Insight Data Issue 06 | OKX Web3 & Nansen: A Beginner's Guide to Web3, the Nine Data Challenges You Can't Avoid

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 uncover effective data to optimize trading decisions? This is a topic of ongoing interest in the market. OKX has specially planned the "Insight Data" column, collaborating with industry data platforms such as NanSen, CoinGlass, AICoin, Coingecko, and 0xScope to explore more systematic data methodologies based on common user needs, for market reference and learning.

The following is the content of the sixth issue, developed by the OKX Web3 team and the NanSen team, focusing on "9 Basic Questions for Beginners Entering Web3," among other topics, hoping to be helpful to you.

About Nansen: Nansen is a blockchain analytics platform that enriches on-chain data using millions of wallet labels. Nansen helps crypto users discover opportunities, conduct due diligence, and protect their portfolios using real-time dashboards and custom alerts.

About OKX Web3: The team brings together top talents with a strong technical background 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 over 90 public chains, with five major sections including wallet, trading, NFT marketplace, DeFi, and Dapp discovery. Users can view multi-chain tokens, NFTs, and DeFi assets through the app, plugin, and web.

1. What basic data dimensions do beginners usually focus on when entering the Web3 world?

Nansen: The simplest way to learn about on-chain data is through on-chain practice, such as swapping on decentralized exchanges (DEX) and then looking up transactions on a block explorer like Etherscan. Being able to read transaction details on a block explorer is key to understanding Web3 data analysis.

Beginners should first focus on transaction data and then gradually delve into tracking and logs. A potential learning progression could be: first learn how to read easily understandable aggregated transaction data (e.g., through Nansen or Debank), then explore transaction data (via block explorers), delve into tracking 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 wealth of data on the blockchain based on activities that occur, but how can we truly understand these activities? Fortunately, Ethereum Virtual Machine (EVM) chains are standardized, and most raw data from interactions is stored in some common tables:

• Transactions: Detailed information about each transaction, including sender, receiver, transaction amount, fees, and timestamps.
• Traces: Detailed records of each step in the transaction process, covering function calls, transfers, and smart contract executions.
• Logs: Event logs generated by smart contracts to record the occurrence of specific events, which are often used to track state changes and event notifications.

Through these tables, users can gain insights into activities on the blockchain, such as analyzing transaction patterns, tracking fund flows, and understanding smart contract execution. This data not only helps us understand the details of individual transactions but can also reveal broader market trends and behavioral patterns.

OKX Web3: We recommend that beginners interested in understanding Web3 focus on information from three dimensions: market data, network data, and community and developer data.

First, market data includes:

• Price data: Real-time and historical price information for cryptocurrencies and tokens.
• Market capitalization: The total value of a cryptocurrency or token, calculated as the current price multiplied by the circulating supply.
• Trading volume: The amount of cryptocurrency or tokens traded within a specific time period.
• Transaction records: Details of transactions recorded on the blockchain, including sender, receiver, amount, and timestamps.

Second, 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 costs on the blockchain, including gas price, gas limit, and priority fees, reflect network usage.

Finally, community and developer data refer to developer activity and community engagement. This includes the number of active developers, submission counts, and contribution metrics to blockchain projects, as well as data on the size and activity level of communities supporting blockchain projects. This data can be obtained through forums, social media, and events, with most Web3 discussions currently happening on Twitter, Telegram, and Discord.

2. How can analyzing on-chain transaction data help grasp market trends?

Nansen: For entry-level users, analyzing on-chain transaction behavior is key to understanding market trends, as it can provide profound insights into the actual state of the blockchain. Unlike traditional finance (TradFi), all transactions on the blockchain are public and transparent, allowing us to interpret and analyze them and gain more market insights than TradFi, such as who is buying or selling. Through on-chain data, we can conduct various types of analyses, such as determining the number of daily active users and their activities. We can query all daily addresses to see who their trading counterparts are or use data providers to accomplish these tasks.

Specifically, we can explore 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 not just superficial; through features like smart money and wallet labels on platforms like Nansen, we can delve deeper into market trends. For example, understanding 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, beginner users can not only understand the basics of on-chain transactions but also gain insights into the complex dynamics behind the market, enabling them to make more informed trading decisions. This transparency and data availability are significant advantages of blockchain over traditional finance, allowing every participant to have a more comprehensive understanding of the market.

OKX Web3: We believe that for beginner users, when engaging in on-chain data trading, they can focus on the dynamics of mainstream assets such as stablecoins, BTC, and ETH, while also paying attention to on-chain market heat.

First, the trading volume and circulation of stablecoins can reflect market sentiment. When the market is uncertain or volatile, users often shift funds to stablecoins to mitigate risk. Additionally, the inflow and outflow of stablecoins can indicate market liquidity; for instance, a large inflow of stablecoins into exchanges may signal impending buying pressure, while a large outflow may indicate selling pressure.

Of course, paying attention to the dominance of BTC and ETH is also important, as it reflects their share of the total market capitalization. When BTC's dominance rises, the market may lean more towards Bitcoin, while an increase in ETH's dominance may indicate a preference for Ethereum and related decentralized finance projects. Analyzing the dominance of these two can provide insights into the buying and selling preferences of market participants.

At the same time, on-chain market heat is also an important indicator.

An increase in trading volume typically indicates heightened market activity, with more buying and selling potentially leading to increased price volatility. Sustained high trading volume can confirm the strength of market trends; for example, in a bull market, high trading volume accompanying price increases indicates a strong upward trend. Additionally, an increase in the number of active users suggests that more market participants are using and trading specific cryptocurrencies or blockchain platforms, 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 engagement typically have stronger community support and more stable development prospects. By focusing on these indicators, beginner users can better understand market dynamics and make more informed trading decisions.

3. What information does smart contract interaction data contain? What indicators should beginners focus on?

Nansen: Smart contract interactions in cryptocurrency contain key information, such as the addresses involved in transactions, the functions called, the tokens transferred, the gas fees paid, and the input data. For beginners, it is essential to first understand who initiated the transaction and what functions were called. Once you can read a block explorer, you will be better equipped to understand smart contracts and the interactions between wallets and other contracts.

OKX Web3: Smart contract interactions contain many key pieces of information that are crucial for understanding the behavior and impact of these contracts. Here are six main elements:

1. Transaction Simulation:

The purpose of simulating transactions is to predict the outcomes of interacting with smart contracts before executing them on the blockchain. The key is to understand the expected state changes, potential errors, and gas costs. Beginners should use transaction simulators to better understand how their interactions affect the blockchain and avoid costly mistakes.

2. Permit2, Authorized Amount:

Granting smart contracts permission to spend a specific amount of tokens on behalf of users is very important. Key information includes the maximum amount the contract is allowed to spend and the duration of the authorization. Beginners should monitor authorized amounts to avoid over-authorizing contracts and potential token theft.

3. Gas Fees:

Gas fees refer to the costs required to execute transactions on the blockchain. Key information includes gas price (the cost per unit of gas), gas limit (the maximum amount of gas that can be used), and total gas fees. Understanding gas fees helps beginners manage transaction costs and prioritize transactions during network congestion.

4. Receiving Address (To-Address):

The receiving address is the target address of the transaction. Key information is the target address of the transaction or smart contract interaction. Beginners must verify the receiving address to ensure that funds and interactions are sent to the correct destination, avoiding asset loss.

5. Ownership:

Ownership is used to determine who controls the smart contract or its assets. Key information is the address or entity that has management authority over the contract. Beginners 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 upgrades. Understanding upgradability is crucial for assessing the stability and security of contracts, as upgradable contracts can be changed by their owners, potentially introducing new risks.

4. How can wallet tracking tools help new users gain insights 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 wallet's net worth, the protocols used, and decoding features that make transactions easier to understand. Nansen provides entity-level breakdowns, allowing users to view all addresses, net worth, protocols used, and decoded cross-chain transactions for specific entities in a single view. For beginners with limited market understanding, these tools can also help them track complex wallets and decide on trades 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. Additionally, by tracking the movements of large holders (whales), users can gain important market insights, as whale trading behavior can significantly impact market trends.

Second, these tools allow users to view the asset distribution across various wallets, helping them understand the trading strategies of successful traders. At the same time, by analyzing wallet holdings, users can identify preferred protocols or projects in the market, aiding in making more informed trading decisions.

Finally, tracking the buying and selling activities of different wallets can provide insights into overall market sentiment, revealing whether players are bullish or bearish. Therefore, sudden large inflows or outflows of funds can indicate changes in market sentiment, helping users predict potential market movements.

In fact, users can try using 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 finance project analysis, offering comprehensive insights into protocol performance and user activity.
3. DefiLlama: Specializes in decentralized finance analysis, providing data on TVL and other key metrics for different protocols.
4. Rootdata: Offers detailed data on various blockchain projects, including performance metrics 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 labels to provide insights into fund flows, wallet holdings, and market trends.
7. Blave: An emerging tool that provides data analysis and insights on blockchain projects and market activities.

Sentiment analysis tools help deepen the understanding of market conditions, and users 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 various 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. What key indicators should be evaluated when analyzing DeFi protocols?

Nansen: When researching different decentralized finance protocols, we consider various indicators, and each application may differ. While these indicators are not exhaustive, paying special attention to certain key indicators can be helpful when seeking new opportunities.

In the context of lending protocols, indicators such as TVL (Total Value Locked), utilization rate, and user count are starting points for assessing the overall activity of the platform. However, when evaluating new opportunities, tracking significant inflows to projects may be particularly noteworthy. Important fund inflows may signal new liquidity injection activities in certain pools, which could be a good opportunity for traders seeking passive income.

Another key indicator is examining the types of entities or depositors that can be tracked within the protocol. Whether it’s funds, smart contract wallets, or other preferred DeFi wallets, these can serve as potential trading counterparts. It is important to note that these indicators do not cover risks, which need to be considered as part of the overall framework when using decentralized finance protocols.

OKX Web3: We recommend focusing on at least the following dimensions of indicators, such as on-chain data, community feedback, team and builders, etc.

First is on-chain data, which includes Total Value Locked (TVL) and trading volume. TVL serves as a measure of the protocol's scale and popularity; high TVL reflects user trust and widespread use of the protocol. Trading volume indicates the activity and liquidity of the protocol; high trading volume typically represents strong user demand and high trust.

Second is community feedback, including activity and sentiment on Twitter, Telegram, and Discord. Positive feedback and discussions on these platforms can reflect community engagement and recognition of the project, serving as key indicators for assessing community participation and user satisfaction; while the team background, including the project team's experience and support from reputable investment institutions, is an important factor in evaluating the project's potential for success.

Additionally, sustainability is also an important consideration, including the project's historical operating time and ongoing development activities. A long-standing and continuously developing project is typically more reliable and durable.

Finally, smart contract audits conducted by third parties can reveal potential vulnerabilities and security risks within smart contracts, ensuring the safety of user funds. Together, these dimensions can provide a comprehensive assessment of a project's health and market potential.

6. How are address labels used in on-chain data analysis? What is their practical role?

Nansen: Although blockchain data is theoretically public, it is practically difficult to interpret it—because most of the content is not human-readable. Wallet labels are a way to transform large amounts of data into a form that anyone can easily digest. At a high level, address labels are how we mark and identify wallet addresses based on their behavior/actions on-chain. Given that there are millions of addresses with different on-chain footprints, labels allow us to categorize all these wallets by their behavior and enable users to quickly find what they are looking for.

The exact identity of wallet owners is often unknown, but we categorize wallets and use labels and emojis to mark them. These can be low-level, such as "Dex Trader," indicating that the wallet has used a DEX, or more complex and practical, such as our "7d Smart Dex Trader" section, which identifies the most profitable DEX traders over the past seven days. By tagging the largest wallet database, our users can gain insights into the types of wallets executing trades and delve deeper into the content they are interested in or discover high-signal addresses based on their needs.

OKX Web3: Generally, the roles of address labels can be summarized in three aspects:

First, in terms of identity recognition and management, address labels are used to identify the association of specific individuals, entities, or organizations with specific addresses. For example, labeling an address as "Exchange A" or "XYZ" helps track and manage their trading history and types of activities, such as deposits, withdrawals, or trades, facilitating transaction classification and analysis.

Second, in terms of risk management and compliance, address labels are used to create whitelist (trusted) and blacklist (risky) lists. This is crucial for monitoring and managing risks, such as preventing funds from flowing to addresses suspected of fraud or illegal activities, in compliance with anti-money laundering (AML) and know your customer (KYC) legal frameworks.

Finally, in terms of market analysis and research, labeled addresses help in behavioral analysis, understanding users' trading behaviors, preferences, and fund 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 level and trading strategies of specific market participants.

7. Why is analyzing fund flows on-chain important?

Nansen: Analyzing fund flows is crucial because it reveals behaviors such as buying and selling by funds. As one of the players most aware of the situation in the market, the actions of fund managers often carry significant guidance. Following their trading movements can help users make timely decisions.

Once you observe funds flowing in or out over a specific period, further analysis is needed to understand the motivations behind it. For example, a large inflow of funds into a fund may indicate preparations to allocate funds to other addresses, or it could simply be part of internal reallocations. For outflows, the key is to track where the funds are ultimately sent. For instance, treating token staking and deposits as fund outflows, but their underlying implications can be entirely different.

OKX Web3: On-chain fund flow analysis is a key market research tool that can reveal market sentiment and development trends, providing important references for trading decisions.

First, by analyzing fund flows, we can gauge the overall sentiment of the market. A large inflow of funds into a specific asset typically suggests optimistic market sentiment, while a large outflow may indicate pessimistic sentiment. Second, changes in fund flows often precede market trend directions; sustained inflows may suggest an upward price trend, while sustained outflows may indicate a downward price trend.

In terms of risk management, fund flow analysis can help identify unusual activities, such as sudden large fund transfers, which may signal market manipulation or impending large-scale trades. Monitoring the movements of "whales" (large holders) is also key, as it can provide important market insights, helping users observe potential price fluctuations and adjust strategies in a timely manner.

Finally, when making trading decisions, fund flow analysis provides an important perspective for trading groups. By understanding how funds flow to different assets or protocols, users can optimize asset allocation, identify new opportunities, and uncover arbitrage opportunities.

Currently, there are various excellent on-chain data analysis tools available in the market, such as Nansen and GlassNode, which provide detailed fund flow analysis, whale movements, and trading pattern identification, offering strong market insights and decision support for beginner players. There are also some user-friendly detection tools available, such as Nansen, which provides detailed on-chain data analysis, including fund flows, whale movements, and trading patterns. GlassNode also offers a wide range of on-chain data metrics, including fund flows, trading volumes, and active addresses.

8. What is holder analysis? How can the distribution of holders be used to assess the health of a project?

Nansen: Holder analysis involves studying the distribution and behavior of wallet addresses holding specific tokens, which can reveal patterns, concentration, and potential market impacts to some extent.

If a token is highly concentrated in private wallets or in the hands of individuals known for pump-and-dump schemes, this is usually a negative signal. Additionally, you can also look at how many tokens the development team or individuals hold, as well as metrics related to contract ownership. Using tools like 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 (EOA), as well as whether they belong to centralized exchanges (CEX), multi-signature accounts, or other types of entities, which helps to assess the project's health more comprehensively.

OKX Web3: When exploring the health of a token ecosystem, distribution insights are a crucial indicator:

First, by analyzing the distribution of holders, we can determine whether tokens are concentrated in a few large holders or widely distributed among many small holders. A good distribution structure typically helps stabilize the market and reduces the risk of large entities manipulating the market.

The reflection of trader behavior shows the market's activity and sentiment: observing the trading activities of holders can provide deep insights into market sentiment and participation. High-frequency trading may indicate speculative behavior, while long-term holding reflects traders' confidence in the project's long-term prospects.

Additionally, project stability is closely related to holder distribution: a stable and diversified holder structure helps support price stability. This stability makes the project less susceptible to large-scale sell-offs or speculative activities and helps maintain long-term sustainable growth in the market.

Of course, community support and trust are important cornerstones for project development: a broad and active holder base typically reflects the size and engagement of the community. This community support is crucial for the project's development, adoption, and response to market challenges.

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 happening in reality.

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 optimistic, pessimistic, or neutral attitudes. These sentiment indicators directly influence traders' emotions and market behavior, serving as important bases for assessing 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 helps users predict short-term and long-term market movements. For example, positive sentiment may indicate that asset prices are likely to rise, while negative sentiment may lead to price declines. Sentiment analysis can provide real-time feedback, helping trading groups adjust their trading strategies and risk management plans in a timely manner.

Evaluating project and market acceptance also relies on social signals and sentiment analysis. By monitoring discussions on social media and online, we can understand the popularity of a project or new technology within the community. Active and positive discussions on social media often indicate that a project is widely recognized and supported, which is crucial for project teams to adjust strategies and promotional routes.

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 timely identify sudden negative sentiments or social media activities, which may signal market instability or potential negative events. Combining on-chain data and market indicators, sentiment analysis helps to comprehensively 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 issues commonly faced by beginner users, hoping to provide effective references for them. In future series of articles, we will continue to explore more practical data usage/analysis methods to provide references for traders and new 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 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 responsible for understanding and complying with applicable laws and regulations in your locality.