Litentry this week: the rise of blockchain data analytics, whitelisting, staking, and new office

🌁 Nansen’s fundraising is the talk of the week. But there’s obviously a lot more beneath the surface, so in this article we’ll take a look at what the rise of blockchain data analytics means to us, and Litentry’s upcoming product plans.

👀 First, what happened to Nansen?

Nansen raised a $12M Series A led by a16z, followed by Coinbase Venture, Imtoken Venture, and others. Founded in 2019 in Hong Kong, the company focuses on ETH address analysis. Through wallet labeling and attribution, they are able to find human-readable patterns in anonymous transactions and achieves transparency in on-chain crypto data.

Nansens business model is subscription-based, with products steering around the two pivots:

  • Wallet labeling and categorization. Persuaded to a wallet’s transaction type, frequency, assets holding, and other traits, they label different wallets correspondingly. For example, a wallet is ‘smart LP’ if made more than US$100,000 providing liquidity and mining liquidity by staking pool tokens on Uniswap or SushiSwap, or ‘Whale’ if ranked one of the top 100 addresses by ETH balance that don’t have any other labels. Their labels are created either by algorithm or manually or by community proposal.
  • Dashboard for data visualization and manifestation. For example, ‘Token God Mode’ visualizes assets flow among exchanges and ‘Wallet Profile’ does target address analysis.

In their words, their product aims to provide ‘radical transparency’ to the blockchain, which is real-time and direct access to the information of the markets, because users can’t understand the activities of addresses unless they’re labeled. For investors, the protocol brings high investment opportunity value, as investors can potentially copy trade from those in the inner circle, or obtain information that how’s accumulating a specific token to execute the corresponding cost-saving position.

What does it tell us? — how much value blockchain data has

At the time of the writing, there are 1.195 billion transactions on the blockchain and we see the highest daily transactions of 1.7 M on the Ethereum blockchain alone in the last 2 weeks. Data is incomprehensive for outsiders, but there is great untapped economic value in investment and business-wise. Besides, The data indexing tools on ETH are already well-established and mature, such as Etherscan, Infura, The Graph, etc. In the Polkadot ecosystem, we also find a good number of projects that build basic tool layers for indexing, such as SubQuery, SubScan, etc. As such, data indexing has laid a solid ground stone for analysis work to be executed.

Generally speaking, blockchain data bring values in the following aspects:

  • Reduce information inefficiency in investment decision-making. Although blockchain address is anonymous, compared to the traditional stock market, crypto has higher transparency in its real-time assets flow. Also because crypto is not fully regulated by government policy, investors might be subject to higher investment risk, it’s even more important for them to grasp the trend of asset flow in the markets to seek good opportunities for investment and lower one’s risk.

Blockchain is a space that is very information inefficient. There’s a lot of opportunities Nansen really helps discover what are these things that are happening on the blockchain maybe you should know as an investor in certain crypto assets. — Alex Svanevik

  • Business and investment insight in the NFT field. Comparison of NFT projects, floor price and price estimation for potential sales, and deep insight into how the market is shape would certainly benefit users and even crypto projects from getting involved in the NFT space.
  • Bot filtering in crypto events. Spambot is notorious for disrupting the system and undermining the interest of both the project side and the users. Identifying bots and filtering them out means the value previously consumed by bots is re-captured and returned to the users.
  • Building up the cohesive connection between projects and users. “Crypto is attention economy, holding a specific crypto token shows alignment with its visions and services as a credential of its loyal community member,” says Felix Xu. Community is the foundation of DAO governance and project growth. As such, leveraging data to airdrop assets or reward to engage with users cost less and brings long-term benefit to the projects.
  • Fighting against ransomware. Using blockchain analysis tools, regulators can confirm compliance with regulatory guidance and law enforcement can trace the ransom paid in cryptocurrency to attackers to its cashout points at cryptocurrency exchanges.

🏃‍♀️ Let’s see other blockchain analysis projects

Though blockchain data is transparent and easily verifiable, blockchain data analysis remains a difficult task because the data is chaotic, intricate like a dark room. Very few people are dedicated to this field as a profession, and even many existing professional analysis services have their limitations. However, Nansen pulled it off by surfacing signals that are sufficient for a good investment decision to be made. Alongside Nansen, there’re also a number of other crypto analysis companies that solve problems using on-chain data. Let’s take a look at each of them.

  1. Chainalysis

The company’s address analysis focuses on meeting the compliance needs of blockchain businesses and availing itself as a tool for illicit fund tracking and cyber-crime solving. They see that ransomware is a serious rising issue and is working closely with the US government to combat it. The firm announced a $100M series E fundraise led by Coatue Management with a $4.2b valuation in June.

Its products include 1) Chainalysis business data, a tool for businesses to learn from their customers' behavior; 2) KYT for crypto KYC compliance; 3) Kryptos for watching crypto service provides’ on-chain activity; 4) Market Intel for cryptocurrency research and data-driven investment decisions; 5) Reactor for visualizations of cryptocurrency flow related to crypto entities. So far there’s a demo for request only.

2. Elliptic

The company provides crypto compliance solutions and services used by crypto businesses, financial institutions, and regulators to detect and prevent financial crime in crypto assets. Founded in 2011 in the UK, the core team now consists of 11 people with backgrounds covering finance, physic, data science, and others.

3. Elementus

The team focuses on building a search engine that enables an easy-to-navigate internet of value for blockchain. The protocol can be used in compliance, investment, and data analytics for business insights. Founded in 2017 in New York, the team is consists of 7 people with backgrounds in data science, sales and others.

✨ Our upcoming product: Whitelisting Service

As an experimental project, we recently conducted a Polkastarter whitelist analysis and were able to find 565 alleged cheating addresses out of 4,644 in our data sample, counting for a staggering 12.17%. We imported the results into the graph database and visualized them using the Neo4j graph database and GraphXR. As you can see below, the red and grey nodes represent the father and child addresses in a transaction respectively. The connection between them represents a $POLS transaction from the father node to the child node. It’s not hard to find that some of the father accounts have made multiple transfers to multiple child accounts in an attempt to earn more in IDOs.

Constellation-like network of the transaction flow. Red node: the father address that transfers out tokens; Grey node: the child address that receives the tokens

By tracing the cheating transactions, we can effectively prevent and discourage cheating in IDO participation, airdrops, DAO governance and other crypto events. A whitelisting product by Litentry will be released soon, let’s first take a peep:

Litentry Whitelisting is a blockchain analysis platform that traces and labels addresses across different networks, including Ethereum, Polkadot, Kusama, Bitcoin, and others. The product primarily provides values in the following aspects:

  • Customize target user groups. With sophisticated machine learning models and big data analytics, we label each wallet according to their historical behavior and assets holding status, so as to allow businesses to efficiently find their target user group and give them economic incentives to further contribute to the ecosystem.
  • Filter out spambots. Spambot is a deeply enmeshed challenge to be solved. Though 100% effective bot filtering cannot be guaranteed, a list of proven spambots is still helpful for the community to lower the noise from unwanted guests.
  • Detect malicious transactions. We’re able to detect and ban out malicious users by tracing their transactions of certain assets and other on-chain events. In IDO platforms, this technology is helpful in enhancing fairness and transparency in the game.

Alongside the above, the whitelist service can be integrated with our DID aggregation protocol to provide an even more precise, comprehensive creditworthiness evaluation of users.

As a data cross-chain indexing and aggregation protocol, Litentry will be a core player in the mainnet data market and will continue to build various applications to provide all kinds of identity services. — Ding Hao, VP @ Litentry

👇 Below are the updates of our week.

Testnet: setup SubstraTEE environment, SGX servers

  • Updated parachain dependency to v0.9.7
  • Investigated SGX servers
  • Setup SubstraTEE the environment and documentation
  • Documentation for ocw and benchmark testing
  • Integrated and tested the latest Phala’s token migration pallet

Misc: NFT pallet documentation, token migration testing

  • NFT pallet documentation
  • Token migration pallet testing
  • Discussed and investigated Web3 API and Metamask API
  • Setup run-deck environment
  • Finalized relaychain & parachain staging environment deployment
  • Fixed Kusama registrar bugs

💸 Did someone say staking? We will soon have a pool for LIT users to earn dLIT!

We partner with DAFI Protocol to introduce identity-based staking models for the DID and DeFi ecosystem. The new rewards distribution program will issue dLIT tokens to LIT users. These smart synthetic dTokens are designed to be algorithmically pegged to the demand of LIT. 👉Find out more here.

🎙 “Ten for Litentry” #1 is out!

Ten for Litentry is a youtube video series where the Litentry team answers most asked questions from the community. In this episode, we have answers covering our competitive advantage, technology, and future focus. See below for a selected q&a from the episode.

Q: Is it correct that Litentry’s cross-chain identity ecosystem can be applied to any user-based platform, in a decentralized way?

A: This is right. Any platform is able to be added to the Litentry model but this is done through some development about combining the identity system from this new platform to the protocol. Because we want to let our validators know how to verify the accounts from this new platform before they start to analyze data from it so it needs some changes to the protocol and it needs some development resource. So in this part, we are thinking about implementing DAO governance for the decision of how we’re going to iterate the protocol of the identity model part. That is to say, we want to let the community and token holders to decide together which new platforms or new blockchains that we want to add to the written trade protocol. But of course the first few platforms blockchains to be added will be just decided by the team for a good versatility.

🏡 Our new Berlin WeWork office!

Just set up our new WeWork office in Berlin, who wants to make a visit? 👀

— And that’s a wrap. See ya next time! 😃

Authors

About Litentry

Litentry is a Decentralized Identity Aggregator that enables linking user identities across multiple networks. Featuring a DID indexing protocol and a Substrate-built distributed DID validation blockchain, Litentry provides a decentralized, interoperable identity aggregation service that mitigates the difficulty of resolving agnostic DID mechanisms. Litentry provides a secure vehicle through which users manage their identities and dApps obtain real-time DID data of an identity owner across different blockchains.

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