While mainstream coverage of cryptocurrency has been overwhelmingly negative in the wake of the collapse of the Terra ecosystem, the bankruptcy of Celsius and the fall of Three Arrows Capital, these events ultimately show why more of the financial system should operate on-chain, bringing more transparency and information to market participants.
In all three cases, the damage was caused and exacerbated by opaque, off-chain entities. And while the reason for the trio of events is important, it has also caused considerable damage to the overall reputation of the industry. These events have made it clear that the industry is in need of more transparency, something that can be made possible with more on-chain data and data analysis tools.
Proponents of blockchain technologies often tout their transparency: the networks are treasure troves of open, incorruptible financial data allowing for economic activity to be measured with an unprecedented degree of accuracy. This new technology creates immutable records of all transactions where sentiment and investor behavior can be measured through the collection and study of data.
On-chain data gives us insight into market events
On-chain data analysis has become essential in the blockchain space. By looking at transaction data and crypto wallet balances, we can gather valuable insights into market conditions. This is crucial for participants and investors trying to plan their next move. Not only does data tell a story of the market’s past, but it allows each and every investor to make an informed decision before initiating any trades or interacting with the market.
Related: A $10B hedge fund gone bust with founders on the run
The importance of analytics platforms has become more apparent than ever before — they are essential for learning from our mistakes and understanding weaknesses within the blockchain ecosystem. The events leading up to Celsius’ collapse and the unveiling of 3AC’s holdings were researched and analyzed thoroughly by analysts and media alike. Research has helped specifically to paint a picture that outlined where the contagion started and how it spread. This was only possible because some of that data was on-chain. If 3AC and Celsius had a full picture of their holdings on-chain — similar to a platform such as Aave which anyone can audit and verify collateralization — fewer investors and creditors may have been duped.
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