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- Building business analytics around decentralized applications (dApps) and crypto-assets.
- Monitoring the development performance of the decentralized economy.
- Catching latent opportunities to generate investment and operational performance.
Blockchain and crypto-assets are progressively advancing in the FinTech area, disrupting our economic and financial system. These technologies are finding synergies with AI, Big Data, and IoT to create programmable, automated, and interoperable financial networks. The Future of Finance is currently being designed, conceived, and deployed before our eyes, producing new types of data fields which are still to be fully exploited.
This report provides you with an overview of major trends to monitor around Web 3.0, the Future of Finance, and the lurking decentralized economy. We showcase Nyctale’s unique value proposal regarding behavioral modeling capabilities to understand and interpret the business and economic activity on decentralized networks.
It will help you to understand how to build business analytics around dApps and crypto-assets, how to monitor the development performance of the decentralized economy, and how to catch latent opportunities to generate investment and operational performance.
Table of contents
- Web 3.0 and the Future of Finance
- From Web 2.0 to Web 3.0
- FinTech, Big Data, and blockchain
- Tokenization is disrupting the financial industry
- Decentralized Finance (DeFi) as a way to broaden traditional financial services
- Stablecoins and Central Bank Digital Currencies (CBDC)
- A new data era for the Future of Finance
- Why are crypto-assets analytics so hard?
- Interpret transactional data to create a unique competitive advantage
- Nyctale’s crypto-assets analytics
- Why Nyctale's tools are so unique
- Usage scenarios
- Product discovery
Web 3.0 and the Future of Finance
From Web 2.0 to Web 3.0
Web 2.0 as we know it has deeply changed the structure of our society and of our economy. The internet network has made information exchanges all around the world more efficient, helping us to work toward a unified worldwide civilization, and allowing the creation of global collaborative networks.
But Web 2.0 has failed to really empower individuals. The centralized digital infrastructure is too vulnerable to hacks and data leaks, and guarantees no individual privacy. Major digital companies have monopoly control over global information and communities’ networks. The fact that power is concentrated among few companies has made it possible to weaponize the web at scale.
Simultaneously, we have entered the 2nd wave of Industry 4.0 that will merge the digital-, physical- and virtual world, surfing on the advent of disruptive technologies such as artificial intelligence, blockchain, autonomous robotics, IoT, or quantum computing.
Within this landscape, blockchain is not a single technology. It proposes an innovative information system architecture to process value exchange within open ecosystems. On the traditional web, information can be corrupted. Blockchain aims at securing high-sensitive data exchanges to preserve them from wrongdoing.
Cryptocurrencies have been the first blockchain use case supported by the cyberpunk ideal to confront the traditional financial system. However, in this new landscape, blockchains are not just a secure ledger for cryptocurrencies and other digital assets. Blockchain represents something much more transformative: a decentralized data infrastructure that could solve technical and market problems across a variety of emerging technologies.
Public blockchain networks have the ability to digitize every kind of financial exchange while enjoying smart contract features, basically programmable finance. When considering the industry of the future, smart cities, smart energy grids, or advanced transportation systems, these solutions will help fluidize value exchanges from many intelligent devices and systems. In developing synergies with Artificial Intelligence and the Internet of Things, public blockchain networks are the interconnectivity piece for many innovations.
We understand the promises of the blockchain ecosystem, in the willingness to build a decentralized Web 3.0 for value exchanges, aiming at giving back power to monetize the use of their data to individuals.
Blockchain technologies are following a similar development scheme than internet technologies 20 years ago. Where the internet brings us information fluidity, blockchain will liquefy value exchanges. The promise behind blockchain technologies is about bringing the digitization process to the next step by provoking a new digital wave on our economic and financial system.
FinTech, Big Data, and Blockchain
Big Data, blockchain, and crypto-assets are three hot topics of our modern and digital world. These emerging fields are disrupting all industries across the globe, while also creating a demand for advancements in technology, skills, and business practices.
The financial landscape is constantly evolving, with new developments occurring across all distribution channels. Digitization is a key trend, which not only changes the way in which consumers and investors interact with traditional financial products and services but which has also led to the development of new technology-driven products and services, by both existing market participants and new entrants such as FinTech enterprises.
The FinTech area has been one of the leading sectors that tightly integrated technological advancements and attracted the attention of practitioners, researchers, high-tech professionals, investors, and ordinary users of financial solutions. FinTech advancements are positively associated with the profitability of the financial industry, and the incorporation of blockchain technologies is representing a strategically favorable choice due to the advantages of blockchain in terms of transaction, operation, and processing cost reduction compared to the central authorization architecture.
It has also been stated by many FinTech and tech giants that the ABCD (AI, Blockchain, Cloud Computing, Data Analytics) represent the four key determinants of the future of FinTech. Big Data and associated analytics processes can serve as intelligent and reliable tools for crypto-assets investors by acting as a protective barrier, real-time monitoring marketplace, and valuation prediction tool, all of which play extremely important roles in mainstreaming financial processes.
In this context, blockchain technologies, Big Data, and its advancements incorporating machine learning and artificial intelligence are progressively dominating the direction and development of FinTech.
Tokenization is disrupting the financial industry
Making use of the advancements in technology tokenization of the economy makes the financial industry more accessible, cheaper, faster, and easier, thereby possibly unlocking trillions of euros in currently illiquid assets, and vastly increasing the volumes of trades.
Tokenization is a concept with unlimited potential. Any asset, virtual or real, can be tokenized and rights to such assets can be represented on a blockchain. While a lot of attention is focused around cryptocurrencies and initial coin offerings (ICOs), assets can also take the form of securities, commodities, and other non-financial assets.
In the current decentralized networks, crypto-assets and tokens are also used as a digital mass coordination mechanism. The industry is rapidly experimenting with new consensus mechanisms and decision-making techniques to coordinate and govern the emerging token economy. Tokens and automated decision-making tools are looking to disrupt entire industries through a distributed coordination network.
The industry is testing economic theories in real-time with real money, which could be the greatest experiment we have ever seen in socio-economics. Blockchain will certainly reshape many processes and workflows in almost every sector and industry. In a lot of them, tokens will enable the introduction of promising economic incentives while building virtuous network effects within dedicated communities. But all of this requires time, many tests, and a lot of failures before being successful.
Decentralized Finance (DeFi) as a way to broaden traditional financial services
On the back of tokenizing assets, blockchain networks are supporting the rise of decentralized financial services. So-called Decentralized Finance (DeFi) applications are providing alternative means to deliver digital financial services. It follows the idea of rebuilding the infrastructure of financial services and moving it onto decentralized networks to take the industry from a centralized system full of monopolies towards a trustless and transparent world that runs with no intermediaries.
DeFi services offer traditional financial instruments without relying on banks or traditional currencies. Instead, these products use cryptocurrencies. The big idea behind DeFi is to create a new decentralized financial system, where payments, trading, and the transaction of value happen over new “rails” driven by tokens and peer-to-peer exchanges. In this emerging sector, blockchain is bringing users things they could not get from traditional services.
Primarily built on the Ethereum network, it represents one of the main application types for cryptocurrencies which bring non-custodial financial services to the mass market by leveraging Ethereum’s interoperability and smart contract capabilities. These innovative tools aim at transforming the financial system in a more decentralized, innovative, interoperable, border-less, and transparent way.
DeFi is fueling a wave of experimentation and innovation in the FinTech space, including offerings of decentralized versions of mainstream financial products. This includes simple services but also more complex products:
- Dollar-pegged stablecoins (e.g. MakerDAO)
- Decentralized exchange platforms (e.g. Uniswap, Kyber network or 0x)
- Peer-to-peer lending protocols (e.g. Compound or Aave)
- Synthetic assets (e.g. Synthetix or UMA)
- Decentralized leverage trading (e.g. dYdX)
- Insurance (e.g. Nexus Mutual)
- Predictions market (e.g. Augur)
- Interest on crypto (e.g. Celsius Network)
The DeFi ecosystem is flourishing and unlocking a parallel financial system that is setting new standards for access, resilience, and transparency.
The DeFi space represents an entirely new financial infrastructure stack with financial primitives, automatic market-makers, priceless synthetic assets, reflexive bonds, etc. DeFi’s unique competitive advantages lie in its combinatorial innovation capacity to enable the development of new products and services in organic and unexpected ways. These new financial technologies can become the building blocks for future innovations, promoting new combinations and new products. If successful, these decentralized business models have the potential to reshape the FinTech industry and create a new landscape for entrepreneurship and innovation.
Stablecoins and Central Bank Digital Currencies (CBDC)
With developments impacting the financial industry, governments and institutions are increasingly forced to enter discussions on industry practices. For centuries, money has been slowly evolving, moving from barter, scarce objects, and precious metals to paper money and then digital money. Nevertheless, it has always been an instrument for state and supra-state sovereignty.
The continuous development of crypto-assets and the blockchain industry has brought new opportunities to the financial area, specifically regarding the issuance and use of currency or other forms of digital assets. Our geopolitical, economic, and social environment has created new expectations for secure, reliable, easy-to-use, globally available digital payments and means of exchange. This has inspired central banks to analyze the potential benefits of Central Bank Digital Currencies (CBDC).
Global events such as the coronavirus crisis intensified research and development of CBDCs and accelerated its adoption with the aim to allow us to abandon cash, send payments fast, and carry out targeted stimulus policies more efficiently.
Blockchain has laid the foundation of this new monetary paradigm. It questions the power of state sovereignty on money. The combination of “peer-to-peer” services, cryptography, and blockchain has contributed to breaking down the barriers to entry for money. Each firm or private organization can potentially become an issuer of money - accessible everywhere and without frontiers.
CBDC is a new form of digitized sovereign currency, generally conceived to be equal to physical cash (general-purpose) or reserves held at the central bank (wholesale):
- General-purpose CBDC could be considered a new form of traditional currency, along with banknotes. It must be compared to other digital money solutions such as stablecoins.
- Wholesale CBDC, which is very different from general-purpose, could be considered a new form of monetary policy instrument for financial institutions.
The implementation of a CBDC is complex and the implications are wide‑reaching. Policy‑makers find themselves in uncharted territories when attempting to evaluate the potential benefits and trade‑offs associated with CBDC. Both academics and central banks started to analyze the merits and dangers of introducing this new form of digitized sovereign currency.
The development of stablecoins, which are crypto-assets pegged to a stable asset, anchor the discussions on CBDC. Indeed, stablecoins, although different from CBDC, are suitable as means of payments. They would be expected to substitute banknotes and/or sight deposits with banks.
CBDC will be launched only if central banks can be confident that its associated issues — undesired structural disintermediation of the banking system, and avoidance in systemic crises of facilitation of aggregate bank runs — have been solved.
Central banks need to ensure that the implications of major changes are well understood. They are somewhat open to study CBDC, although the overall business case and the precise risks to change the financial system in a disruptive way deserve further analysis.
The overall business case for CBDC will also depend on the preferences of households as money users and voters. In progressive countries, in which the use of banknotes falls rapidly and in which electronic payments have become the norm, a business case for CBDC seems relatively plausible.
As consumers become more comfortable using digital means to exchange value, the transition to CBDCs is a natural progression. Once users are aware of how easy CBDCs are to use, they could be keen to invest and experiment with crypto-assets.
A new data era for the Future of Finance
Why are crypto-assets analytics so hard?
In the ever-evolving world of blockchain, cryptocurrencies, tokens, and stablecoins, a new era for data analytics is looming. As all kinds of market players need to be able to analyze and interpret value exchanges on decentralized networks, the rise of new data analytics tools is inevitable.
However, analytics are extremely complex on blockchain networks. Blockchain ledger hasn’t been conceived to ease the extraction and the interpretation of transaction data. While the data produced by blockchains are publicly accessible, procuring actionable insights from the data requires additional work. Blockchain nodes need to be maintained and the raw data must be extracted, parsed, and cleaned. Analytics providers offer services that change raw and unorganized blockchain data into user-friendly and digestible data.
But existing solutions are providing only simplified indicators that can be deployed to a large range of assets and protocols. These tools are frequently used by investors as inputs of their trading algorithms, but the business value remains limited.
For now, no single actor has been able to provide a scalable and automated analytic approach to deliver sophisticated business intelligence services:
- Infrastructure and data providers are delivering raw data without any type of decision-aiding tools,
- Analytics and research firms are providing custom-made reports and analysis, by manually processing raw data to extract business insights, or letting their customers use low-value-added indicators that are far from being decision-aiding tools.
This is notably a consequence of the complexity and heavy workload needed to process blockchain transactions, with IT server costs usually being in the six-figure range per year.
Interpret transactional data to create a unique competitive advantage
In our current hyper-competitive data-driven economy, companies need analytics to run their business efficiently. When considering digital technologies, data are generated at all different layers of a given value chain: by your own activity, by your business partners, by your customers, and by your competitors.
For a few years, successful companies have mainly been those able to value their data landscape to optimize their business processes and strategic decisions. Analytics brings you insights that generate performance through automation. This is how companies are generating profits in our digital economy.
Until now, enterprises involved in the blockchain industry had almost no external solutions to fill their need for business analytics:
- Application providers are unable to measure their performance or to assess the impact of their operational activities on their customer base. It obliged them to invest in inefficient actions with a lack of rationality and fear to be left behind, generating a loss of competitiveness.
- Financial institutions are struggling to perform high-quality due diligence on crypto-assets and associated applications. They are blind in their ability to measure the fundamental and intrinsic value of crypto-assets.
As blockchain technologies are bringing business processes’ digitalization to a new level, they are also creating a new powerful data generation system. All different actions of every entity are recorded on a standardized ledger. It opens the door for a new type of business intelligence and analytics tools to bring sophisticated insights on the market:
- Monitoring tools for usage and investment behavior, gaining strategic information on the different adoption of products.
- Performance monitoring around ongoing development, be it about marketing and communication strategy or linked with new product features.
- Sectoral studies per market segment to identify key trends of development and adoption.
- Synergies and network effect understanding, thanks to a deep understanding of the overall economic and business interactions within a given value chain.
All these insights are hidden in the distributed ledger on which dApps and crypto-assets run. Missing it will naturally represent a loss of competitiveness, as competition within the blockchain industry is fierce with application providers using open source technologies.
As the coming age of the token economy will generate value on top of investment and speculative behaviors, entrepreneurs and investors will need adapted tools to monitor token usage and better understand projects’ intrinsic value. These services are also targeting financial institutions and regulatory authorities. Supporting the healthy development of decentralized applications requires better monitoring of blockchain transactional networks to manage structural financial risks.
Nyctale’s Crypto-Assets Analytics Solutions
Why Nyctale’s tools are unique?
Looking at the current financial industry, there are many types of actors (banks, investment companies, insurance companies, real estate firms, etc.) interacting with currencies and assets in many ways. Considering that this will happen on blockchain networks in the future, financial institutions will need to monitor the activity of all these different groups of actors. It requires to perform behavioral characterization on these networks, which is precisely what Nyctale is providing within its current approach.
Nyctale is an innovative start-up in the fields of data science and blockchain technologies which addresses the lack of monitoring tools on public and private blockchain networks. It tackles the poor readability of blockchain transactions by developing advanced analytics tools to analyze usages, measure value, and control money flows on blockchain networks.
It provides Business Intelligence services to entrepreneurs to assess their performance, investment decision-aiding tools, and due diligence solutions to public and private financial institutions. Nyctale delivers quantitative financial analytics tools and qualitative business insights applied to the decentralized economy.
These advanced modeling tools monitor investment and usage behaviors, combining the most relevant aspects of Bloomberg and Google Analytics to serve the evolving needs of the blockchain industry. It aims at becoming the leading reference marketplace for analytics on crypto-assets, delivering valuable data and high-quality insights to this emerging industry.
Nyctale’s offering has been conceived as a way to support the maturation process of the blockchain and crypto-assets industry. It requires to better understand the economic mechanisms behind these decentralized networks.
Their software suite is providing financial security services with an innovative monitoring solution to manage structural financial risks. This implies different levels of functionality, including tools for tracking transactional patterns, providing economic due diligence services around crypto-assets, and dApps.
Nyctale’s developments are bringing the needed technological building blocks to its analytics SaaS platform:
- An ETL (extract, transform, load) for each blockchain protocol of interest,
- Advanced data science tools applied to these huge and very specific transactional networks,
- A scalable and efficient Big Data infrastructure,
- Actionable interpretative models to analyze crypto-assets usage modalities,
- An interactive product interface.
These developments have been initiated in late 2017 to analyze investment and usage behaviors. The solution delivers strategic insights on decentralized applications by monitoring on-chain activity patterns around crypto-assets to measure token-based business model efficiency. These tools deliver actionable insights through sophisticated KPIs with an easy export capability. Henceforth, you can rate and rank crypto-assets networks activity to analyze, assess, and compare tokens’ performances regarding real usage and adoption metrics.
The innovative aspects of Nyctale's solution are:
- Technological: Cutting-edge data science / Big Data / analytics infrastructure to efficiently process blockchain transactional datasets through behavioral patterns recognition approaches
- Applicative: Advanced and highly sophisticated indicators fuelled by its intelligence engine to provide value analysis tools from a business and economic perspective
- Positioning: Cross-assets and cross-protocols dashboards with a focus on emerging and promising application segments (Decentralized Finance, Proof-of-Stake protocols, etc.)
In 2019, Nyctale was awarded a Jury’s Grand Prize in the ICT category at i-Lab, a major French competition for technological innovative startups organized by the French Public Investment Bank and the French Ministry of Research and Innovation. It represents an institutional recognition of their unique scientific and technological approach to crypto-assets analytics.
Nyctale is the unique actor to develop a behavioral modeling engine around blockchain networks and crypto-assets. Its solution is providing business intelligence services to fuel strategic thinking and consideration regarding the business and economic activity on blockchain networks.
Nyctale delivers highly-valuable analytics tools using Artificial Intelligence techniques. Its algorithmic and big data approach is the needed innovation to efficiently process blockchain data to generate sophisticated and highly valuable indicators that can be used as decision-aiding tools by major financial institutions.
- Identify investment trends around major crypto-assets
Nyctale’s solution supports investors in their portfolio management with investment decision-aiding tools. It enables professional investors to better identify interesting investment opportunities regarding concrete economic activity and usage metrics. The proposed tools will progressively rationalize investment strategies based on a quantitative and qualitative analytic approach fuelled by our AI engine.
- Analyze dApps performance
Nyctale’s solution supports blockchain applications providers in their performance monitoring regarding their own competitive landscape. It enables them to benchmark their own development performance regarding other key projects in their applicative segment. The proposed tools enable them to optimize their business and operational activities regarding the impact of different tasks on their customer base.
- Understand the behavior of key stakeholders
Nyctale’s platform supports key stakeholders of the investment and trading activity around crypto-assets in their risk management strategy. It enables them to better modulate risks and opportunities regarding the fundamental activity of blockchain networks around crypto-assets. The proposed tools progressively standardize operational activities, reducing operational risks, and stabilizing financial performance.
Nyctale’s users can rank covered assets by sophisticated on-chain metrics (characterizing the long-term investor community, speculation, adoption rate, etc.).
The main dashboard provides a clear understanding of a given project development performance by monitoring the weekly and monthly growth rate of major behavioral groups (holders, speculators, incoming investors, outgoing investors).
We provide indicators to analyze the buying and selling pressure around major exchange platforms looking at incoming and outgoing investors’ behaviors. This shows how the investor community is behaving and evolving, with an understanding of what type of investors are generating a given pressure, be it from the buying or selling side (coming from a few wealthy investors or a lot of small/average investors for instance).
Buying and selling signals can be formalized through the analysis of these specific behaviors which represent the investment activity of an overall decentralized community.
We also provide indicators of wealth concentration for covered assets giving insights on the efficiency of a given token distribution mechanism and its overall community evolution. This can be used as a sanity check.
Blockchain technologies, distributed ledgers, and associated open-source transactional networks are fundamentally disrupting the way we perform analytics in the digital space. With the advent of the token economy, major opportunities are appearing in various application sectors especially the financial industry where most of the effort is focused for now.
A new type of business intelligence is emerging along with this new financial architecture. It will soon be possible to analyze sectoral trends, identify innovation opportunities, and monitor synergies, network effects and the influencing power of key projects and entities, as well as to measure the fundamental value of this new asset class. All of this through the analysis of a single IT architecture which will be handling a large majority of transactions.The Future of Finance is here. Digital asset data is going to be one of the sub-sectors specific to the broader crypto space that is well poised to produce its own unicorns. Financial market data spending broke $30 billion in each of the last two years. The consolidation of older financial market data vendors occurred over a few decades. The digital asset data industry will see a similar maturation process. Healthy competition combined with pressures of global events could lead to an acceleration of this maturation. With strong tailwinds generated by financial institutions, investors, and FinTech companies increasing interest, the future looks bright for the digital asset data and infrastructure space.