How is decentralized finance developing?
As Web3 transforms, DeFi transaction volume is increasing and has increased tenfold between 2020 and 2021, reaching $5.8 trillion. Despite the bear market this year, DeFI trading volume continues to generate billions of dollars. The rise of DeFi is also affecting the type of currency used in total transactions. For example, Bitcoin, which once dominated the cryptocurrency markets, now accounts for just over 10% of all crypto asset transactions. The decline in this dominance of Bitcoin is due to the emergence of blockchains designed for decentralized computing. As DeFi has expanded, it has changed the way businesses and customers interact with cryptocurrencies. Bitcoin is often used as a currency and/or a store of value; on the contrary, Ethereum and other DeFi protocols that have smart contract systems are being used in a variety of ways, including in decentralized applications that offer borrowing, lending, trading, gaming, or trading services.
Some businesses have already embraced this revolution, while others are looking for ways to generate revenue potential. But everyone has the same need to manage risk, protect their clients, and investigate DeFi transactions. Since 2021, DeFi protocols have become a prime target for hackers looking to steal cryptocurrencies — criminals who want to take advantage of the complexity of smart contracts to hide their activities. In 2022, which should be the peak year for hacks, it is observed that most of the funds are stolen from DeFi protocols.
How can companies interact with Web3?
With the development of DeFi, the need for solutions to measure risk, prevent illegal activity, and investigate complex transactions has increased. Unfortunately, many organizations do not yet have adequate tools to view, analyze and investigate complex smart contract transactions, and as a result, it is difficult for them to use DeFi to start the Web3 revolution in complete security. Therefore, it is clear that new solutions are needed, and blockchain analysis platforms, for example, allow companies to understand the complex nature of DeFi and improve their transparency, in particular smart contract interactions, NFT transfers, or even decentralized exchanges (or DEXs that allow you to trade with your colleagues, without intermediaries).
Can you explain how Chainalysis can support private and public financial institutions in Web3?
We have launched Storyline, the first blockchain analytics solution specifically designed for this fast-growing cryptocurrency segment that represents Web3.
Clients can handle the complex nature of DeFi and provide clarity and transparency by tracking and viewing all types of smart contract interactions, from simple NFT transfers to decentralized exchanges and cross-chain transactions. The projections are also simplified. Instead of traditional cluster charts, where DeFi transactions can be difficult to analyze, our tool displays a timeline that shows the movement of funds between addresses and allows users to look forward, backward, and across chains to see what is happening with a single address. or more transactions. This really makes smart contracts easier to understand.
Some features demystify the complexity of DeFi, such as creating clear time visualizations to help track history and easily analyze the flow of funds – be it NFTs, native tokens, or ERC-20 tokens across chains.
Our tool also sends automatic trade interpretation that makes common trades easier to understand and highlights risky behavior. Speaking of risky behavior, powerful filters are available that sort cross-chain data to detect unusual or unexpected behavior.
In addition, information from Chainalysis, the Ethereum Name Service (ENS stands for Wallet Address Naming Service), and other data on the network allows users to quickly identify key players and track funds.
In a nutshell, what are the main benefits of Storyline?
First, Storyline helps companies find growth opportunities. By tracking their customers’ transactions—where assets are coming from and where they’re going—they can gather business intelligence.
Another key benefit of our tool is its security. Indeed, organizations can track the risk of a transaction or address, the origin of an asset, as well as its history and its movements. They can better understand how the hack or scam worked, analyze where the money is, and most of all, whether all available information allows the return or freeze of the funds. Storyline also works with businesses and financial institutions to help them identify entities involved in transactions and determine if they are on questionable or untrustworthy platforms. If they are victims of fraud, organizations can request a tool to try to find information that can identify the perpetrator of the fraud, or to file a case against the perpetrator.
We developed Storyline to make the inherent transparency of DeFi more accessible to web companies, financial institutions, and government agencies, and to secure the ecosystem. Organizations can now understand, explore, and communicate the complex stories that are Web3 transactions.