Speaker 1: We screen really every single website that is created in
Speaker 1: the world every day against our models to see whether
Speaker 1: there are new scam websites being created every single day.
Speaker 1: And we have to be at the tip of the
Speaker 1: spab so that we can protect what addresses they're using
Speaker 1: on that scam website, so that we can protect all
Speaker 1: the users around the world before they get scammed. It's
Speaker 1: a constant game of katamaus and now the MISA using AI,
Speaker 1: so we got to get better as gats.
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Speaker 2: visit the link in the description. Hey, folks, welcome into
Speaker 2: the Thinking Crypto podcast. I'm your host Tony Edward and
Speaker 2: we're recording at Station three in New York's Financial District.
Speaker 2: And joining me is Jonathan Levin, who is the co
Speaker 2: founder and CEO of Chanalysis. Jonathan, great to have you.
Speaker 2: Great to veha Jonathan. I've read about chainnalysis and cover
Speaker 2: chainalysis news over the years. You guys have been doing
Speaker 2: some amazing things and you have a perspective on blockchain
Speaker 2: which I think a lot of people may not have
Speaker 2: because you're looking at the data, the analytics, the transaction.
Speaker 2: So I'm excited to dive into that and nerd out
Speaker 2: a bit. But tell us a bit about yourself. Who
Speaker 2: are you, how do you start chainausis and things like that.
Speaker 1: Yeah, So I'm Jonathan. I grew up in the UK.
Speaker 1: I came to the us for chain analysis. But how
Speaker 1: I got into crypto was actually, you know, a typical
Speaker 1: British story. I was sitting at the pub with my
Speaker 1: friend Tom. We had a few beers and he told
Speaker 1: me we should start arbitrage trading bitcoin back in twenty twelve,
Speaker 1: and you know, I didn't do that, as otherwise we
Speaker 1: wouldn't have started chainalysis, and so instead I went down
Speaker 1: sort of a rabbit hole of understanding really the big
Speaker 1: questions the bitcoin was asking, which is, you know, why
Speaker 1: does the state have a monopoly on the issuance of money?
Speaker 1: Why is the Internet dominated by a few major firms.
Speaker 1: How are we going to construct a global payment system
Speaker 1: for everyone to join the Internet economy? And you know,
Speaker 1: those types of questions led me to think that they
Speaker 1: actually needed to be a company that could tell those
Speaker 1: stories with data rather than just think about, you know,
Speaker 1: the use cases. And you know, that's really how chang
Speaker 1: Alsis was born, is really out of a necessity to
Speaker 1: be the company that knows the most about how and
Speaker 1: why people actually use crypto. And that's that's really what
Speaker 1: we've been doing for the last eleven years.
Speaker 2: And you've certainly been a leader net space and it's
Speaker 2: a funny story. You mentioned, you know, you learned about
Speaker 2: it from a friend and a pub I have a
Speaker 2: similar story. I was at Buffalo Wild Wings with four
Speaker 2: other friends. One buddy was trading big oney and he's
Speaker 2: telling us about it where you're having beers and wings.
Speaker 3: I'm like, what is this? It sounds like a scam.
Speaker 1: I mean, it's the best way to learn about it.
Speaker 1: I mean, you know, you stay for a few beers
Speaker 1: and it starts to make more and more sense, right,
Speaker 1: I mean, it just it just happens.
Speaker 2: Yeah, it's funny, you know, initially my reactions as a scam,
Speaker 2: but then he kept bringing it up every other time
Speaker 2: we would go out, and he was started making some money,
Speaker 2: and of course then from there I went down the
Speaker 2: rabbit hole.
Speaker 1: Yeah, it's really really interesting. So we started Chainalysis, and
Speaker 1: really the purpose behind it was to make sure that
Speaker 1: crypto exchanges at the time in twenty fourteen fifteen had
Speaker 1: a really time, really hard time getting bank accounts, and
Speaker 1: one of the fundamental questions that banks had for crypto
Speaker 1: businesses was well what are your users actually doing with
Speaker 1: those crypto assets? And the exchanges were having a really
Speaker 1: hard time explaining to banks what the use cases for
Speaker 1: crypto were and really what individual users were doing with
Speaker 1: their crypto, And so we built chainalysis to allow for
Speaker 1: crypto businesses to actually get bank accounts for the first
Speaker 1: time because they could suddenly explain really where the money
Speaker 1: was coming from, where the money was going to, what
Speaker 1: their users were actually using cryptocurrencies for.
Speaker 2: That's pretty profound. The the use initial use case for
Speaker 2: what you guys were doing was to help get banking. Yeah,
Speaker 2: but now we can go beyond that because it could
Speaker 2: be used for marketing user behavior, habits and in building
Speaker 2: the proper solutions. What are the habits of users, what
Speaker 2: do they gravitate to and things like that.
Speaker 1: Yeah, I think that when people think about the blockchain,
Speaker 1: there's definitely a lot of talk about transparency, but actually,
Speaker 1: like that's what chainolsis provides to the businesses in this space,
Speaker 1: is the transparency about what are users actually doing with cryptocurrency,
Speaker 1: What is happening in stable coins, what's happening in DeFi,
Speaker 1: what are the intersections of these different worlds. You read
Speaker 1: a lot about these different use cases of crypto, but
Speaker 1: no one really understands how they actually fit together. And
Speaker 1: you know, really what the blockchain is really good at
Speaker 1: is providing that complete map of all of those pieces
Speaker 1: of activity, and you need the analytics and data that
Speaker 1: Chainousis has in order to be able to understand those flows.
Speaker 2: So how does chain elsis plug into all these blockas
Speaker 2: there are many out there, right, how are you what's
Speaker 2: the execution look like to Is it an API driven
Speaker 2: feed and you're monitoring it through software and things like that.
Speaker 1: Yeah, So we actually run a lot of nodes ourselves,
Speaker 1: and we use some node providers out there to run
Speaker 1: nodes on our behalf. And then we'll take all of
Speaker 1: the data off of those nodes and index them and
Speaker 1: normalize them to understand how to compute things like the
Speaker 1: balances for individual addresses and wallets, and we transform that
Speaker 1: data into a system of looking at how does money
Speaker 1: move on those blockchains, and we can then recreate sort
Speaker 1: of all of the different ways and which wallets have
Speaker 1: transferred value from one place to another, what has the
Speaker 1: role being of smart contracts in transferring value? And then
Speaker 1: we go and label all of those different was ballets
Speaker 1: and smart contracts with the real world entities that stand
Speaker 1: behind them. So we go out and we find the
Speaker 1: information about which wallets are controlled by coinbase or okax
Speaker 1: or buy bit or binance, and then also you know
Speaker 1: what are all the other use cases of crypto, So
Speaker 1: what are the merchant services, what are the scams, what
Speaker 1: are the hacks, what are the pieces of ransomware that
Speaker 1: are out there? And so you know, together we we
Speaker 1: we build that comprehensive map of hundreds of thousands of
Speaker 1: entities that are really providing services within the crypto economy
Speaker 1: and how all of them have transacted over all time.
Speaker 2: You know, it's interesting because you're you're you're getting a
Speaker 2: full view of the landscape by doing that, and I'm curious,
Speaker 2: who are the folks that are using your services? Is
Speaker 2: it governments, tradify crypto native firms and things like that.
Speaker 1: Yeah, really it's you know, obviously the government, which we
Speaker 1: can touch on. I would say that anyone who's putting
Speaker 1: a cryptocurrency transaction in a blockchain is using us, but
Speaker 1: in some way, and that could be at the really
Speaker 1: low level where people are using us to monitor the
Speaker 1: security of smart contracts or even blockchain integrity or staking.
Speaker 1: They use our product Hexagate to be able to do that.
Speaker 1: And really that goes into the real nuts and bolts
Speaker 1: of how blockchains work. Every smart contract action, every change
Speaker 1: in keys of governance protocols, any change in price of
Speaker 1: an oracle like, everything can be monitored at that low
Speaker 1: level for us all the way up to the way
Speaker 1: that transactions work and really how value is moving across
Speaker 1: the blockchain. And then that's really sort of everyone from
Speaker 1: the exchange landscape that is using US and all the
Speaker 1: biggest wallets and exchanges around the world.
Speaker 2: So you're getting all this data, certainly you're data mining,
Speaker 2: you're aggregating it, but are you able or to people
Speaker 2: who are using your platform able to see real time
Speaker 2: transactions as well?
Speaker 1: Yeah? So really, I mean, if you think about our
Speaker 1: observability product that I was just mentioning, that is all
Speaker 1: about preventing hacks or fund loss in real time. And
Speaker 1: if you think about you know, our scam prevention that
Speaker 1: we offer as well, it's all real time screening transactions.
Speaker 1: And so if you are one of the largest exchanges
Speaker 1: in the world, if you are a large wallet in
Speaker 1: the world, you're using chain analysis to be able to
Speaker 1: screen against risk in real time, to make a real
Speaker 1: time decision about whether you should process that deposit, process
Speaker 1: that payment, or make that withdrawal or credit that account.
Speaker 1: And that's something that we pride ourselves on, is that
Speaker 1: you know, really you can have a comprehensive risk monitoring
Speaker 1: solution for this new payment instrument in a way that
Speaker 1: mirrors what you get in traditional finance.
Speaker 3: Oh absolutely.
Speaker 2: I don't know if you can share details, you know,
Speaker 2: but as much as you can. What are some of
Speaker 2: the common scams that you're seeing that people are trying
Speaker 2: to do?
Speaker 1: Oh, we love this, so we love we love a
Speaker 1: good scam. Ut So there's lots of different scams that happen.
Speaker 1: I mean what we obviously track the different types. I
Speaker 1: would say that, you know, one that we're very familiar
Speaker 1: with is you know, the investment scams that are popping up.
Speaker 1: You know, we screen really every single website that is
Speaker 1: created in the world every day and screen that against
Speaker 1: our models to see whether there are new scam websites
Speaker 1: being created every single day, and we have to be
Speaker 1: at the tip of the sphere making sure that we
Speaker 1: can you know, detect those scam websites that look like
Speaker 1: scams that we've seen before, so that we can make
Speaker 1: a you know, deposit and withdraw or we can detect
Speaker 1: what addresses they're using on that scam website so that
Speaker 1: we can protect all the users around the world before
Speaker 1: they get scammed. So we we like a we like
Speaker 1: a high yield investment product better than the next person.
Speaker 1: We go out there, we make you know, we make
Speaker 1: that identification and then we monitor those websites to be
Speaker 1: able to you know, mitigate against you know, scams if
Speaker 1: you are a major exchange and you're allowing users to
Speaker 1: withdraw to those websites. So that's why one type of scam.
Speaker 1: The other types of scams that we see, I mean
Speaker 1: we see scams on on Telegram, on TikTok, on Facebook,
Speaker 1: all these places. A lot of it is really about
Speaker 1: you know, selling goods and services that people are in
Speaker 1: desperate need for. People want to buy you know, music
Speaker 1: theater tickets, or they want to buy you know, a
Speaker 1: couch on Facebook marketplace, or you want to buy Some
Speaker 1: people are buying cars on Facement marketplace. Some people are
Speaker 1: buying pets on Facement marketplace. Like wherever someone is buying
Speaker 1: an object, you know, there is someone selling a fake object.
Speaker 1: And I think that, you know, from our perspective, like
Speaker 1: those are all you know, damaging the consumer. The consumer
Speaker 1: is not always losing crypto in those examples. You know,
Speaker 1: sometimes sometimes the users are losing their dollars, but a
Speaker 1: lot of the infrastructure is paid for in crypto, and
Speaker 1: some of that laundering activity is also in crypto. We
Speaker 1: at Chaine Analysis we like to close what I call
Speaker 1: the intelligent sloop and so we like to look at
Speaker 1: the full life cycle of any threat to the industry
Speaker 1: or to public safety, and we want to close as
Speaker 1: many intelligence sloops as possible. So we will go out
Speaker 1: and we will go and identify these scams, will identify
Speaker 1: them on the whatever the scammer is using to victimize someone,
Speaker 1: we'll collect that information. So whether that's a cash app tag,
Speaker 1: whether that's a PayPal email address, whether that's you know,
Speaker 1: a xell phone number, like, we'll go out, we'll collect
Speaker 1: those things and make sure that we can provide it
Speaker 1: to the relevant people to prevent the fund loss ultimately
Speaker 1: from the consumers.
Speaker 3: You mentioned.
Speaker 2: You go out and you look at these different websites,
Speaker 2: and my background is in search marketing, So are using
Speaker 2: some sort of search engine crawler, like a bot crawler
Speaker 2: to go out there like Google.
Speaker 1: Yeah, we we call we built our own crawlers to
Speaker 1: be able to go and do this, and you know,
Speaker 1: we we we ultimately are looking at the ability for
Speaker 1: us to use at alms to now go and index
Speaker 1: those websites, interact with those websites, and we're using a
Speaker 1: lot of AI under the hood to actually go and
Speaker 1: have those types of interactions.
Speaker 2: Yeah, I was going to ask you about AI. How
Speaker 2: are you leveraging that? So do you have AI agents
Speaker 2: doing things?
Speaker 1: Yeah, so we we have what we would call like
Speaker 1: undercover AI agents, if you will. There are essentially you know,
Speaker 1: going out and making transactions and looking at websites and
Speaker 1: building our data set and so really like that's you know,
Speaker 1: the force of us actually learning for ten years how
Speaker 1: to go do this manually and ultimately be able to
Speaker 1: train these agents to be able to go out there
Speaker 1: and protect the industry.
Speaker 2: So as the blockchain and web three ecosystem grows, you
Speaker 2: get trac FI coming in building and much more, There's
Speaker 2: going to be a lot of transactions. Jonathan, Right, how
Speaker 2: is chainelsis prepared to handle that?
Speaker 1: Yeah, it's a great question. I mean we think about
Speaker 1: this a lot. I think that you know, ultimately, like
Speaker 1: there are some scale advantages of being in the place
Speaker 1: of chainalysis, the market leader of all of analytics. And
Speaker 1: so you know what we think about is how do
Speaker 1: we make sure that we can continue to collect all
Speaker 1: of the data at scale to label these things. You've
Speaker 1: heard that one of the strategies is to not use
Speaker 1: humans and use agents and yeah, but also you need
Speaker 1: to be able to architectural systems in a way that
Speaker 1: is scalable, you know, Solana and base Us scaling, and
Speaker 1: you know, you need to be able to identify all
Speaker 1: of the different tokens that trade on those blockchains. And
Speaker 1: actually all of that actually comes down to you know,
Speaker 1: great engineering for you know, scaling these systems, and you
Speaker 1: know we've been we've been doing that for eleven years
Speaker 1: and have a good understanding of it.
Speaker 2: You mentioned Solana. You know, we we've seen a lot
Speaker 2: of meme coins launch and Solana would pump that fund.
Speaker 2: Are you monitoring that as well?
Speaker 1: Yeah, well we'll monitor all of the different meme coins
Speaker 1: on on Solana, you know in the you know, tens
Speaker 1: of millions I guess today and as Wild Yeah, it's
Speaker 1: been it's been something that we have really had to
Speaker 1: re engineer our systems to handle these types of different
Speaker 1: use cases, and you know, we used to think about
Speaker 1: individual token support. We don't think about individual token support
Speaker 1: for a blockchain today. We think about blockchain support, and
Speaker 1: tokens come for free in our architecture, and so we
Speaker 1: actually have now scaled to those larger blockchains where there
Speaker 1: are tons of different tokens being issued and all of
Speaker 1: our customers can benefit from seeing anything to do with
Speaker 1: any of those tokens that move on that platform with
Speaker 1: no humans at chain analysis getting involved in supporting that.
Speaker 2: So we talked about the crypto exchange cohort. What about
Speaker 2: governments and tradify? Oh, how are they leveraging your services?
Speaker 1: Yeah, when you think about the government, I mean they
Speaker 1: were actually some of our first customers and really today
Speaker 1: we serve over three hundred and fifty government agencies in
Speaker 1: sixty five countries around the world. We have a very
Speaker 1: large presence among the way that governments really understand what's
Speaker 1: happening on the blockchain, and you know, for us, that's
Speaker 1: all about making sure that they have the tools at
Speaker 1: their disposal to follow the money on the blockchain for investigations,
Speaker 1: public safety, national security, and regulatory oversight. And the regulatory
Speaker 1: oversight piece is the thing that has changed the most
Speaker 1: over the last couple of years, where we went from
Speaker 1: a world of sort of where the US was just
Speaker 1: enforcing against crypto businesses and we've now moved to a
Speaker 1: world of which the regulators are now tosked with overseeing
Speaker 1: the market. And actually that puts us in a different place,
Speaker 1: which is we can actually equip government agencies with the
Speaker 1: tools that they need to have better visibility about what's
Speaker 1: happening in the crypto market than they even have on
Speaker 1: traditional markets that they supervise, and that power changes the
Speaker 1: way that they should be thinking about policy, It changes
Speaker 1: the way they think about examining these companies, and it
Speaker 1: changes the way that there can be a much more
Speaker 1: fruitful collaboration between the venues and their regulators. And really
Speaker 1: that's for us like such a powerful thing for the
Speaker 1: industry because it means that we're going to have like
Speaker 1: a pragmatic regime that all the venues, all the real businesses,
Speaker 1: can innovate faster while the government stays comfortable that they
Speaker 1: have the visibility they need.
Speaker 2: Yeah, I've heard data from Chanels's reference in congressional hearings,
Speaker 2: which is amazing. So you have one of the core
Speaker 2: pillars of this industry too. That's needed for this industry
Speaker 2: to grow because you've got to have the insights, the
Speaker 2: data and analytics to monitor all these things.
Speaker 1: Yeah, I mean, we spend a lot of time on
Speaker 1: Capitol Hill. I've been on Capitol Hill myself, and you know, really,
Speaker 1: you know, we spend time educating people with the data.
Speaker 1: And I think that this is like what I first
Speaker 1: got started with in crypto was people were telling really
Speaker 1: good stories, and we need good storytellers, we need people
Speaker 1: who are going after use cases. We need all of
Speaker 1: those things, but we also need to be very grounded
Speaker 1: in the actual data about how people are using cryptocurrency.
Speaker 1: Is what is this stable coin volume that is existing
Speaker 1: in the world today, Like, what are the flows looking
Speaker 1: like between different countries, what are the types of use
Speaker 1: cases that we actually see getting traction And when we
Speaker 1: come to the government and we explain to them that,
Speaker 1: you know, there is a very small percentage of the
Speaker 1: overall activity that is related to criminal activity, and we
Speaker 1: can show them the evidence of some of these use cases.
Speaker 1: So really that changes the posture of the policymakers.
Speaker 2: Well, absolutely, you know, as you're saying that, I thought
Speaker 2: of are you able to delineate between bought activity like
Speaker 2: fake transactions and real real Yeah.
Speaker 1: We spend a lot of time looking at you know,
Speaker 1: fake tokens, fake transactions, fake volumes like yeah, these are
Speaker 1: all things that you can pick up as you are
Speaker 1: actually looking at the blockchain and looking at these different transactions.
Speaker 2: And then for trad five, are they approaching you now saying, hey,
Speaker 2: we need to get plugged in soil we know what's happening.
Speaker 1: Yeah, I would say that. You know, this is something
Speaker 1: that has been one of the fastest growing parts of
Speaker 1: the chainalysis market today is how trad file is actually
Speaker 1: moving into the space to offer products and services to
Speaker 1: their customers. And really, when you think about trad fi,
Speaker 1: trad fi have a much lower risk threshold than anyone
Speaker 1: who's in crypto today. So anyone who's in crypto today
Speaker 1: is like very much an innovator, very much someone who
Speaker 1: likes to be able to offer new products and services
Speaker 1: and move really quickly. You know, traditional finance is in
Speaker 1: the business of you know, they've got a huge brand
Speaker 1: to protect, they have greater scrutiny from regulators, they have
Speaker 1: a lot bigger risk and compliance teams than you know,
Speaker 1: even what we have in some of the largest crypto exchanges,
Speaker 1: and so what they really want is they want to
Speaker 1: be able to access chainalysis, build a full program around it,
Speaker 1: build a scalable solution for them to be able to
Speaker 1: transact on the blockchain. And actually we start to see
Speaker 1: some of the more major banks, you know, take the
Speaker 1: steps towards public chains, and that's a really really exciting
Speaker 1: moment for the industry.
Speaker 2: So on that note, many of these banks and trad
Speaker 2: fin institutions, they have, for example, an in house wall
Speaker 2: garden blockchain permission private, but it bridges to public blockchains
Speaker 2: because that's what the liquidity is, the settlement. So are
Speaker 2: you able to also plug into their private if they
Speaker 2: allow it?
Speaker 1: Yeah, so we would. But you know, fundamentally, like the
Speaker 1: way that I think about chain analysis is that the
Speaker 1: value of chainalysis is to be able to understand what's
Speaker 1: happening on public blockchain infrastructure. It's something that we are
Speaker 1: really well placed to understand the most about that ecosystem.
Speaker 1: And I think that with all value and money transfer,
Speaker 1: the game is always about liquidity. It's always about where
Speaker 1: is the most liquidity and how does that create the
Speaker 1: most efficient market? And so that will always be on
Speaker 1: a public blockchain. And that's something that I think is
Speaker 1: being realized by trade Fire, is that we start to
Speaker 1: see demand for ubiquitous, instant, low cost payments and value
Speaker 1: transfer of all types, and that can only really exist
Speaker 1: on public infrastructure. It can only really exist in a
Speaker 1: world where everyone can tap into that common standard that
Speaker 1: no one really owns in its entirety, that no one's
Speaker 1: in can of saying who's in and who's out. And
Speaker 1: so this is where I think the traditional finance world
Speaker 1: is realizing that ultimately more and more liquidity is going
Speaker 1: to end up on this public infrastructure that's universally accessible,
Speaker 1: and they need to be ready for that.
Speaker 2: Yeah, that absolutely makes sense. So on that note, what
Speaker 2: does your vision board look like for a chainalysis by
Speaker 2: twenty thirty, you know, as legislation comes in. You know,
Speaker 2: what do you guys, what do you see chainalysis in
Speaker 2: five years?
Speaker 1: Yeah? I think that the way that we think about
Speaker 1: chainalysis in five years is that we are the company
Speaker 1: that is the intelligence layer for all value that moves
Speaker 1: on the blockchain. And you know, the way that I
Speaker 1: see it is that today there are a few thousand
Speaker 1: entities transacting on chain at scale that are our customers
Speaker 1: and the people that we serve, and ultimately like that
Speaker 1: needs to become like fifty thousand, like there needs to
Speaker 1: then become one hundred thousand, that needs to become then
Speaker 1: a million businesses who are significantly moving value on the blockchain.
Speaker 1: And so once you go up those sort of two
Speaker 1: orders of magnitude, chainnalysis becomes really this ubiquitous layer of
Speaker 1: data and analytics that powers all of those different enterprise
Speaker 1: use cases that get us there. And really I think
Speaker 1: that to some extent, not that we fade all the
Speaker 1: way into the background, but that you know, the whole
Speaker 1: ecosystem is running on chainalysis data to be able to
Speaker 1: assess risk, build better products, build their business cases, build
Speaker 1: new financial products. And we really sit there as like
Speaker 1: a common layer of intelligence across the whole industry.
Speaker 2: And that industry is global, Jonathan, So I can't imagine
Speaker 2: you know, this scaling that you have to do in
Speaker 2: demand power that you will need. Obviously at AI helping you,
Speaker 2: but you know, people are like, hey, I want to
Speaker 2: see what's happening in Europe specifically or in Asian markets.
Speaker 3: You're able to do that.
Speaker 1: Yeah, So we actually have boots on the ground in
Speaker 1: over twenty nine countries around the world. You know, that's
Speaker 1: something that we are really happy to be able to
Speaker 1: localize our support for those different markets and something that
Speaker 1: you know, I went around the world with a backpack
Speaker 1: building these markets. Luckily I didn't have to carry suitcases
Speaker 1: of cash and we just went in with crypto and
Speaker 1: made it a lot easier to build these markets. But actually,
Speaker 1: you know, I think that you know, that is starting
Speaker 1: to pay off for us as we know locally support
Speaker 1: and serve governments and industry in those different countries around
Speaker 1: the world.
Speaker 2: So, speaking of international I read recently that chanelso has
Speaker 2: got the first ever academic evaluation blockchain intelligence data by
Speaker 2: independent academic researchers some tu Delf Netherlands. As a mouthful
Speaker 2: you can tell us a bit about that, Yeah, sure.
Speaker 1: So you know, really, when you think of about the
Speaker 1: data and intelligence that chainalysis has, it's really hard for
Speaker 1: people to independently evaluate what is the quality And the
Speaker 1: best way to analyze the quality of the data is
Speaker 1: to have people who have access to the real wallets
Speaker 1: that people are interested in tracking and judge independently whether
Speaker 1: chain analysis had the real information about the wallets that
Speaker 1: then law enforcement had actually seized from those targets. And
Speaker 1: so this study essentially was a partnership between the Dutch
Speaker 1: police and the university to use information that the Dutch
Speaker 1: police had seized from criminal entities and test whether chain
Speaker 1: analysis had an accurate representation of those wallets. And they
Speaker 1: went to our competitors and they asked them for the data.
Speaker 1: And once the data started to look like they weren't
Speaker 1: going to be looked on favorably, one pulled out of
Speaker 1: the study and the other actually threatened to sue the police.
Speaker 1: But in the traditional sort of Dutch fashion, they actually
Speaker 1: sort of put that in the paper, and so you
Speaker 1: can go read that the Dutch police talked about how
Speaker 1: the one of the competitors of chainalysis threatened to sue
Speaker 1: them even if they released anonymous data showing the quality
Speaker 1: of that competitors information. So you can see that. You know,
Speaker 1: for us, when they came to us and said, like,
Speaker 1: we'd like to include you in the study, we take
Speaker 1: our responsibility as the market leader incredibly seriously and we said,
Speaker 1: for sure, you can do it, and we'd love to
Speaker 1: hear any feedback you have about the accuracy that we
Speaker 1: have and so what we saw in that instance was
Speaker 1: we had a very high coverage rate. So we detected
Speaker 1: ninety five percent on average of the wallets that they
Speaker 1: were sort of looking at. So that tells you the
Speaker 1: extent that we could actually go and detect it, and
Speaker 1: we had, you know, less than aner point not one
Speaker 1: percent or around nor point not one percent false positive
Speaker 1: rate on all of the addresses for actors that are
Speaker 1: intending to evade our detection and make our lives difficult.
Speaker 1: And so if you think about that, like that's the
Speaker 1: thing that has actually allowed chainnalysis evidence to be the
Speaker 1: only evidence that actually stands up in court that has
Speaker 1: the scientific method behind it, that has the rigor behind it.
Speaker 1: And so both for government agencies that need to be
Speaker 1: able to rely on scientific evidence where you can back
Speaker 1: up really the analysis that's happening about what's happening on
Speaker 1: the blockchain, and for businesses that want to make really
Speaker 1: hard decisions about the risk of their customers, you know,
Speaker 1: they come to chain analysis to have that golden standard
Speaker 1: versus people that aren't willing to have their data inspected
Speaker 1: and held up to scrutiny.
Speaker 2: I think I know the answer to this question, but
Speaker 2: with the tokenization market on the rise, people are tokenizing
Speaker 2: different assets, goal money market funds and so forth. Is
Speaker 2: it the same blockchain transactions that you're able to monitor
Speaker 2: or you have to do something different there?
Speaker 1: Yeah, I think it's roughly the same from our perspective.
Speaker 1: I would say though that you know, again, if you
Speaker 1: think about the risk that someone's willing to take on
Speaker 1: a tokenized security, and even like a tokenized equity, you're
Speaker 1: starting to get new forms of value transfer, new types
Speaker 1: of relationship between the issuer and those assets and maybe
Speaker 1: the custodian, and so you started to get like a
Speaker 1: more complex financial instrument than we've seen before in the blockchain, right,
Speaker 1: And what that means for us is that we help
Speaker 1: companies like Securitize think about how to monitor for all
Speaker 1: types of manipulation, all types of risk that's involved in
Speaker 1: those types of smart contracts. And that's something that we
Speaker 1: as chain ours think that that is the future. And
Speaker 1: those entities that are helping people tokenize those instruments and
Speaker 1: the people that stand behind those instruments are going to
Speaker 1: have a need for much greater risk management than even
Speaker 1: an asset like bitcoin or ethereum, where you don't have
Speaker 1: a counterparty on the other side. And so the moment
Speaker 1: that you start to have counterparties and the moment that
Speaker 1: these relationships become more complex, the more you need to
Speaker 1: actually understand the mechanics of what's happening on the blockchain.
Speaker 2: I did want to get your thoughts on DeFi because
Speaker 2: DeFi has had its struggles and its headwinds at its face.
Speaker 2: You know, I often say version one point zero of
Speaker 2: anything is not great. We've seen a lot of hacks
Speaker 2: and vulnerabilities. Are things getting better?
Speaker 1: Yeah? I think things are absolutely getting better. And I
Speaker 1: think that you know, I think when you think about
Speaker 1: the sort of evolution of you know, compound, are the
Speaker 1: curve even sort of balancer even though they recently were hacked.
Speaker 1: I mean, you know, the level of sophistication and the
Speaker 1: level of scrutiny on these protocols has improved them a
Speaker 1: lot since the early days. And I would say that
Speaker 1: there's two things that I think about that are really
Speaker 1: important for people to pay attention to. One is there
Speaker 1: are blue chip defied protocols. There are like really the
Speaker 1: top end of the market that have faced sort of
Speaker 1: very high levels of scrutiny that have had, you know,
Speaker 1: billions of dollars go through them. Those those types of
Speaker 1: places are vastly improved from really DeFi one point zero,
Speaker 1: which is like now a long time ago. But I
Speaker 1: think that, you know, one one thing is the technology
Speaker 1: getting better and more robust, and I think that that
Speaker 1: is getting a lot better. The other thing, though, is
Speaker 1: like the sophistication of the teams is also improving, and like,
Speaker 1: I love technology more than anyone, but you have to
Speaker 1: understand where technology meets humans. And actually these teams that
Speaker 1: are helping you manage and really create these protocols are
Speaker 1: now starting to have much more sophisticated mechanisms of pausing protocols,
Speaker 1: of intervening when necessary. And actually, you know, I think
Speaker 1: that you know, while the original vision of true DeFi
Speaker 1: of it being fully decentralized and fully every like code
Speaker 1: is law and all of that good stuff, like, there
Speaker 1: is like a place in the market for something that's
Speaker 1: a bit more hybrid, something that has level of control
Speaker 1: that is fully automated and executes permissionlessly, but actually that
Speaker 1: there is still some governance behind it, and there is
Speaker 1: an adaptability, and there is upgrades, and there is the
Speaker 1: ability to have teams intervene in worst case scenarios, and
Speaker 1: I think that we are still going to find our
Speaker 1: way in terms of our ability to capture the most
Speaker 1: value for the consumer from people who are able to
Speaker 1: both have the sort of programmability and the predictive nature
Speaker 1: of DeFi with some of the controls in place of
Speaker 1: the teams that can actually help adapt to crazy circumstances.
Speaker 2: Oh yeah, and then having Chaine Elsis as a resource
Speaker 2: to be able to you know, maybe developers and these
Speaker 2: folksho are working on things can get a better view
Speaker 2: of what's happening behind the scenes and they can build things.
Speaker 3: That are better.
Speaker 1: Yeah.
Speaker 3: I think it's when when on that.
Speaker 2: Front, I know you've got to go soon, So I
Speaker 2: didn't want to ask what's on your role map and
Speaker 2: we'll hit some wrap up questions.
Speaker 1: Yeah. Sure. So we are really busy at chain oursis
Speaker 1: thinking about really building you know, this risk platform that
Speaker 1: allows people to monitor for the anti money laundering risk
Speaker 1: that we're probably best known for the fraud prevention side
Speaker 1: on scams and really all of the security questions that
Speaker 1: trad FID tokenization happens, and really anyone in the industry
Speaker 1: who's moving money needs to be worried about, and we've
Speaker 1: we've built some interesting things and continuing to work on
Speaker 1: some things. On the security side. For example, we've built
Speaker 1: a model to detect whether your hot wallet is being
Speaker 1: compromised or not. We look at anomalous activity and try
Speaker 1: and help exchanges counter that type of risk. We've built
Speaker 1: products that help with the by bit hack scenario, and
Speaker 1: we're constantly responding on the security side to the latest
Speaker 1: threats that we are seeing happen on the blockchain. On
Speaker 1: the scam prevention side, we're continuing to expand on you know,
Speaker 1: everyone's favorite scam and you know, we're not quite in
Speaker 1: the romance scam space, but we're definitely we're definitely looking
Speaker 1: at every every type of scam type. And then I
Speaker 1: would tell you that, you know, on the compliance end
Speaker 1: of things, like we're really looking at much more automation,
Speaker 1: much more thinking about how do we build more flexibility
Speaker 1: into how people are monitoring for those types of risks
Speaker 1: and how do they how do they make sure that
Speaker 1: there is good decision making happening but you have all
Speaker 1: the information at your fingertips. We've done lots of good
Speaker 1: stuff on the investigation side. Over the past few months,
Speaker 1: and you know, we're really continuing to help law enforcement
Speaker 1: find the best ways to look at our data more
Speaker 1: holistically as well as you know, seize funds when they
Speaker 1: come across it on investigations using a new product that
Speaker 1: we're that we put in the market called wallet scam,
Speaker 1: which we're really excited about, has already helped seize you know,
Speaker 1: hundreds of millions of dollars in criminal proceeds. And so, yeah,
Speaker 1: really really excited about you know, the roadmap on both
Speaker 1: our public sector offerings and our private sector offerings.
Speaker 2: That's awesome and exciting, and it's good to hear that
Speaker 2: the good actors have tools like change alsis because the
Speaker 2: bad actors, you know, they're up to no good all
Speaker 2: the time.
Speaker 3: So it's a constant battle.
Speaker 1: Yeah, it's a constant game of catamouse. And now the
Speaker 1: MYSA are using AI, so we got to we've got
Speaker 1: to get better as as cats.
Speaker 2: Oh absolutely, all right, wrap up questions, because I know
Speaker 2: you got to go first. If you could create your
Speaker 2: own metaverse, would the theme be That's.
Speaker 1: A great question. I think that the theme for me
Speaker 1: is actually everyone would ride around my metaverse on a
Speaker 1: bicycle and so, you know, I'm a I'm a big cyclist,
Speaker 1: and I wish that we lived in the world with
Speaker 1: no cars and you know, everyone just moved around space
Speaker 1: and bicycles and so I actually, I would love to
Speaker 1: live in a metaverse where there were no cars and
Speaker 1: you know, only bicycles.
Speaker 3: Awesome rapid fire questions. Favorite food.
Speaker 1: Favorite food is going to be all Japanese food, and
Speaker 1: you know that could be anything from you know, sushi
Speaker 1: to ramen, to on to really koseki and everything else.
Speaker 3: I love Japanese food.
Speaker 2: And favorite musician or band.
Speaker 1: I'm gonna have to say, hi, am So, I'm actually
Speaker 1: h I'm actually engaged to the bass player of High
Speaker 1: am So. She's uh, I've been I've been on I've
Speaker 1: been on tour with them this year and it's been
Speaker 1: you know, yeah.
Speaker 3: She she listens.
Speaker 1: A favorite movie, Usual Suspects.
Speaker 3: Favorite book.
Speaker 1: It's a hard question. I think that uh, you know,
Speaker 1: in a in a business context, it's really dense. But
Speaker 1: High Output Management by Andy Grove is an incredible book
Speaker 1: and something that I think of daily.
Speaker 2: I have to check that one out. We're not working
Speaker 2: at chanalysis, what are you doing for fun?
Speaker 1: I'm running by schools in very weird places, and you'll
Speaker 1: catch me cheffing every once.
Speaker 3: In a while. Very cool, Jonathan.
Speaker 2: We're going to have to do a round two, maybe
Speaker 2: in twenty twenty six, as you continue to roll out
Speaker 2: some great products. But thank you so much for joining me.
Speaker 1: No, thanks so much, Sanning, really appreciate it.