The number of cryptocurrency projects available in contemporary decentralized finance is mesmerizing. Conducting a proper analysis and evaluating it has become increasingly difficult. We can capitalize on-chain data to analyze a cryptocurrency project, it is one of the most effective ways to examine the cryptocurrency project and its blockchain activities. It refers to all the information that is recorded and verified on a blockchain.
It consists of transaction details, details of sender and receiver, amount of transactions, and timestamps, etc. You can analyze a cryptocurrency project using publicly available blockchain information or on-chain data. This article is all about how you can analyze a crypto project using the on-chain data of the particular blockchain.
What is On-Chain Data?
It indicates the total information directly recorded and verified on a blockchain. On-chain data is like the blood of a blockchain network. It is the stored record of all transactions that happen on the blockchain. You can find the information on every transaction which includes the details of the sender and receiver, the amount involved in the transaction, etc. This on-chain data will be transparent and available to every user, but it will be immutable, which means you can view the information, but you can’t edit or alter the existing data once it is recorded on the blockchain.
Details of transaction history, wallet activity, and smart contract interactions can be retrieved from it. In the transaction details, you can find every cryptocurrency transfer will be verified and recorded. You can access the details of the sender, receiver, and amount of money involved in the transaction. Network users can check the balance and fund movements within their wallets. Data related to smart contract-powered interactions can be retrieved from the on-chain data of a particular network.
How to Use On-Chain Data to Analyze a Cryptocurrency Project?
The potential and future of a particular project can be predicted from the existing on-chain data. A cryptocurrency project’s transaction details and blockchain activities can show its potential. To evaluate cryptocurrency projects, you can use on-chain data like token distribution, transaction volume, active addresses, and whale movements. It can only be accessed by a blockchain explorer, you can access these data stored in the blockchain networks at any time if you have access to blockchain explorers.
Major On-Chain Data Metrics to Evaluate Cryptocurrency Projects
- Active addresses: active addresses indicate the user engagement of a particular crypto project, it is a key factor while analyzing the totality of the project and the future of it. High active addresses indicate the increased value of the project and potential adoption. The higher the active addresses the higher will be the growth. Active addresses is an on-chain data metric that can effectively be used to analyze a crypto project.
- Transaction volume: transaction volume refers to the total value of transactions happening on the blockchain network. The level of transaction volume indicates the adoption and liquidity of a particular crypto project. High transaction volume on blockchain networks denotes increased user adoption and liquidity. These factors can positively affect the price and market.
- Total value locked(TVL): TVL is on-chain data that can be used to analyze crypto projects. TVL on a blockchain network shows how it can act as an indicator to showcase the project’s liquidity, trust, and overall health. A higher TVL indicates confidence in the project and attracts more investors and users. Low TVL indicates the project’s decreased viability and liability.
- Whale movements: Whale movements refer to the buying and selling activities of large cryptocurrency possessors called crypto whales. Details of large transactions or whale movements can indicate the trust of big fish in the project. The presence and interests of whales can attract multiple investors and users to the project. So, we can analyze the project by whale movements.
- Address activity: It refers to the transactions that occur on a definite wallet address. The address activity indicates the number of users engaged in the network and project. Address activity of a particular crypto project is considered one of the major on-chain data metrics to evaluate cryptocurrency projects.
These are some of the effective on-chain data metrics used to evaluate the health and efficiency of a particular crypto project and network. Traders and investors can check and verify multiple on-chain data to conduct a comprehensive crypto project analysis. It will be stored in the blockchain, these data can be accessed by potential traders and investors at any time. Users will have to acquire the service of a blockchain explorer to access on-chain data, Etherscan, Blockchain.com, Blockchair, etc are some of the recommended blockchain explorers to access on-chain data.
The functioning and fate of crypto projects depend on multiple factors. If you are a crypto enthusiast or an active crypto trader, you can adopt various methods to analyze the crypto project and predict the future of it. Assessment of the on-chain data stored in a blockchain network is an effective method, you can access the data with a blockchain explorer and draw your own conclusions about a particular project.
Conclusion
Blockchain technology is the prime facilitator of crypto projects, it enables the secure and effective functioning of these projects. The information and public records of transactions are stored in the blockchain network, these data are called it. Crypto users and investors will be able to effectively use this data to analyze the strength and health of a particular project. This like active addresses, transaction volume, total value locked, whale movements, and address activity are effective metrics to determine the state of a crypto project and analyze its functioning. This article helps you to understand the importance of on-chain data while analyzing a crypto project and how to use it effectively.
