The blowup of FTX and resulting market tumult has many in cryptocurrency citing the importance of a core, original tenet of blockchain technology: transparency. No other sector of the crypto ecosystem embodies transparency more than DeFi, where all transactions are visible and the code behind protocols is in the open for all to see. We developed Storyline to make that inherent transparency more accessible to web3 businesses, financial institutions, and government agencies, and promote the safety and security of the ecosystem.
With Storyline, organizations are able to understand, investigate and communicate the complex stories that are web3 transactions.
By the numbers: Growth in DeFi
The web3 transformation is well underway. DeFi transaction volume grew over 10x from 2020 to 2021, reaching $5.8 trillion. While total transaction volume appears set to fall this year given the bear market, DeFi has driven nearly $3.7 trillion in transaction volume in 2022 — more than half of all on-chain volume. DeFi’s growth is also reflected in the composition of total transaction volume by currency type.
Bitcoin, which once dominated the cryptocurrency markets, is now only just over 10% of all crypto transactions. The decline of bitcoin transaction volume domination is because of the rise of blockchains designed for decentralized computation. As DeFi grew, it changed how business and customers interacted with crypto. Bitcoin tends to be used as a currency and savings instrument, whereas Ethereum and other DeFi protocols—smart contract systems—are used in a variety of ways, including dapps which provide services such as borrowing, lending, trading, gaming, and collectibles (NFTs).
Some businesses have already embraced this revolution and others are still looking for ways to unlock the revenue potential. But, both have the same need to manage risk, protect their customers, and investigate DeFi transactions.
Over the course of 2021, DeFi protocols became the go-to target for hackers looking to steal cryptocurrency as criminals began to use the complexity of smart contracts to disguise their activities. 2022 is on track to become the biggest year ever for hacking activity, with most funds being stolen from DeFi protocols. In October 2022 alone, hackers stole over $700 million across 11 separate DeFi hacks.
New tooling requirements for web3
As DeFi has exploded, so too has the need for solutions to manage its risk, prevent illicit activity, and investigate complex transactions. We heard from our customers that they don’t have the right tools to review, analyze, and investigate complex smart contract transactions, making it difficult to participate in DeFi while also protecting their business and customers. It’s clear that new solutions are needed to safely participate in the web3 revolution.
Intro to Storyline: What it is and how to use it
Enter Storyline, the first blockchain analysis solution to specifically target this fast growing segment of cryptocurrency.
Customers can address the complex nature of DeFi and create clarity and transparency by using Storyline to trace and review all types of smart contract interactions, from simple NFT transfers and DEX swaps to cross-chain bridge transactions and much more. Visualizations are simplified. Instead of traditional cluster graphs, where DeFi transactions can be complicated to parse, Storyline uses a novel timeline view that shows the movement of funds between addresses where users can look forwards, backwards and across chains to discover what is happening with one or several transactions.
We identified and built new, unique functions that unpack the complexity of DeFi. With Storyline, users can:
- Create clear temporal visualization to help tell the story and analyze the flow of funds easily—for NFTs, native tokens, ERC-20 tokens and across chains
- Receive automated interpretation of transactions, making common transactions easy to understand and highlighting risky behavior
- Add paired transactions for cross-chain swap and bridges in one simple action
- Generate simplified views of transaction outcomes, making it easier to understand smart contracts by examining balance changes
- Hone in on what’s important using powerful filters that sort through cross-chain data to identify unusual or unexpected behaviors
This screen grab shows temporal analysis, interpretations, and funds moving from a bridge.
Additionally, attributions from Chainalysis, ENS, and other on-chain data allow users to identify key actors and trace funds quickly.
Using Storyline to spot growth opportunities
With Storyline, businesses can trace customer transactions, reviewing where their assets come from and are sent to, and with whom they’re interacting. This helps organizations gather business insights—by tracing and analyzing just one or a group of transactions.
Storyline helps you track:
- What is the risk of this transaction or address? Was this a false positive alert in our monitoring system?
- What happened: Where did that asset come from? What is its history? Where did it go? How did that hack or scam work?
- Where is the money now? Can our business use these insights to retrieve or freeze the funds?
- Who is involved? Are there counterparties you need to be aware of? Are transactions going to platforms you don’t want to interact with?
- Can I find information that would identify the perpetrator? Can this information help us build a case? Can I prove their involvement?
See Storyline in action:
Trace the flow of NFT transfers, keeping track of customer transactions and interactions:
Trace and understand a timeline of events for smart contracts digging into the relevant counterparties:
Click here to learn more about how Chainalysis Storyline delivers blockchain intelligence for the web3 era. You can also sign up for our Storyline introductory webinar below.
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