Oct 31, 2023
Man and machine: Nansen’s analytics slowly labeling worldwide wallets
Nansen CEO Alex Svanevik sat down with Cointelegraph for an exclusive interview
Nansen CEO Alex Svanevik sat down with Cointelegraph for an exclusive interview during Token2049.
Public blockchains can be accessed and read by anyone, but creating meaningful insights from this data is no easy feat. Millions of transactions are recorded across a variety of chains and layer-2 protocols, creating petabytes of data daily.
Services like Google transformed the early internet, accomplishing a significant engineering task by structuring and curating millions of websites to serve simple user queries. A handful of blockchain analytics platforms are looking to do the same, with Nansen distinguishing itself by processing on-chain data into a growing database of wallet labels.
Cointelegraph visited the Singapore office of the growing firm during Token2049 for a one-on-one conversation with co-founder and CEO Alex Svanevik. Occupying a dedicated space in a co-working environment, the office was abuzz with employees in town from the company's hubs in Lisbon, Miami, London and Bangkok.
Svanevik's background is rooted in artificial intelligence. Graduating from the University of Edinburgh in 2010, the Norwegian's dissertation focused on building models based on how children learn mathematics. His first foray into the world of work involved the establishment of a business-focused AI consultancy before moving into management consulting.
A stint as a data scientist for a media company preceded his eventual move into the world of cryptocurrencies, with Svanevik introduced to Ethereum in 2017. His first job for a cryptocurrency firm bankrolled by a $15 million initial coin offering lasted about a year, as the company became one of many to boom and bust post-2017.
Svanevik, Lars Krogvig and Evgeny Medvedev then teamed up to create Nansen AI, eyeing a gap in the market for an on-chain analytics tool aimed at investors:
Nansen was formed in late 2019 to provide high-caliber analytics tools to investors delivering blockchain data and insights in real time. Svanevik admitted that the platform originally attracted sophisticated cryptocurrency traders with large holdings but has since evolved to have a 50/50 split of retail and institutional users:
The ongoing cryptocurrency bear market, which is mirrored by traditional stock markets, leads Svanevik to believe that Nansen's sector will trend toward greater institutional use over the next two years. Individual investors may take a break from crypto and cut back on analytics services, but continued institutional investment efforts will demand data-driven insights:
Nansen has slowly garnered a reputation for its wallet labeling efforts across the cryptocurrency ecosystem. Again, this hardware and labor-intensive endeavor is a testament to the platform's joint AI and human efforts.
Svanevik estimated that Nansen scans nearly a petabyte of data daily from the variety of chains it keeps tabs on. This also accounts for nearly 20% of the company's running costs. Svanevik described Nansen as a "Google Cloud maximalist," with the computing service being its infrastructure platform of choice since its inception.
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This speaks to the fact that despite public blockchains being available to all and sundry, there is inherent value in bringing order to data and gleaning valuable information from it. This is where Svanevik drew parallels to the platform and what Google did with the wider internet:
Nansen has over 130 million addresses that it has labeled with additional information directly accessible from blockchains. This allows the average user to find out which addresses are held by notable entities such as Binance, Alameda, Celsius and Hodlnaut, Svanevik highlighted.
When asked if the labeling feature was a focal point from the outset of Nansen's existence, Svanevik noted that the first iteration of the platform was a database in which a user could look up addresses and get wallet labels:
The evolution of Nansen's platform was a result of combining "man and machine" into processes and an architecture to compile the information. A network effect led to compounding returns, as identified wallets that have been labeled often lead to the identification of other wallets interacting with them. Ninety-nine percent of this work is still done by AI, while Nansen's research team plays a role in connecting the dots for the remaining 1%.
The labeling of wallets and individuals has also been a point of much debate in the wider cryptocurrency ecosystem. Privacy is an inherent value touted by blockchain technology, but the transparency of public blockchains means that analytics tools can now identify who is in control of specific assets and wallets.
Svanevik said that Nansen is mainly focused on labeling projects and corporations rather than individuals, save for those deemed to be notable public figures:
The Nansen co-founder also believes that the labeling of wallets belonging to major exchanges, institutions and individuals has led to people becoming more privacy-aware. Curating, compiling and serving up information in a convenient way is the goal, which in itself raises some ideological considerations:
Nansen is one of a handful of well-known analytics firms bringing sense and order to blockchain data. Distinguishing the product offering of these similar firms, Svanevik highlighted platforms such as Chainalysis and its focus on tracking the illicit use of cryptocurrency as a key difference from what Nansen focuses on:
Given that 99% of cryptocurrency transactions are above board, Nansen chose to focus on crypto-native investors and operators while market participants such as Chainalysis, Elliptic and PRM Labs cater more toward public institutions and government agencies.
Nevertheless, Nansen has played its part in analyzing major cryptocurrency events, including its role in tracing token movements linked to major firms during the infamous Terra crash in April 2022:
Nansen's tools and its recently launched research department helped journalists at Tech in Asia piece together questionable practices by Hodlnaut, one of a number of cryptocurrency lending firms that shuttered in the wake of the Terra collapse in 2022.
Cointelegraph's in-depth conversation with Svanevik concluded with his take on Singapore as a cryptocurrency hub of Asia. Token2049 attracted thousands of attendees and certainly left the impression that the island nation, with its towering skyscrapers and futuristic buildings, is a center for the ecosystem.
Svanevik believes Singapore is in a unique position to be one of the world's crypto hubs for a few different reasons. First and foremost, the country is "a place where finance meets tech," which is in contrast to its closest Asian contender, Hong Kong, which Svanevik described as more finance-oriented.
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Regulators in Singapore are also aware of this fact. Having participated as a panelist at a recent Monetary Authority of Singapore event, Svanevik highlighted tight controls having both positive and negative effects:
While it's a tough environment to set up shop, the Nansen CEO believes it puts the country in a good position to be a respected jurisdiction to operate out of.
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