Blockchain analysis is a segment that has been growing rapidly and entire company models have been formed around it. But, before we define it, it is important to understand how blockchains function.

There are two most common types of blockchains (proof of work and proof of stake). Regardless of this fact, the idea is that they form blocks in a predetermined duration. Each block contains batches of transaction data that and the blocks are connected linearly. This means blockchains build up a lot of data over time, and this data can be analyzed and used for various purposes. This sums up the concept of blockchain analysis.

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Why is blockchain analysis important?

At their core, blockchains are basically decentralized public ledgers. The security is data is paramount when participating in such systems. The first main reason is to make sure that the blockchain is functioning correctly. The second is that the ability to conduct blockchain analysis makes it possible for them to be audited.

Blockchain analysis firms usually have tools that allow them to assess transaction data such as volumes, address activity and network activity among others. Some of these firms create analytics tools and offer them as subscriptions to traders and investors looking for data that can help them trade on-chain assets more efficiently. Some of the most popular blockchain analysis platforms include Chainaysis, Messari and Glassnode.

Blockchain transaction analysis

Crypto opponents have argued in the past that cryptocurrencies such as Bitcoin are used for money laundering. However, the opposite is true. The fact that blockchains are public immutable ledgers and their ease of auditability means blockchain transaction analysis may help weed out or flag transactions engaging in money laundering.

Blockchain transaction analysis provides an important edge to authorities in the fight against money laundering. Blockchain analysis tools allow them to track and identify anomalies in transaction data. This is why most exchanges will require you to provide KYC data  (know your customer). This is often part of the AML requirements enforced by regulators. In other words, blockchain transaction analysis enforces crypto regulations.

Blockchain analysis tools

Since blockchain technology has been around for over a decade, the number of tools that can be used for blockchain analysis have been on the rise. Here are some of the top blockchain analysis tools that are currently accessible:

  • Ellipitic- This is a blockchain analysis tool designed for law enforcement agencies and financial institutions. It is mainly used to monitor blockchains for illicit activity.
  • Footprint Analytics- This tool is designed to facilitate proper blockchain data organization. It is available as an API and can be used to observe a wide range of blockchain data including GamFi and NFTs.
  • Global Ledger Protocol- This blockchain analysis tool is one of the most ideal options for organizations to enforce AML practices. It can be used for on-chin surveillance.
  • Glassnode Studio- This is a subscription-based data analysis tool designed for retail and institutional users. It provides on-chain metrics that are traders can use to access key trading data in the market.
  • Coinscreener- This is a blockchain analysis tool that is more suited to crypto traders. You can use this tool to boost your technical analysis.
  • Consensys Diligence- The blockchain industry has many players that require some form of data analysis. This includes developers and startups. The Consensys Diligence tool is designed to provide smart contract audits for such participants.
  • Coin Metrics Atlas- This tool is ideal for institutions in the blockchain industry. It offers access to index, market data, network data and network risk solutions to institutions.
  • Chainbeat- It offers real-time smart contract data analytics.

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Are there free blockchain analysis tools?

Most of the blockchain analysis tools highlighted above require monthly or annual paid subscriptions. However, there are some tools that offer free access to some on-chain analysis metrics. However, it is worth noting that these tools may not necessary offer in-depth information or provide any significant data advantage. Here are some examples of blockchain analysis tools that are available for free.

  • Coinmarketcap– This website lists cryptocurrencies based on marketcap and provides information such as daily, weekly and monthly volumes. It also offers historic price tracking. As well as some additional data regarding the listed digital assets, such as their circulating supply, a summary of what the protocols are about, and the exchanges on which they are listed.
  • Coingecko- It provides similar data to Coinmarketcap.
  • DeFiLlama– This is blockchain analysis tool that provides data on DeFi platforms. This includes data such as the total value locked, amount staked in listed protocols, developer data and much more. It is ideal for analyzing how various protocols are performing.
  • Dexscreener– This is a free tool that allows DeFi users to explore the various protocols, coins, tokens and NFTs within various decentralized ecosystems. For example, you can find Solana-based memecoins and projects by filtering so that it will only populate results from the Solana ecosystem. This also works for multiple other blockchains.

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Blockchain analysis conclusion

As you can see, blockchain analysis is an expansive segment with many different types of users. Tools that novices can find easy to use, as well as those that are tailor made for complex analysis. Most of the light on-chain analysis can be conducted on most of the freely available tools. However, the subscription-based blockchain analysis tools are more advantageous especially for traders.

A classic example is being able to see whether whale addresses have been accumulating or trimming their balances during a specific period. Such information may allow you to assess the level of demand in the market and execute trades with a higher success rate.

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