In the cryptocurrency market, data has always been an important tool for people to make trading decisions. How can we clear the fog of data and discover effective data to optimize trading decisions? This is a topic that the market continues to pay attention to. This time, OKX specially planned the Insight Data column, and jointly with NanSen, CoinGlass, AICoin, Coingecko and 0x Scope and other industry data platforms to start from common user needs, hoping to dig out a more systematic data methodology for market reference and learning.
The following is the sixth issue, which was jointly discussed by the OKX Web3 team and the NanSen team around topics such as 9 basic questions that beginners must ask when getting started with Web3. We hope it will be helpful to you.
About Nansen: Nansen is a blockchain analytics platform that enriches on-chain data with millions of wallet tags. Nansen helps crypto users identify opportunities, conduct due diligence, and protect their portfolios using real-time dashboards and customized alerts.
About OKX Web3: The team brings together top talents with deep technical background and rich industry experience. Over the years, they have continuously innovated and practiced in the field of Crypto, and continue to focus on user experience and security. At present, the OKX Web3 wallet is the most comprehensive decentralized multi-chain wallet on the market, supporting more than 90 public chains, with built-in wallets, transactions, NFT markets, DeFi, and Dapp discovery. Users can view multi-chain tokens, NFTs, and DeFi assets through the App, plug-ins, and web pages.
1. What basic data dimensions do beginners usually pay attention to when entering the Web3 world?
Nansen: The easiest way to learn about on-chain data is through on-chain practice, such as exchanging on a decentralized exchange (DEX) and then looking up transactions on a block explorer like Etherscan. Being able to read the details of a transaction on a block explorer is core to understanding Web3 data analysis.
Beginners should focus on transaction data first, then gradually move into traces and logs. A potential progression is to first learn how to read easily digestible aggregated transaction data (e.g. via Nansen or Debank), then explore transaction data (via block explorers), then move on to traces and logs (via block explorers), and finally analyze raw data from data providers (e.g. Nansen). Browsing block explorers is fundamental to understanding this data.
There is a lot of data on the blockchain based on the activities that take place on it, but how do you really understand that activity? Fortunately, the Ethereum Virtual Machine (EVM) chain is standardized, and the raw data of most interactions is stored in a few common tables:
• Transactions: Detailed information of each transaction, including sender, receiver, transaction amount, handling fee and timestamp.
• Traces: Detailed records of each step in the transaction process, covering details such as function calls, transfers, and smart contract execution.
• Logs: Event logs generated by smart contracts to record the occurrence of specific events. These logs are usually used to track state changes and event notifications.
Through these tables, users can gain in-depth insights into activities on the blockchain, such as analyzing transaction patterns, tracking capital flows, and understanding the execution of smart contracts. This data not only helps us understand the details of a single transaction, but can also reveal market trends and behavioral patterns on a larger scale.
OKX Web3: We recommend that newbies who want to learn about Web3 pay attention to information in three dimensions: market data, network data, and community and development data.
First, market data includes:
• Price Data: Real-time and historical price information for cryptocurrencies and tokens.
• Market Cap: The total value of a cryptocurrency or token, calculated by multiplying the current price by the circulating supply.
• Trading volume: The amount of cryptocurrency or tokens traded during a specific time period.
• Transaction records: Transaction details recorded on the blockchain, including sender, receiver, amount and timestamp.
Secondly, network data refers to node distribution and gas fee distribution. The geographical and logical distribution of nodes in the network affects decentralization and security, while transaction fees on the blockchain, including gas price, gas limit, and priority fee, can reflect the usage of the network.
Finally, community and development data refers to developer activity and community engagement. Specifically, it includes the number of active developers, the number of commits, and the contribution indicators to the blockchain project, as well as the size and activity level of the community supporting the blockchain project. This data can be obtained through forums, social media, and events. Currently, most Web3 discussions take place on Twitter, Telegram, and Discord.
2. How to grasp market trends by analyzing transaction data on blockchain?
Nansen: For beginners, on-chain transaction behavior analysis is key to understanding market trends, and it can provide us with deep insights into what is actually happening on the blockchain. Unlike traditional finance (TradFi), all transactions on the blockchain are open and transparent, which allows us to interpret and analyze them and gain more market insights than TradFi, such as who is buying or selling. With on-chain data, we can perform many types of analysis, such as determining the number of daily active users and their activities. We can query all daily addresses and see who their counterparties are, or use data providers to complete these tasks.
Specifically, we can explore things like the distribution of active addresses, the behavior of top entities, the number of smart contract deployments, transaction volumes, and user preferences across entities. This information is more than just surface-level, and through smart currency and wallet tagging features on platforms like Nansen, we can dig deeper into market trends. For example, understand which wallets are accumulating specific assets, which entities are influential in the market, and the potential impact of these behaviors on the market.
Through these analyses, novice users can not only understand the basic situation of on-chain transactions, but also gain insight into the complex dynamics behind the market, so as to make more informed trading decisions. This transparency and data availability are the significant advantages of blockchain over traditional finance, giving every participant the opportunity to understand the market more comprehensively.
OKX Web3: We believe that for novice users, when conducting on-chain data transactions, they can pay attention to the dynamics of mainstream assets such as stablecoins, BTC and ETH, and pay attention to the market heat on the chain.
First, the trading volume and circulation of stablecoins can reflect market sentiment. When the market is uncertain or volatile, users tend to transfer funds to stablecoins to avoid risks. In addition, the inflow and outflow of stablecoins can also indicate the liquidity of the market. For example, a large number of stablecoins entering the exchange may indicate an impending buying pressure, while a large outflow may mean selling pressure.
Of course, it is also important to pay attention to the dominance of BTC and ETH, which reflects their share of the total market value. When BTC dominance rises, the market may be more inclined to Bitcoin, while when ETH dominance rises, the market may be more inclined to Ethereum and related decentralized financial projects. By analyzing the dominance of these two, we can understand the buying and selling preferences of market participants.
At the same time, on-chain market heat is also an important indicator.
Among them, an increase in trading volume usually indicates increased market activity, and more buying and selling activities may lead to greater price volatility. Sustained high trading volume can confirm the strength of market trends. For example, in a bull market, high trading volume accompanied by rising prices indicates a strong upward trend. In addition, an increase in the number of active users indicates that more market participants are using and trading a specific cryptocurrency or blockchain platform, which may drive prices up. Finally, the number of active users is an important indicator of the health of a blockchain project. Projects with high user participation usually have stronger community support and more stable development prospects. By paying attention to these indicators, novice users can better understand market dynamics and make more informed trading decisions.
3. What information does smart contract interaction data contain? What indicators should novices focus on?
Nansen: Smart contract interactions in cryptocurrencies contain key information such as the addresses involved in the transaction, the functions called, the tokens transferred, the gas fees paid, and the input data. For newcomers, the first thing to understand is who initiated the transaction and what function was called. Once you can read a block explorer, you will be able to better understand smart contracts and the interactions between wallets and other contracts.
OKX Web3: Smart contract interactions contain a lot of key information that is essential to understanding the behavior and impact of these contracts. Here are the 6 main elements:
1. Trading simulation:
The purpose of simulating transactions is to predict the results of interacting with a smart contract before actually executing it on the blockchain. The key is to understand the expected state changes, potential errors, and gas costs. Newbies should use a transaction simulator to better understand how their interactions affect the blockchain and avoid costly mistakes.
2. Permit 2, authorized amount:
It is very important to grant a smart contract permission to spend a specific amount of tokens on behalf of the user. Key information includes the maximum amount the contract is allowed to spend and the duration of the authorization. Newbies should monitor the authorization amount to avoid over-authorizing the contract and potential token theft.
3. Gas Fee:
Gas fees refer to the cost of executing transactions on the blockchain. Key information includes gas price (cost per unit of gas), gas limit (maximum amount of gas that can be used), and total gas fee. Understanding gas fees can help newcomers manage transaction costs and prioritize transactions during times of network congestion.
4. To-Address:
The receiving address is the destination address of a transaction. The key information is the destination address of a transaction or smart contract interaction. Newbies must verify the receiving address to ensure that funds and interactions are sent to the correct destination to avoid asset loss.
5. Ownership:
Ownership is used to determine who controls a smart contract or its assets. The key information is the address or entity that has administrative rights to the contract. Newbies should check contract ownership to understand who controls the contract and assess potential risks associated with centralization.
6. Upgradability:
Upgradability indicates whether a smart contract can be modified after deployment. Key information includes the existence of an upgrade mechanism and the conditions for upgrading. Understanding upgradeability is critical to assessing the stability and security of a contract, as upgradeable contracts can be changed by their owners, potentially introducing new risks.
4. How can wallet tracking tools help new users gain insight into market trends?
Nansen: Wallet tracking tools help users gain deep insights by displaying important key metrics in a single view.
These metrics include the net value of the wallet, the protocols used, and a decoding function that makes transactions easier to understand. Nansen provides entity-level breakdowns, where users can view all addresses, net value, protocols used, and decoded cross-chain transactions for a specific entity in a single view. For newcomers with limited market knowledge, these tools can also help them track complex wallets and decide on transactions on their behalf.
OKX Web3: Using wallet tracking tools can help new users gain some market insights.
First, wallet tracking tools can show the flow of funds between different wallets, exchanges, and protocols, helping users understand liquidity trends and identify potential buying and selling pressures. In addition, by tracking the movements of large users (whales), users can gain important market insights, as the trading behavior of whales can have a significant impact on market trends.
Secondly, these tools allow users to view the distribution of assets in various wallets, which helps them understand the trading strategies of successful traders. At the same time, by analyzing wallet holdings, users can identify protocols or projects that the market prefers, which helps make more informed trading decisions.
Finally, tracking the buy and sell activity of different wallets can provide insight into overall market sentiment, revealing whether players are bullish or bearish. Therefore, a sudden large inflow or outflow of funds from an asset can indicate a change in market sentiment, helping users predict potential market moves.
In fact, users can try to use some data analysis tools, such as fundamental analysis, and refer to the following:
1. Dune: Provides custom queries and dashboards to help users track on-chain activities.
2. Artemis: Focuses on decentralized financial project analysis, providing comprehensive insights into protocol performance and user activities.
3. DefiLlama: Focuses on decentralized financial analysis, providing data on TVL and other key indicators of different protocols.
4. Rootdata: Provides detailed data on various blockchain projects, including performance indicators and ecosystem analysis.
5. Glassnode: Focuses on on-chain data, providing a range of metrics to analyze the health and activity of blockchain networks.
6. Nansen: Combines on-chain data and wallet tags to provide insights into fund flows, wallet holdings, and market trends.
7. Blave: An emerging tool that provides data analysis and insights into blockchain projects and market activities.
Sentiment analysis tools can help you gain a deeper understanding of the market. You can refer to the data content of these three products:
1. Santiment: Provides on-chain, social, and development data to analyze market sentiment and identify trends.
2. Mest: Aggregates social media and community sentiment data to provide insights into market sentiment.
3. Kaito: Combines multiple data sources, including social media, to provide a comprehensive view of market sentiment.
Learning to use these tools effectively can help users better understand market dynamics, identify trends early, and make more informed trading decisions.
5. When analyzing DeFi protocols, which key indicators need to be evaluated?
Nansen: When researching different decentralized finance protocols, we look at a variety of metrics that may be different for each application. While these metrics are not exhaustive, it can be helpful to pay special attention to certain key metrics when looking for new opportunities.
In the context of lending protocols, metrics like TVL (total value locked), utilization, and number of users are starting points for assessing the overall activity of a platform. However, tracking significant inflows to projects can be particularly interesting when evaluating new opportunities. Significant inflows can indicate new liquidity injection activity in certain pools, which can be a good opportunity for traders seeking passive income.
Another key metric is to look at the types of entities or depositors in the protocol that can be tracked. Whether it is funds, smart contract wallets, or other Defi wallets of your preference, they can all be possible counterparties. It is important to note that these metrics do not cover risk, which is the overall framework that needs to be considered when using decentralized financial protocols.
OKX Web3: We recommend paying attention to at least the following indicators, such as on-chain data, community feedback, team and builders, etc.
The first is onchain data, which includes total locked value (TVL) and transaction volume. TVL is an indicator of the scale and popularity of the protocol. High TVL reflects the trust and widespread use of the protocol by users. Transaction volume shows the activity and liquidity of the protocol. High transaction volume usually represents strong user demand and high trust.
The second is community feedback, including activity and sentiment on Twitter, Telegram, and Discord. Positive feedback and discussions on these platforms can reflect the communitys attention and recognition of the project, and are key indicators for evaluating community participation and user satisfaction. In terms of team background, the background and experience of the project team and the support of prestigious investment institutions are important factors in evaluating the potential for project success.
In addition, longevity is also an important consideration, including the historical operation time of the project and continuous development activities. A project with a long history and continuous development is usually more reliable and durable.
Finally, there is the smart contract audit. The audit report conducted by a third party can reveal potential vulnerabilities and security risks in the smart contract and ensure the safety of user funds. These dimensions combined can comprehensively assess the health and market potential of the project.
6. How are address tags used in on-chain data analysis? What is their actual purpose?
Nansen: Even though blockchain data is public in principle, in practice it is very difficult to interpret it - since most of it is not human-readable. Wallet tags are a way to turn large amounts of data into a form that anyone can easily digest. At a high level, address tags are how we label and identify wallet addresses based on their behavior/actions on-chain. Given that there are millions of addresses with different on-chain footprints, tags allow us to categorize all of these wallets by their behavior and allow users to quickly find what they are looking for.
The exact identity of the wallet owner is often unknown, but we categorize wallets and tag them with labels and emojis. These can be low-level, like Dex Trader, meaning the wallet uses a DEX, or more complex and useful, like our 7d Smart Dex Trader section, which is the most profitable DEX traders in the last 7 days. By tagging the largest database of wallets, our users can gain insight into the types of wallets performing trades and drill down to what they are interested in or discover high signal addresses based on their needs.
OKX Web3: Generally speaking, address tags have three functions:
First, in terms of identity identification and management, address labels are used to identify the association of a specific individual, entity, or organization with a specific address. For example, labeling an address as Exchange A or XYZ helps track and manage their transaction history and activity types, such as deposits, withdrawals, or transactions, making it easier to classify and analyze transactions.
Secondly, in terms of risk management and compliance, address tags are used to create whitelist (trust) and blacklist (risk) lists. This is essential for monitoring and managing risks, such as preventing funds from flowing to addresses suspected of fraud or illegal activities, and complying with the legal framework of Anti-Money Laundering (AML) and Know Your Customer (KYC).
Finally, in terms of market analysis and research, the marked addresses help with behavioral analysis and understanding users’ trading behaviors, preferences, and capital flow paths. This is very useful for market research and user behavior analysis, and combined with other data sources such as social signals and market indicators, it can assess the activity and trading strategies of specific market participants.
7. Why is on-chain fund flow analysis important?
Nansen: Analyzing fund flows is crucial because it reveals the funds buying and selling behavior. As one of the most knowledgeable players in the market, the actions of fund managers are often instructive. Following their trading trends can help users make appropriate decisions early.
Once you observe funds flowing in or out over a specific time period, further analysis is needed to understand the motivations behind it. For example, large inflows into a fund could be a sign of preparing to distribute funds to other addresses, or these flows could simply be part of an internal allocation. For outflows, the key is to track where the funds are ultimately sent. For example, token staking and deposits are both considered outflows, but the meanings behind them are completely different.
OKX Web3: On-chain capital flow analysis is a key market research tool that can reveal market sentiment and development trends, providing important reference for trading decisions.
First, by analyzing the flow of funds, we can determine the overall sentiment of the market. Large amounts of money flowing into a particular asset usually indicate optimism in the market, while large amounts of money flowing out may indicate pessimism in the market. Second, changes in the flow of funds can often predict the direction of market trends in advance. Continuous inflows of funds may indicate an upward trend in prices, while continuous outflows of funds may indicate a downward trend in prices.
In terms of risk management, fund flow analysis can help identify unusual activities, such as sudden large fund transfers, which may be a signal that market manipulation or large-scale transactions are about to occur. Monitoring the fund movements of whales (large investors) is also key, as it can provide important insights into the market, helping users observe possible price fluctuations and adjust strategies in a timely manner.
Finally, fund flow analysis provides an important perspective for the trading community when making trading decisions. By understanding the flow of funds to different assets or protocols, asset allocation can be optimized, new opportunities can be identified, and arbitrage opportunities can be discovered.
Currently, there are a variety of excellent on-chain data analysis tools on the market, such as Nansen and GlassNode, which provide detailed analysis of capital flow, whale movements and trading pattern identification, providing powerful market insights and decision support for novice players. Currently, there are some relatively easy-to-use detection tools on the market, such as Nansen, which provides detailed on-chain data analysis, including capital flow, whale movements and trading patterns. There is also GlassNode, which provides a wide range of on-chain data indicators, including capital flow, transaction volume and active addresses.
8. What is holder analysis? How to evaluate the health of a project through the distribution of holders?
Nansen: Holdings analysis involves studying the wallet address distribution and behavior of a specific token, which can reveal patterns, concentration, and potential market impact to a certain extent.
If tokens are highly concentrated in private wallets or in the hands of people known for pump and dump, this is generally a negative sign. In addition, you can also see how many tokens are held by development teams or individuals, as well as indicators such as vested contracts. Using tools such as Nansen, users can further observe the distribution of tokens at the address level and entity level. When analyzing addresses, it is important to distinguish between contract addresses and externally owned accounts (EOAs), and whether they belong to centralized exchanges (CEXs), multi-signature accounts, or other types of entities, which helps to more fully assess the health of the project.
OKX Web3: Distribution insights are a crucial metric when we explore the health of the token ecosystem:
First, by analyzing the distribution of holders, we can determine whether the tokens are concentrated in the hands of a few large holders or widely distributed among many small holders. This good distribution structure usually contributes to the stability of the market and reduces the risk of large entities manipulating the market.
Among them, the reflection of trader behavior shows the activity and sentiment of the market: observing the trading activities of holders can provide a deep understanding of market sentiment and participation. High-frequency trading may indicate speculative behavior, while long-term holding reflects traders confidence in the long-term prospects of the project.
In addition, project stability is closely related to holder distribution: a stable and diverse holder structure helps support price stability. This stability makes the project less vulnerable to large-scale sell-offs or speculative activities, and helps the project maintain long-term sustained growth amid market fluctuations.
Of course, community support and trust are important cornerstones of project development: the breadth and activity of the holder base usually reflects the size and engagement of the community. This community support is critical to the development, adoption, and response to market challenges of a project.
9. What role do social signals and sentiment analysis play in Web3 data analysis?
Nansen: Social signals and market sentiment guide on-chain actions and vice versa. On-chain data provides a way to validate social and sentiment signals, allowing people to see who is actually buying and selling and understand what is actually happening.
OKX Web3: Market sentiment indicators play a key role in trading decisions. By analyzing social signals and sentiment data, we can effectively measure the emotional state of market participants towards specific projects or assets, including optimism, pessimism, or neutrality. These sentiment indicators directly affect traders emotions and market behavior, and are an important basis for evaluating market atmosphere and predicting price trends.
Predicting market trends is one of the important applications of sentiment analysis. Combining social signals and sentiment data for trend analysis can help users predict short-term and long-term market trends. For example, positive sentiment may indicate that asset prices may rise, while negative sentiment may cause prices to fall. Sentiment analysis can provide instant feedback to help traders adjust their trading strategies and risk management plans in a timely manner.
Evaluating projects and market acceptance also relies on social signals and sentiment analysis. By monitoring discussions on social media and the web, you can understand how popular a project or new technology is in the community. Active and positive social media discussions usually indicate that the project is widely recognized and supported, which is crucial for the project team to adjust its strategy and promotion route.
Finally, sentiment analysis plays a key role in risk management and market intelligence analysis. As a warning system for market dynamics and event risks, sentiment analysis can promptly identify sudden negative emotions or social media activities that may indicate market instability or potential negative events. Combined with on-chain data and market indicators, sentiment analysis helps to fully understand and monitor the health and dynamic changes of the market.
Conclusion
The above is the sixth issue of the Insight Data column launched by OKX, focusing on the basic problems commonly faced by entry-level users, hoping to provide them with effective reference. In future series of articles, we will continue to explore more practical data usage/analysis methods to provide references for traders and new players to learn trading and understand the industry.
Risk Warning and Disclaimer
This article is for reference only. This article only represents the authors views and does not represent the position of OKX. This article is not intended to provide (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. We do not guarantee the accuracy, completeness or usefulness of such information. Holding digital assets (including stablecoins and NFTs) involves high risks and may fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professionals for your specific situation. Please be responsible for understanding and complying with local applicable laws and regulations.
