Nansen’s analytics slowly labeling worldwide wallets

0
6

Public blockchains can be accessed and read by anyone, but creating meaningful insights from this data is no easy feat. Millions of transactions are recorded across various chains and layer-2 protocols, creating petabytes of data every day.

Services like Google transformed the early internet, performing a significant engineering task by structuring and maintaining millions of websites to serve simple user queries. A handful of blockchain analytics platforms are looking to do the same, with Nansen distinguishing itself by processing on-chain data into a growing database of wallet tags.

Cointelegraph visited the growing company’s Singapore office during Token2049 for a one-on-one conversation with co-founder and CEO Alex Svanevik. Occupying a dedicated space in a collaborative environment, the office buzzed with employees in town from the company’s centers in Lisbon, Miami, London and Bangkok.

Svanevik’s background is rooted in artificial intelligence. Graduating from the University of Edinburgh in 2010, the Norwegian’s dissertation focused on building models based on how children learn mathematics. His first foray into the world of work involved establishing a business-focused AI consultancy before moving into management consulting.

acfa5f39 0f33 4d14 9068 26f90436bce9
Nansen CEO and co-founder Alex Svanevik chats with Cointelegraph at Nansen’s office in Singapore during Token2049 in September 2022.

A stint as a data scientist for a media company preceded his eventual move into the world of cryptocurrencies, with Svanevik being introduced to Ethereum in 2017. His first job for a cryptocurrency company funded by a $15 million IPO lasted about a year, as the company became one of many booming and booming after 2017.

Svanevik, Lars Krogvig and Evgeny Medvedev then teamed up to create Nansen AI, looking at a gap in the market for an on-chain analytics tool aimed at investors:

“On the one hand, you had the free tools that all crypto investors had access to, like CoinMarketCap and Etherscan. And then at the other extreme, you had very expensive tools that were used exclusively by businesses, like Chainalysis.”

Nansen was formed in late 2019 to provide high caliber analytical tools to investors delivering blockchain data and insights in real time. Svanevik admitted that the platform originally attracted high-end cryptocurrency traders with large holdings, but has since evolved to have a 50/50 split of retail and institutional users:

“We started with what you might call the ‘degens’ right before DeFi summer. Many of them used Nansen to navigate DeFi summer – which DeFi pools to allocate your capital to, which tokens to buy, etc.

The ongoing cryptocurrency bear market, which is mirrored by traditional stock markets, leads Svanevik to believe that Nansen’s sector will trend toward greater institutional use over the next couple of years. Individual investors can take a break from crypto and reduce analytics services, but continued institutional investment efforts will require data insights:

“There are many companies, funds, operators, and blockchain and crypto projects, where the businesses that raise money are doing well from a financial perspective. They will not only reduce their operations because crypto tanks 70%. They still need to have really high-quality analysis and information .”

Tagging wallets

Nansen has slowly gained a reputation for his wallet tagging efforts across the cryptocurrency ecosystem. Again, this hardware and labor-intensive effort is a testament to the joint AI and human efforts of the platform.

Svanevik estimated that Nansen scans nearly a petabyte of data every day from the various chains it monitors. This also accounts for nearly 20% of the company’s running costs. Svanevik described Nansen as “Google Cloud max”, with the computing service being its infrastructure platform of choice since its inception.

Recent: What’s left in the NFT market now that the dust has settled?

This speaks to the fact that despite public blockchains being available to everyone, there is inherent value in sorting data and gathering valuable information from it. Here’s where Svanevik drew parallels to the platform and what Google has done to the wider internet:

“If you think of Google as a search engine, every website is public, right? But this is a huge engineering effort to actually structure, maintain and serve the relevant sites for your question. I think Nansen is somewhat analogous to that. But we also have proprietary data that we enrich the public data with, which is kind of one of the things we’re known for.”

Nansen has more than 130 million addresses that it has tagged with additional information directly accessible from blockchains. This allows the average user to find out which addresses are held by notable entities such as Binance, Alameda, Celsius and Hodlnaut, Svanevik emphasized.

When asked if the tag feature was a focus from the beginning of Nansen’s existence, Svanevik noted that the first iteration of the platform was a database in which a user could search for addresses and obtain wallet tags:

“We realized that that alone is not very helpful. You have to combine it with the transactional data, and you have to have some kind of user interface, something of value.”

The development of Nansen’s platform was a result of combining “man and machine” into processes and architecture to compile the information. A network effect led to pooling of returns, as identified wallets that were tagged often lead to the identification of other wallets interacting with them. Ninety-nine percent of this work is still done by AI, while Nansen’s research team plays a role in connecting the dots for the remaining 1%.

The labeling of wallets and individuals has also been a point of much debate in the wider cryptocurrency ecosystem. Privacy is an inherent value presented by blockchain technology, but the transparency of public blockchains means that analytical tools can now identify who controls specific assets and wallets.

Svanevik said that Nansen is mostly focused on labeling projects and businesses rather than individuals, except for those regarded as famous public figures:

“We really don’t put much effort into labeling individuals. If we do, it’s usually because they’re remarkable. They are founders of projects — imagine, you know, Do Kwon or Vitalik. These are famous public figures. And we think it’s in the public interest to have them labeled.”

Nansen’s co-founder also believes that the labeling of wallets belonging to major exchanges, institutions and individuals has led to people becoming more privacy conscious. Curating, compiling and serving information in a convenient way is the goal, which in itself raises some ideological considerations:

“There is a fundamental dilemma with transparency and privacy in blockchain, and something that people should think about and pay attention to.”

“Bad tags” vs. “good tags”

Nansen is one of a handful of well-known analytics firms bringing sense and order to blockchain data. Differentiating the product offering from these similar firms, Svanevik highlighted platforms like Chainalysis and its focus on tracking the illicit use of cryptocurrency as a key difference from what Nansen focuses on:

“Chain analysis tends to focus on the illegal use of funds, what you might consider ‘bad labels’. This is sanctioned, this is fraud, etc. Whereas Nansen tends to focus on ‘good labels.’ This is a smart money address that you may want to follow because they have made good investment decisions in the past, that this is a fund that you may want to know about, etc.

Considering that 99% of cryptocurrency transactions are over the table, Nansen chose to focus on crypto-native investors and operators while market participants such as Chainalysis, Eliptika and PRM Labs cater more to public institutions and government agencies.

However, Nansen played its part in analyzing major crypto events, including its role in tracking token movements linked to major companies during the infamous Terra crash in April 2022:

“LUNA is one example where we had the tagged Terra data and we had Ethereum data to complement it because of the wrapping of LUNA and the crooked pools that actually caused the collapse of TerraUSD. But also things like Hodlnaut and their involvement in it and our ability to look at that.”

Nansen’s tools and its newly launched research department helped journalists at Tech in Asia piece together questionable practices by Hodlnaut, one of a number of cryptocurrency lending firms that closed after Terra’s 2022 collapse.

Settled in Singapore

Cointelegraph’s in-depth conversation with Svanevik ended with his take on Singapore as Asia’s cryptocurrency hub. Token2049 attracted thousands of participants and certainly left the impression that the island nation, with its towering skyscrapers and futuristic buildings, is a hub for the ecosystem.

Svanevik believes Singapore is in a unique position to be one of the world’s crypto hubs for a number of different reasons. First and foremost, the country is “a place where finance meets technology”, which contrasts with its nearest Asian competitor, Hong Kong, which Svanevik described as more finance-oriented.

Recent: Music NFT is a powerful tool to transform an audience into a community

Regulators in Singapore are also aware of this fact. Participating as a panelist at a recent Monetary Authority of Singapore event, Svanevik highlighted tight controls having both positive and negative effects:

“During the time I lived here, they became stricter. They are not with open arms, inviting everyone who does anything with crypto. So, it is quite difficult to get a license here. It’s a long line, and they’ve gotten a fair amount of criticism for it.”

Although it’s a tough environment to set up shop, Nansen’s CEO believes it puts the country in a good position to be a respected jurisdiction to operate out of.