ZK Podcast: Blockchain analytics with Alex Svanevik from Nansen

Transcript

[Music] welcome to xero knowledge a podcast where we talk about the latest in zero knowledge research and the decentralized web the show is hosted by me anna and me frederick in this week's episode guest host taron and i chat with alex svanovic ceo and co-founder of the company nansen we cover crypto analytics defy analytics as well as discuss the push and pull between a need for privacy and the need for blockchain transparency

and data now before we start in i want to say thank you to this week's sponsor alio alio is the first platform for fully private applications they use blockchain and zero knowledge cryptography to deliver a web experience that is both personal and private with elio developers can write private applications without a background in blockchains or any expertise in cryptography the company consists of a world-class team of cryptographers engineers and designers and they've recently released the developer preview one an early peek at what the future of the web could look like the release introduces a new programming language called leo as well as a new community driven package manager for leo and a new development environment or ide

called elio studio we recently had howard wu the co-founder of elio on the show for an interview if you haven't yet checked it out and want to find out more i highly recommend giving it a listen i'll provide a link in the show notes as well as a link to the developer preview so that you can learn more about elio and start contributing today so thank you again elio now here is our interview with alex from nenson so this week i'm happy to invite tyrone back to the show as a guest host hi tyrone hey how are you good nice to see you back here you know it's always good to be on on the podcast in our conversation today we're going to

be touching on crypto analytics but we're specifically going to be looking at defy analytics and we have a really good guest to do that with we have with us alex svanovic who's the ceo and co-founder of nansen welcome alex thank you nice to be here before we start in on you because obviously we want to learn a little bit about your background the name nansen what is that name what does that mean that's a really good question actually we took it from an explorer who's called city of nansen he's a norwegian explorer polar explorer and he sort of embodies the values that we have in the company of curiosity and courage and he had many famous expeditions he led an expedition called from

which made it uh the furthest north that anyone has ever ever been uh cool so he did a lot of other interesting things and he actually helped develop the theory of the neuron oh wow so he was also a scientist so so he's the inspiration for the name it's also pretty easy to pronounce in all languages which is good so what got you interested in this particular space tell us a little bit about the path that led you to founding nansen yeah so my own personal background is in machine learning and data science i've worked about 10 years in startups larger corporations and i also did a few years in management consulting and then in 2017 is when i transitioned into working full-time in crypto

so i discovered that there was an abundance of data in crypto and an openness around data but i found that the space was still quite immature when it came to analytics products um and so for me personally that that meant i could create some value in the space was that the first project you worked on like did you immediately start in at the analytics side of things or yes i mean i think you know like a lot of others i started first looking at you know crypto investments you know this was right before the ico boom and bust and so i was actually looking quite a bit at icos and like what could drive success rates and multiples uh in terms of valuations and so on

so i did a small project around icos with a couple of other people but very early i started looking at on-chain data which i found to be the most interesting aspect of crypto cool you know one thing i think that's kind of interesting is a lot of the episodes on this podcast focus on sort of future facing changes to blockchains like new blockchains blockchains have new privacy tools or are more scalable but you know you've really focused on kind of retrospective analysis of blockchains and doing things in that world how long have people been really doing analytics within crypto and kind of but yeah what's actually the history because i feel like

you know people have heard of chain analysis or they've heard of kind of some of these investigations but i don't think people actually totally know how this kind of space got started so definitely my focus has been on the ethereum ecosystem and so there's obviously a history before ethereum when it comes to on-chain data and you mentioned chain analysis which has been i think you could you could say a controversial player in in the crypto space they've focused a lot of having customers outside of the crypto space right like law enforcement uh regulatory bodies government agencies and so on i think with ethereum uh there's been maybe a couple of other analytics

companies that have focused more on the actual crypto entities as the customer base and so that's definitely the case with nunsen so i would say that from you know the the ico boom and bust there were a lot of analytics companies that kind of arose in that era and then many of them transitioned into more like regulatory uh focus so you might have been looking at kind of tokens and so on in 2017 but then as the interest for these tokens kind of died in 2018 and 19 many of them pivoted towards more b2b analytics and even you know regulatory applications like compliance

so i think there are some you know some examples of companies doing that and i think you know if you look at the whole analytic space there's probably been a bias towards bitcoin probably partially because of that because you know most of the customers buying analytics and data were actually you know on the b2b side focusing on on bitcoin yeah i mean bitcoin analytics in the case of bitcoin i guess all that you'd be analyzing is just like i mean it's purely account names and transaction information i suppose whereas with ethereum because there's like dapps working on top of it like when you do analytics on that are most of those analytics still just on like value transactions or is it just on like

who the accounts belong to or do you see already like a more sophisticated analytics idea happening there yeah that's a great question in our case and actually with all of onshane analytics that you do with ethereum you can look at much more than just value transfer you can look at interactions with smart contracts you can look at for example ownership of you know multi-segs membership in different dows you know participation rates and governance you know it's a very rich ecosystem in that sense and the cool thing about ethereum is that it's actually not that hard to do on-chain analytics for example you have events that get emitted from smart contracts

and these you can actually pull out from just reading out the logs um from from the blockchain so those are some things we look at the unique thing about nunsen in particular is that we also have this off-chain contextual layer on top of the product so we don't only have kind of vanilla on chain data we also enrich the on-chain data with contextual information about for example which exchanges are involved in the transactions which d5 protocols are there so if you wanted to learn you know how does money flow around the different real world entities nonsense is probably the best place to go to find out before we dive more into nuns in itself i'm curious to hear like what are the other projects i'm wondering if there's projects that i

may have heard of that are doing that on ethereum looking deeper than just transaction data just to give some kind of maybe some reference points to people yeah absolutely so some other companies in the space are bloxy for example which i think focus mostly on api access they also have a great website with lots of different you know insights so you can pull out of there uh you also have glass node which is another one dune analytics which a lot of people use to write sql queries on elementors is another one which is a bit more on the b2b side so there's there's quite a few different analytics companies in the space and you know many of them have an on-chain focus and some also you know focus more

on the off-chain market data which would be you know the obvious like coin market cap coin get go and so on which are more on the on the you know market side of things and off chain centralized exchanges etc so i think you know one interesting role that we've seen is that kind of blockchain analytics has has historically as you've pointed out in in bitcoin really been focused on analyzing crime and sort of trying to i identify individual users at the cost of reducing fungibility and making privacy more difficult but i think in d5 there's because of kind of this richer data that you've you've kind of intimated

there's a bigger role for analytics especially in terms of understanding smart contract state and how certain external entities are interacting with blockchain so where do you kind of see the role of of analytics within within d5 and how that's going to grow i think there's at a high level uh when when we think about you know the the user segments of nonsense for example which i think sort of maps out quite nicely to the entire crypto ecosystem it's really two main purposes either you use analytics as an advantage when you do investing in trading which is a you know big use case for it uh on its own crypto is interesting because it has very low transaction costs as a

market but it's also very inefficient still which means that information is incredibly valuable if you spot you know an inefficiency in many cases you can profit from it within seconds so that that's definitely one use case the other use case is for the kind of crypto teams and defy project teams themselves to make their products better you know this could be trying to better understand the different wallets that are in interacting with their smart contracts what other contracts are those using even if you don't know you know their identity you don't need to know who they are but the fact that you have a persistent record of that account can help you in a better understanding you know what other protocols they use

and so on and so forth so just where you might see you know analytics on web users in a web 2.0 world you can see analytics on smart contract usage on wallets even if you don't know who they are but you have a persistent record over time that you know maps to some kind of entity in in the real world so i think those are the main use cases for investing in trading and really to make products better in the space and you know from from my own experience speaking with customers at nunsen but also just seeing usage of other products that we that we've talked about i think those are the main use cases that you know people use analytics products for you could

also say there's like an entertainment value so some people just like you know lurking and like you know checking out different wallets or different projects and seeing you know what's actually happening but very often it borders on to the kind of investing use case for you know retail investors and so on i think you've also been cited by journalists is sometimes like if you're doing a report or something like that they maybe would use this but yeah that's that's a great point that's actually a third use case yeah normally we talk about three different customer segments and that's that's actually the third one which is still pretty small to be honest in terms of numbers but it is really important like strategically and and when you think about the impact that some of these researchers can have definitely what's the big difference here you know

when you're doing d5 and you're doing analytics on decentralized financial instruments or you know contracts what have you is there any version of this in traditional finance that you are looking at and kind of trying to replicate or is it completely crypto native are you actually like and and this is also to you tarun since you come from that world but like are there a lot of analytics tools like this in traditional finance i'd actually love to hear tarou's take on this first before i go actually yeah i mean i think the data transparency doesn't exist as much so like most of your tools that you're using are like trying to backwards infer what you know people's behavior or like their identity

and based on you know how often they [Music] send certain sized orders or something to an exchange you're like okay this is the whale who always rounds all of their order sizes to 27 or multiples of 27 or something right versus uh i think certainly in ethereum given that it's only pseudonymous and people tend to not read you know use new addresses very often you tend to be able to do a lot more rich analytics and i think what we've seen in in the crypto world is that's changed the market behavior quite a bit when everyone is able to observe you i think there was a re a controversy last week where a large exchange owner

who shall not be named was publicly shorting or like a trading firm associated with him uh was publicly shorting a coin and they basically got short via d5 protocol and they had an angry mob go after them on twitter which in normal finance you you know the lender would have to leak your name to the press which would then you know what i mean it's not like uh at least in my my view this is like a little richer because the market structure is impacted by the analytics versus the in normal finance it's the analytics exists in spite of the market structure you're saying that behavior is probably altered because you are public not just the behavior of the reaction but like the behavior of the actor

in the first place if they have the foresight to realize that like they will be seen maybe yeah i think alex probably knows way more examples than me of people using their product to kind of build a narrative like that you know we have customers who've spotted you know other entities accumulating a certain asset and then basically have accelerated their own purchasing of of said asset you know which in in their own words save them execution costs of maybe 250 000 right so yeah so just as an example but i i don't think we've seen that much of the kind of bluffing and so on that i think we will see it's not clear that you know the entity that tarun mentioned

is not clear to what extent they would actually you know let's say sell the full amount of tokens that are being sent to some centralized exchange and so you could imagine scenarios where an entity would do that in order to spoof almost do an unchanged spoof right where basically the market might get frightened and start selling off and they get a better price at buying it up somewhere else so it becomes kind of this poker game almost of misleading people on chain which which is interesting and it's like its own kind of new dimension of game theory that's interesting but but mostly i i think people love the they have a fascination with with on chain i think because it's it feels very

futuristic and mysterious in a way that you can just see these like massive transactions and they very often go viral right like if you see someone make a uh one bitcoin transfer of like you know billions of dollars or whatever it is they tend to go viral so i think there's kind of like an innate kind of curiosity or fascination among people as well looking at on-chain data and and all these things come together in this you know wacky thing called crypto which is like part entertainment part finance that's so funny it's true it's like you hear sometimes about the these big movements and then there's all these the speculation and narratives and storytelling around like what they think that might be and sometimes you'll have sort of an expert way in and just be like oh it's just this don't

worry about it but then like obviously the conspiracy theorists are like well but who knows but what from your position like what you see obviously you've built like an analytics tool but do you also i'm assuming you're paying attention to this space and the dashboards as well like what what are you looking at what would you look at what do you think is like the most interesting thing for people to pay attention to in this yeah so i'm definitely the biggest user of themselves in terms of hours like and i dog food the product literally every day so again it comes back to those use cases right for the 3d segments like if you're an analyst if you're a product manager for example or an engineer

or an investor and so in my own use cases mostly on the industrial or perhaps trader side and that's also about you know 70 of our customers so if you're for example going to acquire a token or like change your position in a token either invest more into a token or sell off some typically you might want to look at what are some entities that like have been accumulating this token lately like the last 24 hours uh the last seven days or 30 days have they changed their positions that's one thing that people very often look at and so sometimes actually the accumulation on its own will be a buy signal for some people depending on their strategy because it indicates that they know something that the rest of the market does not know

so that's that's kind of one one use case so the way i think about it conceptually is really are you doing due diligence on a specific asset or are you doing discovery of new assets and so in due diligence you know that would be an example of what i just said you're looking at a specific asset but in discovery you could look at you know what are some of the smartest wallets you know because you can actually think of them as entities even if you don't know who they are what are some of these smartest wallets doing on chain are they yield farming from a specific project are they accumulating a token and so on so that's that's another case where with this yield farming craze we've had many people have been looking at who are

actually the yield farmers in specific contracts and then they maybe you know maybe mistakenly but sometimes they use that as a proxy for risk and they say oh you know this big fund is yield farming this this they're actually the biggest farmer of this contract i will assume that they have done the risk due diligence and i will just ape in after them which is you know sometimes it might work as a heuristic but it's definitely not 100 safe and we heard about that in the sushi swap saga episode that we did a few weeks ago where we we heard about people kind of like tyrone i think you had an example of people pinging you this is this is the same this this is the same thing by the way who we were talking about we should find

a code name yeah everything boils down to sbf lately and so i think the analytics have been quite interesting in that the once people started realizing you know i think in the normal markets if like a whale influences the market and people like want to kind of like dox the whale because they like affected microstructure they'll do things like call bloomberg and tell bloomberg like hey like there's this market manipulator or like you know call the sec or you know kind of make some noise that way but the cycle the life cycle is so much faster in crypto right like i feel like we went from like three weeks ago with sushi swap to like now sbf is a villain he went

from like the hero that saved sushi swap to like he's the villain and everyone is looking at all of alameda's on-chain transactions i mean i think it's a really interesting case as well where uh you you start thinking about how crypto is kind of a new paradigm especially when it comes to privacy you know reputation identity and so on because i think some entities will just choose to embrace the transparency of blockchain and you know it makes a lot of sense that you'd want to increase privacy for individuals and even you know funds in many cases but i think also obviously out alameda i guess we could just say you also said sbs before so it's not it's pretty clear yeah no we've already we've already we i i i was just saying it

and so and so it's pretty clear that like they have a much larger brand now like partially because of all this stuff going on on shane so is that a good thing or a bad thing i mean traditionally you know all pr is good pr so i think there's kind of a discussion to be had on that aspect as well where you might actually use the blockchain as like in like almost like a social media you know it's kind of more like twitter than a banking system which is kind of strange but in many ways that's that's how it is you just mentioned something you just mentioned this concept of privacy on like in these analytics systems and obviously analytics is the observation of kind of data and the connecting of points right it's like linking things to

one another privacy this is a topic that we definitely want to cover on this podcast how do you approach privacy because we talked about the previous analytics companies in their case it was often about identifying users and reporting them potentially to an external party or even the example you just gave like in d5 are you still trying to identify the users or not it's a great question so first of all there are some regulations here right so even disregarding what we personally believe about something there are regulations you have to follow like gdpr for example in europe so we don't track data on individuals for example so we don't add labels for individuals with the exception of people who have

kind of where they have placed the information in a public domain already for example you know my name is so-and-so and i'm i'm a multi-seg signer of project abc yeah that that would be a scenario where we're comfortable placing the label and if that entity comes to us and says hey you should remove that we will do it got it also i guess if someone tweeted it if they were like this is my address send me okay then you kind of make that decision yeah yeah you know again assuming that you know that tweet is still up so it's in the public domain and so on but really what we've found is like people aren't really interested in individuals as much i mean they're they're interested in notable individuals of course but then there's typically a corporate entity associated with it

and so we when it comes to real world entities we focus on you know projects exchanges funds in some cases mining pools you know these these larger entities that are not tied to individuals that's mostly what people care about and so it's been not that difficult for us in that sense to you know find a limit between individuals and you know all these different corporate entities what you're saying here are you saying that like on the individual level you at least nensen doesn't have a focus on linking the individual account holder to an in like a person but yeah you have identified i guess the corporate accounts yeah and in many cases we have i should

also point out just you know for full transparency that when it comes to individuals many people dox themselves on chain like literally through dns names right yeah and you know some people do that willingly and consciously other people probably aren't as aware of this and i think sadly a lot of people tend to think that if you can't see something on ether scan then you can't see it on the blockchain which is a really bad heuristic because you obviously have the whole transactional history of the blockchain available for anyone so if someone has the time they can sit down parse out all the on-chain transactions and identify exactly where all these ens names

are associated like which wallets which ones that own them in the past and so on and so we do show ens names in our platform and sometimes that can be quite revealing of course there's no guarantee that if someone buys you know alex vlanovic.e that's actually me but that's what it says on chain so we don't censor enos names as such like we do we do display them in in the platform but really the focus for us is not on individuals and we don't add any labels i think it is also important to distinguish between the collection of data and the display of data so in the case of ens that's not really a collection of data we're just displaying the data that's already on chain

if we were collecting data on individuals like hey you know we found this information someone told this person owns this wallet you know and if we put that in the platform that's a very different use case um from a privacy perspective and a data perspective it's funny like when you talk about kind of an analytics platform i often for some reason for me like to be honest i haven't used i haven't used one i haven't used anything past a block explorer and i think of a block explorer as being sort of like the first level of analytics but i mean all it is is really just like here's some very basic data pulled from the blockchain displayed for you this is what this you know user's account number is called here's the amount in it here's

the transactions but actually what you just said there you you hinted at something like what isn't displayed in the block explorer oh yeah i mean there's lots of stuff that's not displayed right so first of all if you think about a product like etherscan which is great and i use it every day i love it i think it has different goals than most analytics products in in particular nansen has very different goals so first of all etherscan seems to me to try to be more of like a registry or or a reference and it intends to be less opinionated and that means it doesn't sort of favor the display of certain things over other things and if you go to a specific address and you look just

visually you'll see all the transactions listed chronologically right there's no kind of visual emphasis on any particular transactions and so nonsense is a bit different because we give ourselves kind of the liberty to be opinionated about how we display data and so we will typically make more emphasis on like large transfers larger transactions because we imagine that investors and sometimes you know product teams are actually more interested in that so that's that's one thing that is kind of you know there's a difference between the more kind of aggregated analytics and opinionated analytics if you call it that versus the just blockchain explorers and so we don't really have

the goal of displaying everything that happens on chain in that sense um with something like etherscan there's a lot of stuff you don't see the ens names you have to kind of go to a separate section and look that up okay you don't necessarily see past enos names and i'm not sure why they kind of haven't focused that much on having enos names in the main view it could be because they are i don't know thinking about the privacy concerns but in my personal opinion it's better to make people aware that these ens names are actually there yeah and and so it's funny because i've seen after nonsense started getting popular i think a lot of people have actually become more privacy aware which is

which is a good thing in my opinion because we are not out there to you know to track down individuals who you know hold some certain amount of crypto in their wallets that's not really the focus and people generally speaking don't really care about that in your tool do you also show all of the links like every account and the links that that account would have to other accounts like if you know yeah so you do you do so we do have for example a dashboard that's called the wallet profiler and so you input an address and you see all the neighboring wallets that this one has transacted with in order to help you understand the context of what this wallet is and it can often be quite helpful to understand you know what are the the different d5

protocols for example that have interacted directly with the smart contract uh what are the main entities in terms of exchanges or even funds or market makers like we talked about and so yeah you do see that definitely that's that's one of the more popular dashboards in our platform i like that idea though that like by looking at and actually i would i would say that in the web 2 world with my old startup when i learned about you know online analytics or google analytics like obviously like my realization of what was being tracked my eyes were open to that all of a sudden i was like wow like i have to think about my own behavior and yes you know i i all of a sudden understood how my privacy would also be impacted by this

i haven't yet looked at anything on the crypto side so i think it sounds like it's a good time to do it maybe this is a good recommendation to people because to better understand what it actually is you'd have to actually see that displayed in a way like what you've done what your actual history looks like for real yeah so one idea we've played around with which i think we might do is to just give people a simple tool where they can actually just look up their own address and see like hey here's what you can actually see about this address and of course you know our product is a paid product so we can't just let them do that for any address but you could imagine that they just sign a message proving that they actually own that wallet and because of that they are

allowed to see the transactions on their own which would be kind of a privacy tool that might help people get more aware of what's actually you know possible to see totally that would be actually amazing to have yeah like a a self-reporting privacy tool for i mean defy general blockchain like that would be so useful i yeah this is higher up on our list is there anything like that not that i'm aware of i mean i don't know if tyrone has seen anything i'm not aware of anything so nope yeah i haven't seen anything quite yet although i feel like that is a direction that you know we're inevitably headed towards especially i think as the projects themselves want better analytics on under users i feel like that's going to

be a market force that kind of pushes this yep so you know going a bit back to this discussion about privacy identity and so on we do already have some examples of people that have like an on-chain reputation so there are enos names that aren't they aren't widely known who they are in the real world the most famous one or the one that i follow the most is called newbie.eth and this entity you know did some incredible trades and some activity and like early yield farms and i know for a fact that a lot of a lot of people follow this account but the funny thing is like no one i'm guilty okay yeah you're following yeah following this person and i'm sure some people know

uh like you know who this person is but i don't know but i still follow them right because so so in fact their address is is actually an asset in itself you know it's it's valuable if a token project has nubia.ed on their top 20 list as one of the holders like i'm going to be looking at that project it's just that's just kind of how it is so i think it's almost like a third phase you know internet in the early days everyone was using like avatars nicknames we didn't really know who people were web 2.0 you had kind of the facebook era where you know everyone had their full name on the internet and everyone knew who you were and you logged in with your facebook and everything web 3 might be kind of a return to

the roots in that sense where you can have a pseudonymous presence online and people don't know who you are but you can still build up kind of like an identity asset on its own for better or worse as we've seen recently exactly sometimes you can build a quick reputation in a month or two and then do a massive uh rug pull indeed so yes indeed right but now everyone can watch you and will hold it against you in the future i think there's actually this interesting thing of like on-chain analytics forces everything to be an iterated game you can't just kind of like win a one-shot game where you're like oh i'm just gonna [ __ ] over everyone and like take all the rewards

well if if there's some sense of on-chain identity and you don't do a very good job of hiding it which is expensive in some ways right you actually might not be able to win in whatever crypto game you're playing you you know you everyone knows and will start suddenly being able to turn against you and so that's interesting i'm just thinking about that example of like i don't know like some cartoon character type avatar twitter personality but like there are addresses probably linked to like anyone who's in crypto and on twitter they may have at some point like shared that link and then even if they try to kind of move away from that avatar they try to create a new identity let's say because all of it's sort of cartoony

and fake anyway it's not directly linked to them they still have to use the same crypto accounts they still have to use like there could still be some sort of link between them there yeah in a you know if you don't have good opsec i guess i mean yeah you could just create a new address and fund it from a centralized exchange and then it's quite hard to track it to be honest from the outside the exchange notes exactly exactly so it's kind of hard to do it fully trustlessly i mean you do have like tornado cash and so on and some promising early projects in practice probably easiest now is just to you know fund an address from from coinbase or something like that if you just want to be pragmatic and that's what a lot of people do

in a future where there are more private blockchains how do you view the role of analytics and how do you view analytics evolving if say like we have a world where privacy-focused blockchains take over or like even like layer twos are private so you only get some some data on the main chain how do you view the evolution of privacy and analytics because i feel like just like in the normal markets there's this cat and mouse game yeah of like everyone knew they're being watched they moved to something they thought was more private then they just found out that a new entity [ __ ] them instead of the old entity and you know yeah but i feel like in crypto we actually have a chance for like separating church and state in terms of privacy and transactability so you know we're not

there yet but you know how i'd love to hear what you think about kind of how analytics interacts with that i guess the first thing i think about because you know we we run a business around analytics the first thing i think about is like if you see either certain privacy chains or privacy technologies or layer two like how will this impact our ability to do analytics and just from from the perspective of our team three different scenarios either it's impossible like either some technology that just doesn't you know make it possible to do certain types of analytics which seems kind of i don't exactly see how that would play out in practice because you know there are gonna be some kind of traces of things happening

but it might not be as kind of parsable as it is today so that's one outcome like it's just impossible and then it's gonna be impossible for everybody not just for us right and then at the other extreme it's going to be relatively easy to still do analytics which you know let's say you have some new chain that gets very popular and it's similar to ethereum 1.0 today so it's still going to be quite easy for us to do it and in that case you know we're going to be able to do it because we've done it with with ethereum 1.0 and then there's kind of this step in the middle where it's going to be just a lot harder and in that scenario i think analytics companies are going to become even more important because it's harder to do it on your own and so you're going

to have to rely on analytics companies so that's almost like the the best case scenario in a way if it gets if it's not impossible it's just really hard i think that's a scenario where analytics companies will actually thrive ironically perhaps because a lot of people are kind of you know they ask us like what's what are you going to do in that scenario but that's actually the best scenario for i think strategically for analytics companies with l2 so it's taking a step back from like our business which is obviously top of mind for me i think with l2 you might see more fragmentation right so that means you might have more niche players focusing on specific l2 technologies or basically you know second layers yeah and so you might see that there's a

standard that evolves for like gaming for example and then you'll have gaming analytics companies or blockchain gaming analytics companies pop-up that could be one uh scenario and with other chains i think that's you know that's a tricky one if you just have like other chains than ethereum get to the same level of ecosystem activity uh there's not much evidence that we have any i think so far but yeah if that happens we'll we'll probably see either you know some of these companies move over and actually support other chains in our case our technology doesn't really rely on ethereum specifically like we have an abstraction layer above that that we can use for other

chains as well in most cases but you might see then a new wave of you know if it's near protocol analytics or you know if it's polka dot analytics or whatever it is and yeah and in the case of privacy chains personally i don't i you know we haven't seen that much evidence that you know people are using privacy features even the ones that exist today you know so far yeah yeah so far so i guess the the verdict is still out on that if it's gonna really take off and also you know the regulatory aspects might become a bit trickier yeah yeah so there's different things there just one last thing i i would add on it is that i think it goes back to the transparency

versus privacy dichotomy and some entities will obviously want to prefer transparency like if if you're a c5 protocol like a lending protocol i think it's actually competitive advantage if you can show transparency like that you have certain funds like i i'm not sure i would deposit funds into say like nexo or celsius or block fi if like their whole stack was kind of privacy first oriented where you don't really know what's happening with the funds i think i'd be more comfortable depositing funds into a c5 protocol if there's a degree of transparency that's just me personally and i think some people might feel the same way

but you know there is that kind of dilemma between um transparency and privacy but actually a solution to what you just described i mean there are zero knowledge proof systems and concepts already in in place which suggests this idea of selective disclosure where you would be able to prove you know for sure that the funds are there without revealing how much is there exactly or without any sort of information leakage that's where like i mean i love this idea of like it doesn't have to be privacy or transparency but you could actually somehow find a way to have both yeah that's really cool but but like in practice just kind of riffing off that in practice like how would a platform like nexo do that without having a third party that

almost acts as like the trusted party that i can actually in an easy way show to other people that they actually hold the funds but that's where like if it's especially if it's numbers you could actually use a zkp to prove that it reaches a certain threshold and all you would get is the answer would be i mean i'm simplifying like crazy sure but the output would be something like does this c5 entity actually have it the output would be true right that's like a very simple way that i've understood this idea of selective disclosure using zkp's and it works best when there's a value like a numerical value or something very mathematical it's less easy when it's something like you would need some third party checking your id like say it was like your age

it's like you still at this stage in in time would need some entity to say yes that is their age like the i don't know the dmv or something and then you could put that on chain and then you could prove it using ckp's but it's you're still you have this sort of arbiters this um real world third-party entity step that you describe but if it's numbers you don't need that so much but i don't know exactly how they would implement this but i do hope to actually see that combination someday yeah 100 i mean that sounds really really interesting there still have not been good designs for financial exchange mechanisms that use their knowledge proofs

for instance like something uniswap like is fraught with a bunch of difficulties because you have to have some things that are global public state that everyone agrees on and some things that are private state like hey i made a trade but somehow not leak information in terms of like the timing of when you send orders and things like that so i think there's still a huge design space that people who work on zkp's i think are basically more focused on you know simple circuits and things like that but i think for a lot of these default applications where we don't have any of the economic mechanisms built that are compatible with privacy to some extent so yeah i think this i mean this is a topic i know tarou and you and i have talked

about this but this is a topic we want to cover eventually which is that of privacy and defined like whether they work together i think when it comes to the question of analytics because we'll bring that we'll bring it back then to analytics like it's almost like i think you're kind of correct in saying that like right now there the privacy chains maybe aren't useful enough or these pr even privacy layer twos they're not seeing the volume that you would necessarily like need dedicated analytics to deal with yet but they could and yeah i i kind of want to i want to hear like even a little bit more about what you were thinking with the like how would an l2 analytics like how would it how would you even track that right now

this is actually kind of taking it outside of privacy but going back to the sharding or heterogeneous shards or these other kind of you know interconnected interoperable systems or layer twos how would you even approach something like that i think at least one way you might do it is to simply rely on a certain project's own apis let's say you've got a gaming oriented l2 they might actually be somehow tracking transactions that they place on because you know layer 2 doesn't necessarily have to be privacy oriented as such and so we could still parse out you know the data from either their apis that they provide to us or in some cases you could read it directly off uh chain if you're a validator or

something like that on on that layer two network in the case of zero knowledge and so on i'm definitely not an expert so we should get afghani or something back on this podcast and dive into that i think you know one year from now we might have some you know more real world experience with some of these l2 solutions and so on that's true i mean it is so i know i'm sort of throwing this question to you like you're supposed to have an answer right now but like seriously like i used an l2 i think for the first time a few weeks ago with the zk sync i don't know if i'd used it before so with with the git coin kind of grants and stuff like that where i actually like looked at a block explorer on l2 and like proactively like interacted with it so

um that's really cool it's pretty fresh you know yes maybe i'm late to the party but like still i think i'm more probably like i always call myself a late early adopter so if i if i'm there we're about to not be early adoption time but i just tap into the end i don't think you're you're quite late i don't even think the ux on layer twos is solidified uh yeah i agree it seems it seems like we haven't even i mean most of them are still on test that right there hasn't really been one that's been like hey we're in production and there the interfaces have changed a bunch and the validator sets have changed so i think we're we're this is like 2012 in bitcoin for for l2s maybe even

11. wow yeah i mean it's pretty awkward to to interact with these right like you have to you know put in like a custom rpc or like all these different things in metamask or whatever you're using it's it's definitely not a delightful user experience it sounds like for both the topic of privacy and the topic for sort of l2 this is like a moving space and so in my opinion it's something to like keep an eye on and uh it's definitely opened up some new questions for me and something to explore yeah so i mean i think one thing that's interesting is you know we've talked a lot about trading and keeping track of users who are in trading or like monitoring different users and how there's actually in this crypto world unlike the normal world there's this interaction where the

analytics influences the market and the market influences the analytics and you get this feedback loop on the other hand you have positive feedback loops too right so there's governance where you know in order to make governance decisions people need to have really good data to justify numbers that they're going to pick or to justify why certain types of entities should be excluded from rewards i'd say the uniswap's dharma air drop has been very controversial because of that or potential airdrop but you know i think there's also these kind of positive some games not just zero-sum games like trading where there's a huge benefit from

studying these things and so i'd be curious to learn what what are some of your most surprising learnings from kind of some of your research especially when a lot of it might not be the trading use case like there because you know i think there's starting to be a lot of other use cases and it'd be great to hear like what some surprising things you found so governance is definitely an interesting area we did some work with aragon where we looked at participation rates for example in agp votes and you know that was an interesting process because we we could actually see for example you know what you might describe as insider voting uh where basically you have wallets that are a small degree

away from certain specific like a team multi-seg or you know a token sale contract or things like that and that was actually something that aragon like asked us to to find for them right just because it's a it's something that the community should know if you have examples of that and it's not necessary it's not like you know insider voting sounds a bit harsh but it's really just people who are you know central in the project in some cases and they're of course totally allowed to participate in governance as well and so we did an interesting project where we kind of reviewed every single agp vote that's ever taken place on aragon and it was kind of interesting to see for example what are the different votes that drive

more engagement so like voter engagement in itself is an interesting area i wouldn't like single out you know a specific vote or anything like that in the in the case of aragon but it was some you saw some clear trends that certain votes that related to like other projects for example like should you fund another project those votes had high engagement and then other votes that were more kind of admin oriented you know they were basically like no engagement at all and it was just like a couple of call it central key players in the ecosystem that voted on them more out of chore if you know if anything so i think that whole area is really really interesting and as you say i think it's positive

some to understand governance processes better and i think most people would agree that the kind of governance experience today is not that great like there's definitely room for improvement on that there's a lot of voter apathy even just voting in itself like the mechanics of it is costly with gas fees and so on it's been a bit better now with snapshot.page and so on but like definitely the whole governance area i think is really really interesting and i personally think that you kind of need to have the kind of entity contextual layer on governance maybe not necessarily knowing who the real world entity is but having like a persistent view on

like who this user or who this is like a reputation yeah like exactly even if it's not like a person yeah and that reputation has to hold value maybe even outside of just like this governance thing where it's like if you because what you wouldn't want is someone to build up reputation in this tiny little kind of similar to the example i gave before like where it still only lives in this little bubble so you have a good reputation there but there's no stake really there's nothing to be lost if on one decision they forfeit that reputation but they you know make off with a ton of money then maybe for them on that one in that case it doesn't matter so like some link between that inner reputation and the external world you still need even if it's

sort of pseudonymous or not connected to a person exactly and again you know transparency can be quite useful here as well like if you know you know the certain positions of some entity with regards to which other assets they hold that can obviously influence how they vote and so just being aware of that can be useful of course you know you can hide away assets in other wallets as well but that's yeah i mean i i totally totally agree with that um assessment so so i think governance is a really interesting and like comp it's a complex area where you know things like gauntlet for example are going to be extremely important in making governance better and you had a good um example of this recently with uni right

yeah i mean i think one of the things especially as i've been doing more research and trying to you know make this more understand how people who are interacting with the system should really think about parameters and how people should write proposals is that in crypto the wealth of data is actually a lot better than what you have in the normal world in terms of governance where you know you're trusting some type of lobbyists data collection and analysis for for better or worse like if you've ever interacted with government agencies they're always trusting some random consultant who went and scraped data for them and gave them a csv and then unfortunately xl overflowed

because they didn't have enough cells kind of i don't know if you guys saw the the xl bug with britain but basically britain missed 1500 coveted cases because they like had too many rows and xl and it overflowed xl that's like xl's limit that's insane but also very unsurprising if you've worked with data in the real world like that this stuff happens right which is crazy well it's just funny that it's like sitting in like the entire country's covid stuff is in their database as an excel sheet right so like this is the type of stuff where like crypto and governance is it's way more transparent like why are there three people who are looking at this excel sheet that

contains the health of the country but what i mean is like when you make governance decisions in crypto and define particular you just have so much more data to use which is great unlike the normal world but you also have to figure out how to distill it to something that is a clean easy to understand piece and i think yeah that's where i see a huge amount of value in in the analytics and for transparency kind of thing because i think you know we've seen version 1.0 of crypto where people kind of vote randomly or they make random proposals or it's like extremely interested party furthering a certain agenda

but there's you know there's going to be the more people that use these systems the more they'll be things filled out in the middle and i think personally i found using nansen has been really really useful for because it looks at off-chain entities and non-chain entities and how they interact yeah and i think that's the thing that you know i think the old school analytics companies like chain analysis they only focus on that from the perspective of hey is this person a terrorist or you know money laundering or whatever but i actually think when it comes to behavior it's more complex and you really do need to understand smart contract state to to be able to say something useful about why someone should make vote on your proposal yeah just to just to kind of add

to what you said i mean this was kind of the main reason why i started working full-time in in crypto that there is this abundance of data but it's still quite immature in in the sense of you know how you use it for analytics and so you know if there's anyone listening who's like a data scientist or you know data analyst or data engineer i mean i really strongly believe that this is the most exciting industry to work in if you have that skill set because there is so much data like at your fingertips and there's still tons of work to do on the analytics side so i can't really imagine any better industry to work in if you if you are interested in data and analytics it's just even blockchains themselves are actually

really neatly structured so you have really high data quality you don't have these kind of excel issues that the roon just mentioned it's just a really great industry to work in if you like analytics the funny thing about that is that like you know most people i know who are in kind of data science statistics and machine learning like they they still have this aversion to crypto like oh it's just like scammers and it's like everyone just ponzi scheming each other why would i ever want to work in that like i remember when i left i got a lot of ostracism from like my friends who were in sort of more like statistics and do science and stuff they're like oh like why would you like leave the clean stuff

for this kind of scammy area and and i think what we've seen is that well first of all the covet has shown that everything is a scam by looking at the stock market but secondly you know i think data being used for bad has finally come to light to a larger swath of the population that like it's there's no free lunch to this kind of like platform based data science and you kind of towing the line between transparency and privacy is probably the future yep but yeah it still has it crypto still has a very bad reputation amongst people it does it does i mean so just to draw an analogy it's maybe not a great analogy but when i started studying

machine learning in like 2007 2008 i remember talking to people who were in kind of just computer science in general about how how exciting like ai and machine learning is you know back then it wasn't really clear that machine learning was going to have that big of an impact as it has had in the last you know decade and so a lot of people just dismissed it and we're like yeah machine learning that sounds fancy but it's really really boring to work within practice like it's not interesting at all a lot of people actually told me that and you know you might see the same thing now like people tend to have a certain skepticism towards new technologies they don't believe in it before they actually see what's what's possible to do with the new technology and crypto

has like twice that challenge because you also have like the the scams and all that stuff in addition um but you know i think we already have some amazing examples of what you can do with defy and like you the one some of the first projects i showed to people are compound and and unisop which actually solve you know real world problems and they're easy to use they're fully decentralized with regards to governance and so on so i just hope you know i think we're going to get more great examples like that that's over time going to draw people in even if they're a bit skeptical right now cool i wanted to ask you so you like on the on the website there is this ai focus

how do you actually use ai because we haven't spoken about that at all so far yeah like where is the ai component in all this yes so i think you know ai at this point is kind of a buzz word but the machine learning component is really you know that's how i would just describe it so uh when it comes to for example scoring the probability of a wallet having a certain label that's one example of how you'd use machine learning so for example what's the probability that any random wallet belongs to coinbase so it's controlled by coinbase and then you could think of this in like bayesian terms or you know probabilistic terms and you can add evidence that you have from the on-chain data so for example

does this wallet have different tokens in the same wallet or does it just have one type and does it have you know a fixed size in batches of transactions coming into it what's the gas price that is used on the transactions does it have this certain kind of graph features in the transactional network and all of these become features that you can use in order to make a probabilistic assessment of whether or not it belongs to coinbase so that's how we use it in practice it's not really ai in the sense that we're kind of just you know speaking to like a robot or something and we're asking them about addresses but it is the machine learning component and machine learning is

basically what powers all of ai today cool uh what would it take to bring people to the space kind of in the same way you just talked about the transition from ai kind of being like pie in the sky to like every under cs undergrad is trying to do it what type of things would be needed for that transition and you know personally i think having really good analytics tools like someone has to make pie torch or tensorflow for this stuff right yep and like that's kind of what we're all doing on like in some sense but like what are kind of the tools that you think that would kind of move us in that direction to like every you know smart undergrad is like hey i

want to work on this yeah i'd say maybe two things the first one is i do think that we need a bit of a culture change in crypto in the sense that we tend to be very inward facing and actually not that outward facing like basically it's a full-time job in itself to keep track of what happens in d5 and that's not that's a good thing but it also makes it not that easy for newcomers to have to you know understand these six layers before you get to the seventh layer of the product that you're using so i think just generally a mindset shift where you try to actually make it a bit more uh welcoming and just easier for new people to participate in this space i think that

that's a good thing there's a lot of people doing great great work on that front but i think we could be even better and then the second is you know since you mentioned ai and machine learning as the analogy there are some things that actually pop popularized machine learning heavily so kaggle is probably a good example where you had machine learning competitions where a lot of people actually started doing machine learning on kaggle because you had this incredible forum of people sharing how they built certain machine learning models and how they were able to win competitions and so having kind of either competitions or more like you know hackathons and open forums for people to

participate i think that's that's another area where you could learn from machine learning and ai and of course the fact that kaggle also had like a financial incentive you could win lots of money was was really good they also did great work on the pr side right they were able to get some incredible stories posted about some person from some field that was able to make a massive breakthrough in another field just because they know how to do machine learning right that's like incredible marketing for machine learning so i don't have the exact solution but something along the lines of kaggle for crypto i think would be really cool that's really cool dark forest yeah maybe i'm addicted i think the games are kind of the those are actually really good

that's a really good point like being able to use x for solving problem and wise usually important crypto has has spent most of its time being like hey how do we take x from somewhere else and apply it to crypto but yeah i guess that hasn't really made the any other field kind of improve yes i think you're right gaming is a really exciting era for this so another example that i love is xc infinity which is um this nft based game and they have these incredible stories of how like people in the philippines and a couple of other countries were playing these games and they're actually making money off of them because there's like you get dire rewards from playing the game

and you can actually sell certain like potions that you earn from playing the game and you can sell them on unit swap you know to the open market which is really cool and then in addition now with the uni-swap airdrop that happened like there were people in you know the philippines and vietnam like all over the world who just overnight received like two thousand dollars in unit tokens which was just like incredible thing on its own that's not really you know addressing necessarily like that technical crowd but it is definitely a way to make crypto more mainstream and to get those incredible stories out there on how people can use it and actually benefit from it directly cool so now if anyone wants to learn more about nansen specifically what should they do go to nonsen.ai

you can also follow me on twitter a svanavik is my handle and one thing is anytime if you're on twitter if you see medium decks trader as a meme that is that is a one of their labels that became like kind of a huge meme over the last few weeks so if you see that in the screenshot you'll know that's cool we might we might have some medium dextrator mugs coming out at some point yeah nice well thanks so much for coming on the show and talking to us about analytics crypto analytics defy analytics and and all of the other topics we covered i feel like from what we talked about i've already had in my mind like the idea for three new episodes to kind of go a little deeper into some of those directions so it's been cool

thanks a lot thanks for having me really fun being here thanks for coming on alex yeah and tyrone thank you for co-hosting again hey yeah thanks for having me and to our listeners thanks for [Music] listening