In B2B relationships, trust has always been of great importance. However, trust has become a foundational element of business interactions in today's business climate. So, there is little surprise that blockchain started seeing more use cases out of the cryptocurrency context as a technology enabling trust and powered by trust. For instance, blockchain analytics has been a subject of great interest for organizations from various industries not previously connected with web3 development but greatly invested in building transparency.
Since adopting blockchain analytics means braving into unexplored territory, we made this comprehensive guide to illuminate the value of the technology, its top use cases, and potential pitfalls that stand between decision-makers and their objectives.
What is blockchain analytics?
In our previous insights dedicated to blockchain, we often mentioned digital ledgers as viable and functional paperwork replacements. In turn, digital ledgers are powered by blockchain analytics—processes that identify, analyze, and organize transaction data, visualizing it in an easily traceable and comprehensive way.
To provide an example of data visualization, we can look at one of the public blockchain ledgers. This is how most Ethereum blockchain analytics platforms (such as Etherscan.io) present their public transaction data:
Within a comprehensive layout, the transactions are clustered into blocks. Clicking on each block provides more information about transactions, their number, and status.
Users can explore all transactions within the block in even greater detail, tracking wallet addresses, the transaction's time and size, and every detail of its journey in general.
As a result, all public blockchain users gain real-time visibility on their asset movement, gaining valuable insights—as a result, they are assured about the transparency of payments. What is also noteworthy is that the blockchain analytics system has made transaction data highly accessible, letting users find the necessary information in massive volumes of insights and then check it in a couple of clicks within a comprehensive dashboard.
Etherscan.io isn’t the only platform offering such convenient features. This level of usability and transparency is a default for blockchain analytics platforms that support Ethereum-based transactions.
What makes blockchain analytics important?
So, it’s now clear how blockchain analytics work in the context of cryptocurrency transactions. But how is it useful to businesses that aren’t engaged in crypto transactions? How can the value offered by blockchain analytics be applied in other sectors and directions?
To answer this question, we should go back to blockchain technology's core advantages.
When a digital ledger replaces tons of paperwork, it does more than remove clutter and save everyone's time. It provides all the parties participating in a process with a single and immutable source of truth. Essentially, instead of working with their sources of truth, i.e., data gathered by their systems, document copies, and bits of information sent by partners, stakeholders gain full access to all insights simultaneously without worrying about compromised or tampered data.
Blockchain data analytics give a 360-degree view of all transactions happening within a specific trading activity, to the point of documenting the time when they occur, senders, and recipients. Consequently, there are much fewer blind spots or lost bits of data compared to traditional data management methods. Such visibility makes blockchain analytics highly valuable to all companies working with Big Data and needing to navigate it for better decision-making.
When comparing blockchain analytics data with more traditional data management and storage practices, we can instantly identify one major disadvantage of the latter—low scalability. As all major data still mostly relies on centralized storage, handling bigger loads of information becomes a challenge that affects the growth and evolution of the business model. Decentralized blockchain data analytics removes that challenge and enables companies to use exclusive and actionable insights for reimagining B2B relationships and enterprise processes.
Yet, how are these benefits applicable to different industries, including those not involved with blockchain? This is where tokenization comes in handy.
What is tokenization?
In simple terms, tokenization is creating a digital marker (a token). This digital marker serves as a replacement for sensitive information (client data, credit card number). The marker is represented by an unexploitable record of data, which can be easily identified and tracked within the system. Digital markers can't be tampered with and hold little value if somehow stolen because they can't be traced to an individual, making them a solid alternative to encryption.
What makes tokenization particularly valuable to businesses is that everything can be tokenized. Within asset tokenization, products, items, and even licenses can be assigned a unique digital marker that secures their visibility within a blockchain analytics system. Consequently, it opens the door to new track-and-trace opportunities across various sectors, from retail to logistics and supply chains.
Additionally, tokenization enables businesses to potentially avoid cases of counterfeit products, which is particularly relevant to pharmaceutical companies. Since each product has its unique marker, every participant in the product's journey can look it up, verify it, and document its authenticity, leaving forgers little room for maneuver.
By offering new opportunities for better traceability, management, and organization, tokenization is the bridge between businesses and the advantages of blockchain analytics.
Blockchain analytics: use cases
One of the reasons decision-makers and stakeholders hesitate to proceed with their idea of adopting blockchain data analytics is their uncertainty about the status of blockchain in the near future. Optimists claim blockchain will change financial systems as we know it, beginning a new, intermediary-free era. At the same time, we have pessimists claiming that blockchain is unviable, lacks flexibility, and has no chance of widespread adoption.
Nevertheless, unlike numbers, opinions don't define the real status of digital currencies and blockchain across the globe. And contrary to the common assumption that cryptocurrency is a fading trend rather than a part of the evolving financial system, ongoing numbers, and trends demonstrate unrelenting growth in the use and adoption of digital assets.
- 55%of major banks have invested in adopting blockchain technology for financial operations
- 86% increase in blockchain patents was documented by Bank of America in 2021
- $1,18trillion total market cap increase for all cryptocurrencies documented following BlackRock filing a BitCoin ETF application
These stats confirm that DeFi keeps strengthening its position within the new ecosystem—with the help of banking organizations that harness the disruptive technology and polish it further. This progress is impossible to ignore and unforgivable not to act upon—which is why businesses and enterprises join in adopting different blockchain capabilities for their needs. Such activity creates many opportunities for innovation and experimentation with blockchain technology and blockchain analytics in a large variety of sectors.
1. Illicit activities investigation
With great anonymity comes great responsibility. While blockchain technology is hailed for its security and ability to give power back to investors and buyers rather than a regulatory organization, it has also been used for illegal activities. Many criminal organizations, hackers, and ransomware creators demand their ransom be sent in cryptocurrency. Terrorist organizations get sponsored by anonymous crypto wallets. Blockchain transactions are used for drug purchases and payment for illegal services.
From those examples, it may seem that the crypto environment provides criminals with the perfect cover for their operations—but this is the opposite of the truth. The same technology that allowed criminals to fly past the law enforcers' radar equips law enforcement organizations with the means and tools for tracing and identifying shady transactions. This is why multiple law enforcement agencies became one of the very first blockchain technology adopters, empowering their investigation with blockchain analytics platforms.
How exactly do blockchain analytics work for law enforcement agencies?
Single out specific transactions
By going through transactions, investigators can pinpoint patterns indicating illicit activities.
Investigators collect and analyze transaction data, connecting it to real-world sources.
Discover red flags
Blockchain analytics data visualization tools allow for mapping up fund trails and marking suspicious transactions.
Gather a database
Investigators enhance their awareness with a large and updated database of crypto activities.
Law enforcement agencies' use of blockchain analytics is already past its trial stage. In fact, law enforcement entities have become one of the first blockchain analytics adopters, weaponizing blockchain data analytics to undermine criminal schemes and intercept ransomware extortionists. These results hold a promise of a safer and more regulated future where blockchain and DeFi are smoothly integrated into the financial environment, extending their capabilities to entrepreneurs, investors, and analysts—and offering means to protect buyers' rights.
2. Big Data analytics
Big Data plays a central role in identifying winning strategies, changing towards more efficient business models, and making decisions that should deliver long-term value. However, Big Data analytics can be rather challenging to manage. Due to its sheer size, big data is hard to store, structure, and organize. Also, it takes a while before Big Data is processed and implemented to improve the enterprise.
For that reason, enterprises are constantly searching for methods of facilitating and accelerating Big Data management, trying to remove redundant steps and harness any disruption that can offer them an upper hand. In that regard, blockchain analytics and Big Data are considered a "match made in heaven" as the former unlocks a number of advantages that facilitate the work of data analysts:
- Massive data lakes
The use of blockchain analytics alleviates the problem with Big Data storage as blockchain provides an additional data layer where volumes of financial and transaction data can be stored within organized blocks. Accordingly, companies can store an entire financial history within a block-based data lake, letting analysts access individual blocks for exploring certain transactions and activities. This change significantly improves the traditional painstaking navigation through multiple systems and manual data transfer.
- Increased data value
The most common issue of Big Data Management is its slow processing. It's not uncommon for executives or customer relationship managers to receive an outdated Big Data analytics report because while the departments were working on gathering, verifying, and visualizing then-relevant data, they had no way to notice and include fresher insights. In the end, companies don't get all the insights they need to make a real impact. Blockchain analytics avoids that due to real-time recordkeeping and easy traceability, providing businesses with a full and data-rich view of their activities.
- Facilitated data sharing
Within a blockchain analytics platform, Big Data can be instantly shared among all the participants who have access to it. Data analysts, sales teams, marketing teams, and data scientists can instantly download and use the information for their respective directions, avoiding the problem of data silos or data discrepancies. With all departments being on the same page, it becomes possible for an enterprise to build momentum regarding growth and workflow transformation.
The value blockchain analytics can inject into Big Data doesn't just end there. There is a great potential for getting more accurate AI-powered sales forecasting by regularly enriching ML systems with fresh and validated data. In the long run, such a combination of blockchain data analytics and AI technology yields opportunities for building predictable strategies and removing uncertainties from business landscapes.
3. Retail and ecommerce
Since almost all assets can be tokenized, it was inevitable for blockchain technology to find practical implementation in the area of retail and e-commerce.
In fact, we'd extend this application to any commercial relationship that includes several participants (manufacturer, distributor, and vendor), as the most complicated part of those relationships is that not all members fully trust each other. This lack of trust stems from low visibility and uncertainty: all participants want access to full sales data to be sure that every side receives their established share, but they are never confident that other members provide them with all the insights.
Blockchain analytics allows creating a transparent sales database that keeps all the participants aware of the operations and product journeys while not allowing the possibility of some participants tweaking data in their favor or not showing them the full picture. Respectively, blockchain analytics become the foundation for long-term and stable B2B relationships where technology becomes an unbiased and honest intermediary balancing the interests of several parties.
What else can blockchain analytics do for retail and e-commerce?
- Deliver accurate sales data
When data analysts manually collect sales and transaction data, some of it may slip through the cracks or get lost during its transfer to the Excel table—leading to reports being compromised by human error. Blockchain analytics platforms come with options to export block data, complete with information on all transactions via a CSV file, letting analysts spend less time gathering data and dedicate themselves fully to gleaning valuable insights.
- Implementing personalization
Getting more visibility on transaction data means knowing more about buyers' preferences and behaviors. Such knowledge allows retailers to pinpoint the core needs of their target audience, identify the best-performing product, and put it in the foundation of their sales strategies and promotions. Also, blockchain analytics help cut redundancies as companies get more information about products that don't sell well and become a drain on resources.
- Improving supply chain dynamic
Today, logistics and e-commerce go hand-in-hand to meet the needs of buyers who would rather order a product online than go to a store. However, to keep up with expectations, e-commerce brands, and 3PL companies they partner with need to build transparent communication to ensure flawless product journeys. Blockchain analytics provides them with a shared database documenting the history of their interactions and letting them track item shipments.
These benefits have already been explored and positively evaluated by a number of retail companies. For example, the French brand Carrefour became a pioneer, implementing blockchain for tracing their organic foods and using blockchain analytics to study sales data in greater detail. Since then, the company has been able to increase its sales rate and, therefore, plans to continue enhancing its capabilities with blockchain technology.
Blockchain analytics: limitations and downsides
With all the successful use cases and the robust advantages of blockchain data analytics enlisted, it’s very easy to forget about the pitfalls. Just like any technology, blockchain isn’t immune to flaws and limitations—knowing them before getting started with adoption, however, guarantees a more pleasant experience.
Reliance on the “silver bullet” effect
One point we should address first and foremost is that blockchain analytics isn't a replacement for all data analysis tools. It's an impactful addition that allows enterprises to expand their knowledge base and offers a new, more convenient way to store and organize data. However, to achieve groundbreaking results and complete objectives (preventing illicit activities, predicting demand, managing Big Data), blockchain analytics must be used together with a wide range of other data sources and tools. For example, a powerful custom blockchain analytics platform must be paired with a suite of tools for:
- Parsing other data sources
The transaction and digital asset data needs to be supplemented with insights from other channels (forums, social media, trading platforms, business entities) to build a full portfolio of a user.
- Off-chain data matching
After off-chain data is collected, it needs to be connected with blockchain analytics data. Doing it by hand can be time-consuming, which is why advanced blockchain analytics systems come with features that do it automatically, requiring minimal user intervention.
- Data visualization
While public blockchain analytics platforms always visualize transaction data in an organized and comprehensive way, adding even more clarity within custom solutions is possible. For instance, investigators use tools with multi-chain visualization to identify suspicious cross-chain activities.
Therefore, when thinking about adopting a custom blockchain analytics system, decision-makers need to consider its synergy with their other solutions—or what features can be added to gain even more value with the help of their platform.
It's not uncommon for stakeholders to go back on their decision to implement blockchain when they see employees respond to their initiative with confusion. Blockchain remains an entirely new territory even for tech-savvy workers, which leads to them having logical concerns about being able to adapt to the technology and performing worse. Due to this, stakeholders would often postpone the adoption to prevent negative workflow disruptions or compromising employee productivity. Our suggestion is to plan blockchain analytics adoption in advance, staying in close contact with employees and gradually introducing them to the specifics of the technology.
Blockchain analytics reveal a large number of blindspots and data gaps, which is definitely a positive change. However, it can be overwhelming. Aside from wanting to see a bigger picture, decision-makers should also know the areas they want to zoom in on and have a detailed understanding of what they want to do with them. They should also prepare their data analysts and scientists to work with new data formats in advance. Switching to the new level of transparency doesn't come without friction points, so addressing them and working them out as soon as possible is important.
Is it necessary to adopt a blockchain analytics platform?
Is it possible to achieve the same transparency and visibility without blockchain analytics? There are good alternatives to blockchain analytics software that provide an in-depth look into a company's financial history and collaboration features. The difference is that blockchain analytics systems already have a growing successful use case track record, gaining more visibility and further cementing their reputation as a trust-building solution. The interest in the technology also leads to introducing more ways to facilitate the integration of the technology with the enterprises' ecosystems.
Therefore, we'll be seeing more iterations of custom blockchain analytics platforms and systems and further integration of blockchain into various industries. However, the only way for stakeholders to find out whether their organization needs blockchain analytics is to consult with an external expert who can critically review their structure and offer suggestions.
So, if you're currently curious about the potential value of blockchain analytics, let's chat! Our vetted Trinetix experts will consult you on all your top-of-mind concerns and help you map out the right solution for your pain points and business vision.