-world usage of blockchains. Blockchain analytics allow you to make full use of the transparency that comes along with the technology. It helps you to see beyond the surface to understand what’s actually happening on-chain. It gives everyone the opportunity to keep up with what smart money is doing and make better investment decisions. Blockchain analytics is a crucial tool that law enforcement leverages on. It allows them to trace transactions and screen for illicit or suspicious activity that’s happening on-chain. While the idea of having access to so much data might be a foreign concept to most people today, it’s only a matter of time before users understand the usefulness of blockchain analytics tools and become smarter money. 

Start exploring the blockchain world today!


The authors of this content and members of Nansen may be participating or invested in some of the protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Nansen does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Nansen at any time without notice. Nansen accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.