With the exponential growth of the decentralized finance (DeFi) market in 2020, companies worldwide are placing crypto integration at the forefront of their business development strategies. Unfortunately, blockchain-based protocols are highly technical and difficult to understand, especially when there’s a need to pull and analyze chain data. This leads to unnecessary bottlenecks that impede the mass adoption of blockchain technology and digital assets.
Covalent aims to provide companies with access to the internet’s richest blockchain data set. In doing so, businesses will be able to leverage blockchain data to extract actionable insights required for day-to-day operations and appropriate decision making.
This article will explore the growing need for blockchain data analytics, while focusing on how Covalent is planning to bridge the gap between traditional finance and DeFi projects.
An Overview of the Merge Between Traditional and Decentralized Finance
Over $12 billion have been locked in DeFi contracts so far, a value that’s bound to increase over the next couple of years. Based on this, it only makes sense that traditional finance companies are interested in capturing a slice of the blockchain cake.
There’s a paradigm shift coming in the financial sector. It’s been brewing for a while, but it has become quite clear now. This shift is more noticeable than ever, especially since PayPal has announced support for cryptocurrencies. For those who haven’t heard, PayPal’s multi-million user base will now be able to purchase and spend Bitcoin, Litecoin, Ethereum, and Bitcoin Cash, directly from their digital wallets. This move will certainly aid worldwide crypto adoption while encouraging other companies to support crypto and integrate blockchain technology.
Slowly but surely, the flood gates to mass adoption will open. Companies that decide to bite the bullet and become crypto-friendly will likely start their journey by accepting digital currency payments. To do this, they’ll need to partner up with wallet providers for asset storage. Soon enough, these businesses will consider moving their operations onto the blockchain. By this point, the first challenges will be visible - companies need a viable solution that’s capable of exploring and indexing blockchain data. Without it, blockchain integration becomes cumbersome and a waste of corporate resources. This creates a paradox - how is it that a technical solution that promises low costs and lightning-quick transactions fails to do the very things that it was designed to take care of?
In response to this unmet demand, Covalent has created a highly-sophisticated API that’s ready to help companies keep a close eye on their wallet balances, open positions, and historical transaction activity. Furthermore, Covalent was designed to make retrieving rich blockchain data easy for anyone, regardless of their experience and understanding of blockchain technology. While the service was mainly crafted to index the Ethereum blockchain, it’s perfectly capable of pulling data from any other protocol.
Based on these aspects, it is quite likely that over the next few years, Covalent will expand from serving crypto-based projects exclusively to helping out firms across the fintech landscape. Companies like Plaid and Finicity have already shown that there is an untapped demand for financial data analytics. Covalent will continue to fulfill this demand as more and more fintech projects migrate to blockchain technology.
How Covalent Compares to Data Services for Traditional Finance
Plaid represents a renowned API that helps connect financial institutions to apps. Customers can leverage Plaid to securely access well-structured financial data throughout the world by using a single API. Finicity is yet another open banking platform that helps app developers connect user financial data to their services. Both of these companies promise easy-to-use APIs, yet both lack support for blockchain protocols and cryptocurrencies.
Plaid was recently acquired by Visa, whereas Finicity was purchased by MasterCard. Since both services help developers share financial and banking-related information, this leads to more streamlined processes that reduce friction within the market. As expected, platforms like these are well-suited for large-scale payment facilitators like Visa and MasterCard. Reports indicate that Plaid was bought for $5.3 billion, whereas MasterCard acquired Finicity for $800 million. Plaid’s and Finicity’s sheer valuation prepositions are clear indicators of the absolute necessity for categorized financial data.
However, it’s not only financial companies that require well-structured data APIs. For instance, Segment is a customer data startup that promises efficient data pulling from multiple sources, without requiring users to invest time and resources into developing code. Thanks to its top-notch communication embedding functionality, Segment will be acquired by Twilio for $3-$4 billion.
These recent trends demonstrate a clear appetite for customer data pipelines. Analysts believe that the value of the blockchain market will continue growing exponentially, so this creates an even higher demand for blockchain data structuring. As companies adopt cryptocurrencies and blockchain technology, the inherent need for data APIs increases.
Due to its revolutionary services and high degree of versatility, Covalent is bound to serve many of these companies as they shift from traditional protocols to next-gen solutions. At this time, nothing compares to Covalent’s data capturing capabilities, thereby highlighting a considerable contrast between Covalent and wannabe competitors.
Inside Covalent’s Data Analytics Solution
Covalent does not only mean to disrupt the data market, but rather to bring forth incremental innovation. As such, the company features robust proprietary software that can easily explore and index blockchain data in a structured manner.
In exchange for their business, companies gain access to rich blockchain data sets that can be seamlessly integrated into current workflows. By leveraging on-chain data, Covalent users can upgrade their technical infrastructure and service catalog while removing barriers that stand in the way of blockchain integration.
Bottom line
To wrap things up, the blockchain revolution and the massive growth of the DeFi market are signaling a strong need for structured blockchain data extractions. Companies like Plaid and Finicity have already unveiled the sheer demand for customer data pipelines. In response, Covalent is here to provide a stress-free solution to blockchain data indexing. By contracting its services, DeFi and other blockchain-based projects gain access to real-time structured data that’s pulled from multiple blockchain protocols. Covalent’s value proposition is now crystal clear - as it evolves, the company will spearhead the effort of bringing blockchain data transparency and visibility to the mainstream.
This is beyond my expectation for Covalent! But I'm excited for more it can offer moving forward! Since it's latest partnership with @polkastarter really blown me as they further enhance the security of their DEX! The data will validate wallets to ensure they are not used for illegal purposes and enhance their anti-scam features.