If you are familiar with crypto-focused publications then you’ve likely heard of the term ‘on-chain’ data before. More specifically, you’ve probably heard of platforms like Glassnode and CryptoQuant being discussed in these circles.

Admittedly, these two firms, and others like them, have become very important in the crypto industry and in some cases, are considered the backbone of the industry. But why is on-chain data so important? And why are firms that provide on-chain data considered so vital to the blockchain industry as a whole? Let’s find out:

 

What is On-Chain Data?

The first thing to note is that the entire blockchain and crypto industry is dependent on, you guess it, blockchains. These blockchains are where transactions are carried out, data is stored, and so on.

Within the industry, we are constantly making decisions that involve blockchains such as whether to buy or sell a crypto or create a new application on a specific blockchain. These decisions need to be made with certain data in mind.

After all, how will you know whether to sell a token if you don’t know its price and how will you determine its price if you don’t know the number of transactions that have taken place on its blockchain?

On-chain data, essentially, is data that is gotten directly from the blockchain that it relates to. If the current price of 1 ETH is $10,000, for example, on-chain data is gotten from the Ethereum blockchain itself and not from another source reporting on the Ethereum blockchain.

 

How do we get it?

Platforms like Glassnode and CryptoQuant get their on-chain data by being perpetually connected to various blockchains and reporting data and changed in real-time. Those who want to get their data from platforms like Glassnode and CryptoQuant or connect to them and set up accounts to do so.

 

Why is it important?

With all the attention that on-chain data reporting platforms get, it is worth asking why they are so important in the first place. After all, can’t the data technically be gotten without it having to be on-chain?

It can but for several reasons, on-chain data is prized above all else. First, there is the question of validity. Despite all the advancements made in the industry, there is no data that can be as trusted as the one coming directly from the source.

This is because the data being collected is being used by everyday people and companies to make important decisions and as such, must be as accurate as possible. Then there is reporting speed. If a firm wanted to get fast data on multiple blockchains, they would have to manually connect to several of them and then collect and analyze the data, which is both time and effort-consuming.

By using on-chain data suppliers, this process can be skipped entirely and the decision-making cycle made easier.

 

In Conclusion

On-chain data is the backbone of the crypto and blockchain industry in many ways and on-chain data reporting platforms are not just helpful in the expansion of the industry but essential as well.

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