bitcoin (and cryptocurrency overall) is an extremely volatile asset class. Yet with the price per bitcoin more than quadrupling in value since the beginning of the year, investors and anyone looking to make some money have been trying to find ways to analyze the mysterious cryptocurrency, as well as its alternatives, such as Ethereum and Litecoin.
While still in its beginning stages, big data analytics is starting to be used to analyze bitcoin and other cryptocurrencies. While many may decry the potential uses of big data analytics for cryptocurrency like identifying users, saying that such uses undermine the spirit of cryptocurrency itself, there are still ways in which big data analytics can legitimately benefit cryptocurrency, such as by identifying fake or dangerous users, preventing theft, and predicting trends.
While the blockchain guards users’ anonymity by providing limited information, such as the wallets involved in a transaction and the amount of currency sent, this data and other related data about the blockchain, such as social media analytics, grows by the day with Bitcoin alone seeing over 200,000 transactions per day (as of September 30, 2017).
One way that data analysts can harness blockchain-related information is by validating transactions and making sure transactions and transaction participants are legitimate and trusted. Without verifying the identity of blockchain participants, it could be hard for businesses to adhere to increasingly strict regulations surrounding cryptocurrency and not sell to criminals or other characters with untrustworthy intentions. With business creation in America already on the decline, small businesses don’t need anymore obstacles to their survival like being blacklisted for unintentionally selling to criminals.
This kind of identity verification would be made possible by in-depth analysis of data produced by blockchains and pattern recognition across thousands of transactions. Through such analysis and pattern recognition, pernicious users can be identified and dealt with accordingly. While many may decry this as going against the spirit of blockchain technology protecting users’ anonymity, these kinds of analytics may ultimately grant cryptocurrency more legitimacy and greater adoption by ensuring that users are protected.
Data analytics can also help cryptocurrency by deterring the theft of cryptocurrency or fraudulent use of them.
