Abstract: In the cryptocurrency market, data has always been an important tool for people to make trading decisions. How can we clear the fog of data and discover effective data to optimize trading decisions? This is a topic that the market continues to pay attention to. This time, OKX specially planned the "Insight Data" column, and jointly with Coingecko, CoinGlass, AICoin and other mainstream data platforms, starting from common user needs, hoping to dig out a more systematic data methodology for market reference and learning.
The following is the fourth issue, jointly organized by the OKX Web3 team and the Coingecko team around the theme of "Quickly Getting Started with the On-Chain World", covering entry basics, filtering noise, screening high-quality opportunities, etc. We hope it will be helpful to you.
About Coingecko: Founded in 2014, as the world's leading independent cryptocurrency data aggregator, its mission is to provide the cryptocurrency community with an in-depth, 360-degree market overview. CoinGecko provides comprehensive information from thousands of data points, such as price, trading volume, market capitalization, developer strength, community statistics, etc. Currently tracking more than 14,000 crypto assets from more than 1,100 exchanges around the world.
About OKX Web3: The team brings together top talents with deep technical background and rich industry experience. Over the years, they have continuously innovated and practiced in the field of Crypto, and continue to focus on user experience and security. At present, the OKX Web3 wallet is the most comprehensive decentralized multi-chain wallet on the market, supporting 90+ public chains, with built-in wallets, transactions, NFT markets, DeFi, and Dapp discovery. Users can view multi-chain tokens, NFTs, and DeFi assets through apps, plug-ins, and web pages.
1. How can newbies quickly understand the on-chain world?
Coingecko: Based on our experience, we recommend that beginners start connecting to the crypto world through mainstream browsers such as Etherscan.io and Mempool.space. They are like search engines for blockchain transactions, with a huge amount of information. For example:
• Trading volume: How many trades are occurring each day? Is this number increasing or decreasing?
•Active addresses: How many unique addresses are transacting every day?
• Network fees: Are they high or low? This may indicate network congestion.
•Block time: How quickly are new blocks added to the chain?
Specifically, transaction volume and network fees provide insights into network usage and congestion levels, with higher fees generally correlating with increased demand for block space as users compete to quickly process their transactions. For proof-of-work (PoW) chains like Bitcoin and proof-of-stake (PoS) chains like Ethereum, these metrics provide insights into network usage, adoption, and market sentiment. Additionally, tracking wallet addresses belonging to whales, popular traders, exchanges, and projects — observing large inflows and outflows, and even holding behavior — can also provide insights into potential price movements. Of course, if you can’t find these explorers, you can easily find these blockchain explorers on Coingecko.
OKX Web3: For beginners, it is very important to master the basic concepts. Going further is to understand the common mainstream public chains on the market such as Bitcoin network and Ethereum network and their basic operating mechanisms, such as PoW mechanism and PoS mechanism.
PoW stands for Proof of Work, also known as the workload proof mechanism. It mainly verifies transactions by solving complex mathematical problems, consuming a lot of computing resources and electricity. Bitcoin and Ethereum 1.0 are typical examples of using PoW. Its characteristics: high security, but high energy consumption and slow transaction confirmation speed.
PoS stands for Proof of Stake, also known as the equity proof mechanism. It mainly verifies transactions by holding tokens, and the holder of the token has the opportunity to be selected as a block validator. Ethereum 2.0, Cosmos, Tron and other public chains mainly adopt this mechanism. Its characteristics are that a certain amount of tokens must be pledged, and the transaction speed is relatively fast.
In general, users can learn about the on-chain world faster by understanding the basic operating logic of popular public chains and using on-chain wallets (such as OKX Web3 wallet, Metamask, etc.) to participate in actual transactions on some networks. In addition, users can also learn systematically by reading project white papers and taking some online courses (such as Coursera, Udemy, etc.).
2. How to intuitively and quickly feel the changes in on-chain liquidity?
Coingecko: For novice users, if they want to perceive changes in a timely manner, they need to at least pay attention to data changes in dimensions such as the number of participants, 24-hour trading volume, total locked value (TVL) and bid-ask spread.
Among them, 24-hour trading volume represents the total transaction value processed by the network within 24 hours, reflecting daily usage and liquidity. A surge in trading volume usually means that the market's interest in cryptocurrencies has increased, and price fluctuations may be triggered by major news or events. A decrease in trading volume may indicate a weakening of market interest, a weak trend, or a consolidation period before a new trend emerges.
The total value locked (TVL) represents the total amount of assets locked in blockchain smart contracts, reflecting the overall activity level of the network. A higher TVL means more assets are locked in the protocol, and users have more capital available for trading and borrowing, indicating higher liquidity and higher user trust in the network. This also implies that the protocol is relatively reliable and secure. By monitoring changes in TVL, you can better understand changes in liquidity.
The bid-ask spread is the difference between the highest bid and lowest ask price in the order book. A smaller spread generally indicates high liquidity, as there is a high level of interest from both buyers and sellers. Conversely, a larger spread indicates low liquidity. While each of these indicators has its own importance, they should be considered together for a comprehensive analysis.
OKX Web3: Generally speaking, we often use the following indicators to feel the changes in on-chain liquidity.
The first are indicators directly related to transactions: such as the total daily transaction volume of DEX, which can reflect the trading volume of market trading activity; the number of independent trading addresses per day, which can reflect the number of trading addresses of market user activity and liquidity; and the liquidity provision (LP) size of the token in each DEX pool, that is, the size of the funding pool.
The second is indicators related to the supply of tokens: such as the circulating market value and the total circulating market value; the tradable amount and the maximum supply of tokens; and the value of locked assets, the team's locked position and the amount of destruction in the DeFi protocol. By monitoring these data dimensions, we can fully understand the changes in liquidity on the chain to a certain extent, so as to make more informed trading decisions.
3. How to filter out noise and capture high-quality opportunities?
Coingecko: There is a lot of noise in the market, which requires us to establish a systematic industry cognition. The aforementioned contents can help novice players lay a good foundation. It is recommended to practice more and gradually enhance your ability to filter out noise.
As for the question of capturing opportunities, the basic premise is the same, which requires full understanding of all aspects of the industry while paying attention to common basic data indicators. For example, active addresses, transaction volume, and large-cap activity. These indicators can reveal network usage, market sentiment, and the concentration of holdings of different investors. By tracking these indicators, traders can assess the overall network health and identify potential trends before price fluctuations appear.
Secondly, it is crucial to learn to use authoritative data analysis tools and platforms. For example, platforms like Glassnode, Dune Analytics, and The Graph provide detailed on-chain analysis, which can help users make informed decisions to a certain extent. In addition, the real-time decentralized trading aggregator and tracking tool GeckoTerminal provides detailed analysis of decentralized exchanges, helping users monitor liquidity, trading volume, and price fluctuations in real time. All of these tools can help beginners identify market trends and potential profit opportunities early. But it is important to cross-validate data from multiple sources to obtain a more comprehensive perspective.
In addition, it is also crucial to monitor whale behavior, such as large asset holders involved in staking or DeFi. Another example is large funds publicly disclosed by institutional investors such as MicroStrategy. In addition, the flow of funds of large wallets related to exchanges, major liquidity providers of DeFi, and large DeFi protocol participants will have a profound impact on the market.
Of course, community activity is also important. Many successful on-chain projects have active communities that play an important role in the development of the projects. It is recommended that new players join communities such as Discord, Telegram, and X (formerly Twitter) for in-depth observation. Finally, we recommend that beginners develop the habit of cross-validating data to better observe the overall market picture.
OKX Web3: We mainly provide some common ideas here:
First of all, when screening information sources, it is recommended to follow reliable media and directly pay attention to the project’s official website, official Twitter, Telegram channel, and Discord community to obtain first-hand information.
Secondly, the evaluation of the project background is very critical. Evaluating the background and past experience of the project team can help determine its credibility and execution capabilities. Review the project's technical white paper, evaluate the innovation and feasibility of its technical solutions, and pay attention to its code base and development progress to judge the project's technical strength and development potential. In addition, paying attention to the project's partners and investors, and cooperation with well-known institutions and companies is also an angle.
Of course, data analysis cannot be ignored. Use tools such as Nansen, Glassnode, Dune, and Defilama to analyze the project's on-chain data, such as the number of active addresses, transaction volume, and number of contract calls. Active on-chain data often indicates that the project has real users and usage scenarios. Check the project's financial status and token economic model, evaluate its sustainability, and pay attention to indicators such as lock-up volume (TVL), liquidity, and token distribution plan. Finally, to avoid noise, you must stay calm and rational, and don't be affected by short-term market fluctuations and excessive media hype. Maintain independent thinking, don't blindly follow the trend, and establish your own judgment criteria and investment strategy to make a wiser choice.
4. What indicators should be paid attention to in order to identify systemic risks in the first place?
Coingecko: To identify and avoid systemic risks in cryptocurrencies, players can monitor large collateral positions, especially those held by influential figures or projects, and be cautious about protocols or tokens, especially when a single entity holds too much assets or debt. Finally, it is also crucial to understand the liquidation thresholds of major DeFi protocols - tracking these thresholds across popular lending platforms can help predict potential liquidation chain reactions.
OKX Web3: In general, common risk types include:
Generally speaking, crypto asset transactions face the following common risks: First, there is liquidation risk. When the value of the collateral asset drops below the loan value, the user's collateral will be liquidated, resulting in losses. Second, there is liquidity risk. Insufficient market liquidity may make transactions difficult to execute or prices fluctuate drastically. In addition, there is smart contract risk. Contract vulnerabilities may lead to theft of funds or abnormal contract execution. Finally, there is market risk. Price fluctuations may cause significant changes in asset value.
To deal with these risks, we recommend paying attention to four key data indicators and adopting corresponding strategies. The first is the collateral ratio and liquidation threshold. DeFi platforms such as Aave and Compound provide real-time collateral ratio and liquidation information. The second is to pay attention to market price fluctuations. Platforms such as Coingecko and CoinMarketCap provide price volatility data. Third, monitor trading volume and liquidity. Platforms such as Dune Analytics and DeFi Pulse provide locked volume and trading volume data. Fourth, pay attention to market sentiment and macroeconomic events. Information can be obtained through cryptocurrency news websites and social media sentiment analysis tools.
However, in general, if you want to identify systemic risks in a timely manner, it is recommended to use real-time monitoring tools. Setting automatic alerts is a more direct solution, such as setting automatic alerts for price fluctuations, mortgage rate changes, etc., so that timely measures can be taken when risks are approaching. Through these methods, everyone can more effectively identify and avoid systemic risks and protect their investments from drastic market fluctuations and potential liquidation crises.
5. How to protect the safety of your assets in the dark jungle?
Coingecko: The first thing to do is to be vigilant at all times, especially with unsolicited messages, emails, and websites. Before clicking on a link or sharing sensitive information, always verify the sender's identity and the authenticity of the URL to avoid falling victim to a phishing attack. Be sure to avoid being tricked into acting hastily by urgent messages, which is a common tactic used by phishers. When using platforms such as X (formerly Twitter), Discord, or Telegram, do not interact with suspicious links. If you are unsure, visit Coingecko for official website and social media links screened by our team of experts.
In addition, to enhance wallet security, it is recommended to use different wallets for transactions, airdrop participation, and long-term fund storage. This practice can effectively reduce risks and protect the security of your overall portfolio. Of course, for large amounts of funds and long-term holdings, you should choose a high-security hardware wallet and regularly back up your private keys to secure offline storage. In addition, regularly updating wallet applications, browsers, and security tools, understanding common phishing techniques, and staying vigilant can also effectively reduce the risk of becoming a victim of phishing attacks.
OKX Web3: First and foremost, it is very important to choose a reliable wallet. In terms of software wallets, such as OKX Web3 Wallet and MetaMask, they are very convenient to use, but be sure to download them from the official website or official app store to avoid using versions from unknown sources to reduce potential security risks. In addition, hardware wallets such as Ledger, Trezor, and OneKey that store private keys offline to effectively prevent hacker attacks and isolate private key risks are also relatively secure.
The second is to avoid phishing websites and apps. When you visit a cryptocurrency website, be sure to double-check the URL and avoid clicking on unknown links. It is recommended to bookmark frequently used websites and access them through bookmarks. Be sure to only download wallet and exchange apps from official websites or official app stores, and confirm the credibility of the app's developer and publisher.
In addition, it is more important to manage private keys and mnemonics. Be sure to write down your private keys and mnemonics on paper and store them in a safe place, and avoid storing them on networked devices. Although it may be a bit troublesome to do so, never share your private keys or mnemonics over the Internet to avoid information leakage and asset theft. Of course, in order to prevent the loss of your wallet due to a single point of failure, you can store backups in different safe places.
In addition, when using decentralized applications (dApps), some safety measures must be taken. Regularly check and revoke unnecessary dApp authorizations, and use tools such as Token Approval Checker and revoke.cash to remove authorizations in a timely manner. In addition, in daily authorization transactions, only authorize necessary permissions and the specified number of authorizations. Give priority to using audited smart contracts and avoid using dApps from unknown sources. Although this may be a bit inconvenient when trying new dApps, it is recommended to test with small amounts of assets first and confirm safety before making large operations.
Of course, when surfing on the chain, the most important thing is to improve security awareness and be wary of social traps. Do not trust strangers' emails, text messages, and private messages. When it comes to fund transfers or sensitive operations, double confirmation must be performed to ensure the other party's identity and intentions are genuine.
Conclusion
The above is the fourth issue of the "Insight Data" column launched by OKX, focusing on the topic of how novice players can play in the on-chain world, hoping to provide a reference for new players. In future series of articles, we will continue to explore more practical data usage/analysis methods to provide references for traders and novice players to learn trading and understand the industry.
Risk Warning and Disclaimer
This article is for reference only. This article only represents the author's views and does not represent the position of OKX. This article is not intended to provide (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. We do not guarantee the accuracy, completeness or usefulness of such information. Holding digital assets (including stablecoins and NFTs) involves high risks and may fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professionals for your specific situation. Please be responsible for understanding and complying with local applicable laws and regulations.
