How to read on-chain data?

Understanding On-Chain Data

On-chain data refers to the information that is stored and recorded directly on a blockchain. This includes transaction details, wallet addresses, block information, smart contract interactions, and more. Unlike off-chain data, which may be stored in centralized databases or external sources, on-chain data is immutable and publicly accessible. Understanding how to interpret this data is crucial for developers, analysts, investors, and researchers who want to gain insights into blockchain activity.

To begin reading on-chain data, one must first understand the structure of a blockchain. Each block contains a list of transactions. Each transaction includes inputs, outputs, timestamps, and metadata. These transactions are cryptographically linked, ensuring data integrity.

Tools for Accessing On-Chain Data

To effectively read on-chain data, you need to use specific tools and platforms. Blockchain explorers such as Etherscan (for Ethereum), Blockchair (for multiple blockchains), and Blockchain.com (for Bitcoin) are essential. These tools allow users to search for transactions, wallet addresses, blocks, and other on-chain events.

Another category of tools includes blockchain analytics platforms, such as Glassnode, Chainalysis, and Dune Analytics. These platforms aggregate and visualize on-chain data to provide insights into network behavior, transaction trends, and wallet activity.

For developers, blockchain APIs like Alchemy, Infura, and Moralis provide programmatic access to on-chain data. These APIs allow for real-time querying of blockchain networks and can be integrated into custom applications.

Decoding Blockchain Transactions

Once you access on-chain data, the next step is to decode and interpret it. A typical blockchain transaction includes:

• Transaction hash: A unique identifier for the transaction.
• From and To addresses: The sender and receiver of the transaction.
• Value transferred: The amount of cryptocurrency sent.
• Gas fees: The cost paid to miners or validators for processing the transaction.
• Timestamp: The time when the transaction was confirmed.
• Contract interaction: Whether the transaction involved a smart contract.

Understanding these fields helps in tracing fund flows, identifying suspicious activity, and analyzing network congestion. For example, a high number of pending transactions or elevated gas fees might indicate network stress.

Interpreting Wallet Activity

Analyzing wallet addresses is a key aspect of reading on-chain data. Public wallets can be explored to see their transaction history, balance, and interactions with other addresses or contracts.

Tools like Etherscan allow users to input a wallet address and view:

• Balance history
• Incoming and outgoing transactions
• Token transfers
• Smart contract interactions
• Internal transactions

This information is especially useful for tracking large holders (commonly known as 'whales') or monitoring exchange deposits and withdrawals. By observing patterns in wallet activity, analysts can infer market sentiment or detect potential market manipulation.

Using Dune Analytics for Advanced On-Chain Analysis

For more advanced users, Dune Analytics provides a SQL-based interface to query and visualize on-chain data. It allows users to create dashboards, build custom queries, and explore datasets curated by the community.

To use Dune Analytics:

• Create an account and log in.
• Select a blockchain (e.g., Ethereum, Polygon, Optimism).
• Write or import a SQL query to extract specific data.
• Visualize the results using charts, tables, or maps.
• Share or publish your dashboard for others to use.

This platform is particularly useful for tracking DeFi protocols, NFT activity, and tokenomics. For instance, you can create a query to monitor the total value locked (TVL) in a decentralized exchange or track the distribution of a new token.

Reading Smart Contract Interactions

Smart contracts are self-executing agreements with the terms written in code. Reading on-chain data related to smart contracts involves understanding how they are triggered and what functions they execute.

To interpret smart contract interactions:

• Use a blockchain explorer to find the transaction that interacted with a contract.
• Check the contract address and verify its source code (if verified).
• Review the transaction logs and event emissions to understand what functions were called.
• Look at the input data field, which often contains encoded function calls and parameters.

For example, when a user interacts with a decentralized application (dApp), the transaction may trigger a function like swap() on a decentralized exchange contract. By decoding the input data, you can see the exact parameters, such as the token being swapped and the amount.

Frequently Asked Questions

Q: Can on-chain data be altered or deleted?No, on-chain data is immutable once it has been confirmed by the network. This immutability ensures the integrity and transparency of blockchain systems.

Q: Is all on-chain data public?Most blockchains are transparent, meaning anyone can view transactions and addresses. However, some blockchains like Monero or Zcash offer enhanced privacy features that obscure transaction details.

Q: How do I know if a wallet address is associated with an exchange?Certain tools and databases, such as Chainalysis or Whale Alert, label known exchange addresses. You can also compare addresses with publicly known exchange deposit addresses.

Q: Are there risks in interpreting on-chain data incorrectly?Yes, misinterpreting data can lead to incorrect conclusions. For example, assuming an address belongs to a single user when it might be a multi-signature wallet or part of a larger system. Always cross-reference data from multiple sources.