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Six use cases in Blockchain Analysis


Blockchain analysis is the process of inspecting, identifying, grouping, modeling, and visually representing the data contained in the blockchain. As we know, blockchain technology allows us to have a distributed ledger visible and searchable by anyone. Obviously, this feature belongs to public blockchains, the discourse is relatively different when we are dealing with new-generation blockchains such as Corda or Hyperledger. In any case the features of transparency and immutability are often used to justify the value of DLTs.

And what about data?

Are we maybe forgetting them? Of course not, as you probably know data is considered the new digital oil. It’s raw, it needs to be extracted, and blockchains contain lots of it, immutable and available to anyone. In this non-exhaustive article, we will see what are some applications of blockchain analysis. With a focus on the bitcoin blockchain, we will see how you can create value from analyzing the raw data contained in blockchains.

Blockchain Analysis for Competitive Intelligence

As the crypto market grows, more and more companies and institutional entities have decided to invest in crypto assets. BlackRock and Tesla are just two of the latest big players that have invested in bitcoin. The first released a document where they stated they would invest in bitcoin futures through two of their funds. The second one, Tesla, bought bitcoins for a counter value of $1.5 billion, stating that they will be used as liquidity and that, in the future, they will accept cryptocurrency payments. The government of Bulgaria also holds a reserve of 200,000 bitcoins. Obviously, the bitcoin blockchain is public and this allows us, once we identify the wallets containing the funds, to monitor the movements of competitors, whether they are companies or national entities.

Blockchain Analysis for Security, Privacy and Confidentiality

As we were saying blockchain analysis can be useful from a competitor monitoring perspective. On the other hand, these competitors (or our company), will be interested in maintaining as much privacy and confidentiality of information as possible. From a privacy perspective, blockchain analytics can help us understand what information we are exposing in our operations, and study new strategies to maintain the confidentiality of that information. 

Blockchain Analysis in Research

The uses of blockchain analytics in academic and research fields are hypothetically infinite. It can be useful for understanding how much a crypto is actually anonymous, how much it is used, who uses it, and for what. This enormous wealth of data can be easily manipulated and processed with new machine learning techniques, and this allows for insights that we don’t even expect at the moment.

Blockchain Analysis for Education

The possibility of exploring a large amount of data, such as that contained in the blockchain, translates into a chance to grow your experience as a data analyst. An open platform, like the one we are building at PlutoHash, is a great opportunity for students to get up close and personal with blockchain technology. 

Blockchain Analysis for Forensic Investigations

Investigative research with the purpose of finding evidence of criminal activity is definitely one of the major uses of blockchain analytics. Bitcoin blockchain does not completely guarantee anonymity, because as we know the public address where the funds transit is visible to everyone. This makes it possible to track criminal activity and, through other investigations, link the public address to the identity of the wallet owner. Obviously this is resource intensive, but in line with government regulations, many private companies are developing techniques to recognize wallets associated with criminal activity. Two of the most widely used machine learning techniques are clustering and tag addressing.

Blockchain Analysis for Monitoring the Healt of the Network

The last use case, not least of course, is network health monitoring. With this kind of analysis we can check if the miners are following the protocol or if changes have been made, we can check the amount of fees paid, we can better understand how a cryptocurrency is used and for what. 

As you can well understand the uses of blockchain analytics are various and different, we will probably still discover new ones. 

Would you like to get your hands on the raw data of the bitcoin blockchain? 

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