Insight Data Issue 04 | CoinGecko & OKX Web3: A Quick Start to the On-Chain World, Here’s What You Need to Know

Author: OKX

Abstract

In the cryptocurrency market, data has always been an important tool for making trading decisions. How can we cut through the data fog and discover effective data to optimize trading decisions? This is a topic of ongoing interest in the market. OKX has specially curated the "Insight Data" column and collaborated with mainstream data platforms such as CoinGecko, CoinGlass, and AICoin to explore more systematic data methodologies based on common user needs for market reference and learning.

Below is the content of the fourth issue, themed "Getting Started in the On-Chain World," jointly created by the OKX Web3 team and the CoinGecko team, covering basics, filtering noise, and selecting quality opportunities, hoping to be helpful to you.

About CoinGecko: Founded in 2014, as a leading independent cryptocurrency data aggregator globally, its mission is to provide in-depth, 360-degree market overviews for the cryptocurrency community. CoinGecko offers comprehensive information from thousands of data points, such as price, trading volume, market capitalization, developer strength, community statistics, etc. Currently, it tracks over 14,000 cryptocurrencies from more than 1,100 exchanges worldwide.

About OKX Web3: The team brings together top talents with strong technical backgrounds and rich industry experience, continuously innovating and practicing in the Crypto field for many years, with a sustained focus on user experience and security. Currently, the OKX Web3 wallet is one of the most comprehensive decentralized multi-chain wallets on the market, supporting 90+ public chains, with built-in wallet, trading, NFT market, DeFi, and Dapp discovery across 5 major sections. Users can view multi-chain tokens, NFTs, and DeFi assets through the App, plugin, and web.

1. How can beginners quickly understand the on-chain world?

CoinGecko: Based on our experience, we recommend beginners start linking to the crypto world through mainstream explorers like Etherscan.io and Mempool.space, which act like search engines for blockchain transactions, providing a wealth of information. For example:

• Trading Volume: How many transactions occur daily? Is this number increasing or decreasing?
• Active Addresses: How many unique addresses are trading daily?
• Network Fees: Are they high or low? This may indicate network congestion.
• Block Time: How quickly are new blocks added to the chain?

Specifically, trading volume and network fees provide insights into network usage and congestion levels, where higher fees are often associated with increased demand for block space as users compete to have their transactions processed quickly. For proof-of-work (PoW) chains like Bitcoin and proof-of-stake (PoS) chains like Ethereum, these metrics offer insights into network usage, adoption, and market sentiment. Additionally, tracking wallet addresses belonging to whales, popular traders, exchanges, and projects—observing significant inflows and outflows, and even holding behavior—can also provide insights into potential price trends. Of course, if you can't find these explorers, you can easily locate these blockchain explorers on CoinGecko.

OKX Web3: For beginner users, mastering basic concepts is very important. Further, understanding mainstream public chains like the Bitcoin network and Ethereum network, as well as their basic operational mechanisms, is essential. For example, the PoW mechanism and the PoS mechanism.

PoW stands for Proof of Work, which primarily verifies transactions by solving complex mathematical problems, consuming a large amount of computational resources and electricity. Bitcoin and Ethereum (1.0) are typical examples of PoW. Its characteristics include high security but high energy consumption and slower transaction confirmation speeds.

PoS stands for Proof of Stake, which primarily verifies transactions by holding tokens, giving holders the opportunity to be selected as block validators. Public chains like Ethereum 2.0, Cosmos, and Tron mainly adopt this mechanism. Its characteristic is that a certain amount of tokens must be staked, resulting in faster transaction speeds.

In summary, users can quickly understand the on-chain world by learning the basic operational logic of popular public chains and using on-chain wallets (like OKX Web3 wallet, Metamask, etc.) to participate in actual transactions on some networks. Additionally, reading project whitepapers and taking some online courses (like Coursera, Udemy, etc.) can facilitate systematic learning.

2. How to intuitively and quickly sense changes in on-chain liquidity?

CoinGecko: For novice users, to perceive changes in a timely manner, at least the following dimensions of data changes should be monitored: the number of participants, 24-hour trading volume, total locked value (TVL), and bid-ask spread.

Among them, the 24-hour trading volume represents the total transaction value processed by the network within 24 hours, reflecting daily usage and liquidity. A surge in trading volume usually indicates increased market interest in cryptocurrencies, potentially triggered by significant news or events that cause price fluctuations. Conversely, a decrease in trading volume may indicate waning market interest, a weakening trend, or a consolidation period before a new trend emerges.

Total locked value (TVL) represents the total amount of assets locked in blockchain smart contracts, reflecting the overall activity level of the network. A higher TVL means more assets are locked in the protocol, providing users with more capital for trading and lending, indicating higher liquidity and greater user trust in the network. This also suggests that the protocol is relatively reliable and secure. By monitoring changes in TVL, one can gain better insights into liquidity changes.

The bid-ask spread refers to the difference between the highest buy price and the lowest sell price in the order book. A smaller spread usually indicates high liquidity, as both buyers and sellers are more interested. Conversely, a larger spread indicates low liquidity. While each of these indicators is important, they should be considered comprehensively for a thorough analysis.

OKX Web3: Generally, we often use the following indicators to sense changes in on-chain liquidity.

First, indicators directly related to trading: such as the daily trading volume of DEX, which reflects the trading activity in the market; the number of unique trading addresses daily, which can reflect user activity and liquidity; and the liquidity provision (LP) size of tokens in various DEX pools, i.e., the size of the capital pools.

Second, indicators related to token supply: such as circulating market capitalization and fully diluted market capitalization; the circulating supply and maximum supply of tokens; and the locked asset value in DeFi protocols, team lock-up portions, and burn amounts. By monitoring these data dimensions, one can gain a comprehensive understanding of changes in on-chain liquidity, thereby making more informed trading decisions.

3. How to filter noise and capture quality opportunities?

CoinGecko: The market is filled with noise, which requires us to establish a systematic understanding of the industry. The aforementioned content can help new players build a solid foundation, and it is recommended to practice more to gradually enhance one's ability to filter out noise.

As for capturing opportunities, the basic premise is the same: one needs to have a thorough understanding of all aspects of the industry while paying attention to commonly used basic data indicators, such as active addresses, trading volume, and whale activity. These indicators can reveal network usage, market sentiment, and the concentration of holdings among different investors. By tracking these indicators, traders can assess the overall health of the network and identify potential trends before price fluctuations become apparent.

Secondly, learning to utilize authoritative data analysis tools and platforms is crucial. For example, platforms like Glassnode, Dune Analytics, and The Graph provide detailed on-chain analysis, which can help users make informed decisions to some extent. Additionally, real-time decentralized trading aggregators and tracking tools like GeckoTerminal provide detailed analysis of decentralized exchanges, helping users monitor liquidity, trading volume, and price fluctuations in real-time. All these tools can help beginners identify market trends and potential profit opportunities early. However, it is important to cross-verify data from multiple sources to gain a more comprehensive perspective.

Moreover, monitoring whale behavior is also crucial, such as large asset holders participating in staking or DeFi. For instance, institutional investors like MicroStrategy and other publicly disclosed large funds. Additionally, the fund flow of large wallets related to exchanges and major liquidity providers in DeFi, as well as large participants in major DeFi protocols, can have far-reaching impacts on the market.

Of course, community activity is also important. Many successful on-chain projects have active communities that play a significant role in project development. It is recommended for new players to join communities on Discord, Telegram, and X (formerly Twitter) for in-depth observation. Finally, we suggest that beginners develop the habit of cross-verifying data to better observe the overall market.

OKX Web3: Here, we mainly provide some commonly used thoughts:

First, in terms of filtering information sources, it is recommended to focus on reliable media while directly following the project's official website, official Twitter, Telegram channel, and Discord community to obtain first-hand information.

Secondly, evaluating the project's background is crucial. Assessing the background and past experience of the project team can help determine its credibility and execution capability. Reviewing the project's technical whitepaper, evaluating the innovativeness and feasibility of its technical solutions, and paying attention to its codebase and development progress can help assess the project's technical strength and development potential. Additionally, monitoring the project's partners and investors, as collaborations with well-known institutions and companies can also provide insights.

Of course, data analysis should not be overlooked. Utilizing tools like Nansen, Glassnode, Dune, and Defilama to analyze the project's on-chain data, such as the number of active addresses, trading volume, and contract call frequency. Active on-chain data often indicates that the project has real users and use cases. Reviewing the project's financial status and token economic model to assess its sustainability, while paying attention to indicators like locked value (TVL), liquidity, and token distribution plans. Finally, to avoid noise, it is essential to remain calm and rational, not to be influenced by short-term market fluctuations and media hype. Maintain independent thinking, avoid blindly following trends, and establish your own judgment standards and investment strategies to make wiser choices.

4. What indicators should be monitored to identify systemic risks in real-time?

CoinGecko: To identify and avoid systemic risks in cryptocurrencies, players can monitor large collateral positions, especially those held by influential figures or projects, and be cautious with protocols or tokens, particularly in cases where a single entity holds excessive assets or debts. Finally, understanding the liquidation thresholds of major DeFi protocols is also crucial—tracking these thresholds across popular lending platforms can help predict potential liquidation chain reactions.

OKX Web3: Generally, common types of risks include:

In general, trading cryptocurrency assets faces the following common risks: First is liquidation risk, where the collateral value falls below the loan value, leading to the liquidation of the user's collateral and resulting in losses. Second is liquidity risk, where insufficient market liquidity may make it difficult to execute trades or cause significant price fluctuations. Additionally, there is smart contract risk, where contract vulnerabilities may lead to funds being stolen or contracts being executed abnormally. Lastly, there is market risk, where price fluctuations may lead to significant changes in asset value.

To address these risks, we recommend focusing on four key data indicators and adopting corresponding strategies. The first is the collateral ratio and liquidation threshold. DeFi platforms like Aave and Compound provide real-time collateral and liquidation information. The second is to monitor market price fluctuations; platforms like CoinGecko and CoinMarketCap provide price volatility data. The third is to monitor trading volume and liquidity; platforms like Dune Analytics and DeFi Pulse provide locked value and trading volume data. Fourth, it is also necessary to pay attention to market sentiment and macroeconomic events, which can be obtained through cryptocurrency news websites and social media sentiment analysis tools.

Overall, to timely identify systemic risks, it is still recommended to use real-time monitoring tools, and setting up automatic alerts is a more direct solution, such as establishing automatic alerts for price fluctuations and collateral ratio changes, so that measures can be taken promptly when risks approach. Through these methods, everyone can more effectively identify and avoid systemic risks, protecting their investments from severe market fluctuations and potential liquidation crises.

5. How to protect your assets in the dark jungle?

CoinGecko: The first priority is to stay vigilant, especially against unsolicited messages, emails, and websites. Before clicking links or sharing sensitive information, always verify the identity of the sender and the authenticity of the URL to avoid becoming a victim of phishing attacks. Be sure to avoid being rushed into action by urgent messages, as this is a common strategy used by phishers. When using platforms like X (formerly Twitter), Discord, or Telegram, do not interact with suspicious links; if in doubt, visit CoinGecko to find the official websites and social media links vetted by expert teams.

Additionally, to enhance wallet security, it is recommended to use different wallets for trading, participating in airdrops, and long-term fund storage. This practice can effectively reduce risks and protect the overall safety of your investment portfolio. For large amounts of funds and long-term holdings, choose high-security hardware wallets and regularly back up private keys to secure offline storage. Moreover, regularly update wallet applications, browsers, and security tools, and stay informed about common phishing techniques to effectively reduce the risk of becoming a phishing attack victim.

OKX Web3: The first priority is to choose a reliable wallet, which is very important. Software wallets like OKX Web3 wallet and MetaMask are very convenient to use, but be sure to download them from official websites or official app stores to avoid using versions from unknown sources, reducing potential security risks. Additionally, hardware wallets like Ledger, Trezor, and OneKey, which store private keys offline, can effectively prevent hacker attacks and isolate private key risks, providing higher security.

Secondly, avoid entering phishing websites and applications. When visiting cryptocurrency websites, always carefully check the correctness of the URL to avoid clicking on unknown links. It is recommended to bookmark commonly used websites and access them through bookmarks. Always insist on downloading wallet and exchange applications only from official websites or official app stores, and confirm the credibility of the developers and publishers of the applications.

Furthermore, managing private keys and mnemonic phrases is even more important. Always write down private keys and mnemonic phrases on paper and store them in a secure place, avoiding storage on connected devices. While this may be somewhat cumbersome, never share private keys or mnemonic phrases online to prevent information leakage and asset theft. Of course, to prevent single points of failure from causing wallet loss, backups can be stored in different secure locations.

Additionally, when using decentralized applications (dApps), certain security measures must be taken. Regularly check and revoke unnecessary dApp authorizations, using tools like Token Approval Checker and revoke.cash to timely revoke authorizations. Moreover, in daily authorization transactions, only authorize necessary permissions and specified authorization amounts. Prioritize using audited smart contracts and avoid using dApps from unknown sources. While this may be somewhat inconvenient when trying new dApps, it is advisable to test with small amounts of assets first, confirming safety before proceeding with larger operations.

Of course, while surfing on-chain, the most important thing is to raise security awareness and be wary of social traps. Never trust emails, messages, or private messages from strangers. When it involves fund transfers or sensitive operations, always double-check to ensure the identity and intentions of the other party are genuine.

Conclusion

The above is the fourth issue of the "Insight Data" column launched by OKX, focusing on how novice players can navigate the on-chain world, hoping to provide reference for beginners. In future series of articles, we will continue to explore more practical data usage/analysis methods to provide references for traders and novice players learning to trade and understanding the industry.

Risk Warning and Disclaimer

This article is for reference only. The views expressed in this article are solely those of the author and do not represent the position of OKX. This article does not intend to provide (i) investment advice or recommendations; (ii) offers or solicitations 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 regarding your specific circumstances. You are solely responsible for understanding and complying with applicable local laws and regulations.