Frontier Blockchain Analytics: Enterprise Solutions for Federal Missions
Highlights
Introduction
Decentralized finance (“DeFi”) is maturing as a sector. Stablecoins settled over $10T worth of value over the last few years. Global financial firms – including Fidelity, BlackRock, PayPal, and Charles Schwab – are entering the blockchain and digital asset market in earnest.
For federal agencies with financial oversight and enforcement responsibilities, the explosive adoption of digital assets by businesses, investors, and consumers has significantly disrupted operations. Financial examinations, tax investigations, and fraud litigation have grown dramatically more complex, and crypto assets are triggering spikes in consumer complaints and caseloads. For example, the Federal Trade Commission reported that one out of every four dollars lost to fraud in 2021 was due to cryptocurrency scams, and in 2022 the Internal Revenue Service doubled its crypto seizures year over year.?
Agencies that lead economic strategy for the U.S. are similarly challenged to make informed decisions related to the digital asset economy for the benefit of our national interest. Under a 2022 Executive Order , for example, more than 17 agencies had to come together to explore the potential and risks associated with establishing a U.S. Central Bank Digital Currency (CBDC) to accelerate and lower the cost of cross-border payments.?
As economic value is increasingly digitized and tokenized, federal agencies must rapidly mature their capabilities to trace digital assets so they can combat illicit activities and support licit use cases. Agencies need faster access to onchain blockchain data and analytical tools capable of delivering insights at mission speed – without compromising federal security requirements.
Moving beyond Bitcoin and Ethereum?
Since the 2009 introduction of Bitcoin as a peer-to-peer payment network, hundreds of alternate blockchains have emerged. Each features a technology design and data structure optimized for particular use cases. Ethereum, for example, pushed blockchain beyond simple financial payments and into smart contracts and decentralized apps (dApps).?
Emerging digital asset uses go beyond payments and basic smart contracts, including:
Solana and other newer blockchains promise greater versatility, higher throughput, and faster, cheaper transactions. The design trade-offs engineered into frontier blockchains provide an enticing incentive for dApp developers. According to Electric Capital , Solana boasted a developer adoption growth rate of 83% in 2022 and is rapidly gaining developer mind-share, reflected in Solana’s number of active developers surpassing 2000.?Clearly, frontier blockchains are where developers, investors, and consumers are moving – and fast. As new blockchain technologies emerge, time to adoption is shrinking dramatically. The market value ($50B) Bitcoin achieved in eight years was matched by Ethereum in only three – and by Solana in just over a year.
Put simply, federal agencies need new tools and methods to achieve a level of agility that matches the market adoption rate.
It’s time for enterprise solutions
As agencies have evolved their blockchain analytics capabilities, most have pieced together analytical toolsets by licensing multiple solutions with niche features. Typically developed by start-up firms, these tools often overlap. The result: redundancy and steep learning curves for agency analysts who find themselves swiveling between tools.
Furthermore, because the majority of agencies’ current analytical solutions were designed for Bitcoin or Ethereum, and other early blockchains, they cannot parse transactional histories or trace activity on newer networks. To adapt with the market, agencies must identify and adopt a new class of tools built to analyze frontier blockchain data.?
Rather than acquiring yet another one-off tool, federal agencies need a unified solution – one capable of meeting the surging demand for blockchain analytics today and fostering their capacity to adapt to future market shifts.
What agencies need is an enterprise solution backed by enterprise-grade services – with partners capable of helping them mature their skills and processes.
Agencies need frontier blockchain analytics at scale?
Since the launch of Solana’s public blockchain in 2020, agencies have seen increases in exploits and potential illicit activity on the platform. Alongside this increase in enforcement caseloads, agency analysts are fielding new demands for blockchain data and insights from other non-enforcement divisions across the enterprise, such as policy and training units. The impact of digital assets extends beyond enforcement to other federal agency domains, including:
In response, federal agencies have expanded their digital asset teams, units, and offices. For example, in 2022 the Securities and Exchange Commission doubled the size of its Crypto Assets and Cyber Unit and the Department of Justice established the National Cryptocurrency Enforcement Team.
With limited licenses to one-off software solutions, however, even expanded agency teams continue to struggle with mounting backlogs.
Federal missions need digital asset data in minutes, not months?
Currently, most agencies rely on third-party data vendors to extract, clean, and deliver blockchain data. Notoriously protracted procurement cycles often delay acquisition, and the typical process for obtaining blockchain data takes anywhere from a few weeks to a few months.?
Without question, the practice of buying blockchain data is too slow to meet current demand – let alone the anticipated year-over-year increase in caseloads.
With the advent of APIs and maturing infrastructure, agencies have gained more programmatic access to these datasets, but cost and control remain persistent challenges. Worse, volatility in what is still an emerging market means that a data vendor or API provider could cease operations, leaving the agency without a supplier.?
Complex cases require aggregated data for holistic insights?
As analytical backlogs have grown, they have also increased in complexity. As a result, agency teams face increasingly complex analytical questions. For example, to trace the flow of funds and provide attribution to addresses, onchain data must be integrated with data from complementary or corroborating sources, including
Currently, no industry standards exist for digital asset data. Across the many databases housed on- and offchain, data fields and nomenclature vary. Agency analysts need tools capable of aggregating these disparate data structures and mining that aggregated data for comprehensive insights.?
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Unfortunately, many vendors that provide agencies’ existing toolsets lack the technical depth, resources, and advanced methods required to blend data in this way.?
Delivering digital asset data and insights at scale
Just as the entry of traditional financial institutions into the digital asset space signaled a new level of market maturity, the arrival of global solution providers signals a commensurate level of maturity in blockchain analytics technologies.
Agencies now have access to a new, enterprise-grade solution developed by AFS, in collaboration with Google Cloud, to deliver digital asset data in near real time and at scale. The solution enables agencies to establish a direct connection to the blockchain of interest and – within a single tool – combine and automate key data processes:
With enterprise-quality tooling and services – including cloud engineering, data engineering, and data science – agencies can accelerate and advance their blockchain analytics pipelines without compromising security.?
Access data faster with network nodes?
Google Cloud’s Blockchain Node Engine solution enables agencies to launch and deploy dedicated blockchain nodes at scale. By establishing and running a blockchain node, agencies can extract transactional data in near real time – reducing refresh rates from months to minutes.
With direct access to onchain data, agencies eliminate black-box solutions, gain data lineage transparency, and can integrate their own insights much faster.?This enables agencies to conduct near real-time monitoring and dramatically accelerate retrospective analysis and event reconstruction.?
For example, third-party data vendors may augment onchain data with open-source intelligence such as criminal reports, indictments, or reports of hacked wallets. But data attribution may be delayed by weeks or months.?Alternatively, if an agency leverages shared-node services, performance and reliability may be compromised by the other parties on the node. In contrast, a dedicated node offers direct access to near real-time data, allowing agencies to add attributions at the speed of their own investigations.
In addition, using dedicated nodes streamlines the chain of custody and eliminates black-box data algorithms.
Maintain data control and security compliance
The peer-to-peer architecture underlying blockchain networks presents a challenge for achieving FedRAMP security. By default, public blockchain nodes are designed to connect indiscriminately to nodes in any geographic region.
Before deploying for federal use, network nodes must be adequately hardened, with dedicated firewalls and other security systems. Equally important, any tool that connects to a node must be tailored with custom security settings and other appropriate safeguards.
With a proven enterprise integrator like AFS , agencies can specify and implement cloud architecture requirements to comply with federal standards and systems, maintaining full control over the entire lifecycle of blockchain data.?
By design, cloud infrastructure is optimized for transparency. Agency teams gain full visibility into their data lineage – eliminating the use of opaque third-party APIs or proprietary black-box algorithms, while also streamlining the agency’s ability to pull onchain data using their dedicated node.?
This level of transparency and control serves enforcement agencies in particular, whose insights must meet certain standards to be used in litigation. To serve as evidence, agencies should have visibility into the underlying node infrastructure as well as the data pipeline. Analysts must be able to verify the treatment of data after extraction and any attributions or other data added to an onchain dataset.
By providing full visibility into analytical algorithms and data lineage, enterprise solutions can meet evidentiary standards. This visibility also empowers agency teams to support rule-making and policy offices, whose leaders need to understand digital asset trends, key industry entities, and potential impacts of policy decisions on the industry and consumers.
Automate and accelerate the analytical pipeline?
As development and transactional activity expands to additional frontier blockchains, federal missions must be capable of analyzing more data in shorter time periods.?Using artificial intelligence (AI) tools, analysis can be accelerated by applying pattern recognition to:?
By delivering fast, efficient, and higher quality insights, automated blockchain analytics can position agencies to get ahead – and stay ahead – of continued growth in digital asset use and misuse.
Foster organizational maturity?to Keep pace with technology and industry trends?
Enterprise partners bring technical depth, resources, and process maturity practices. Enterprise cloud systems can be engineered to store all types of blockchain data, regardless of platform. And solutions partners can help agencies fully define and standardize novel use cases that gain mainstream status, with rapid integration into agency-wide dashboards.?
The right enterprise solution goes beyond data procurement and software licensing to include change management, organizational strategy, and knowledge transfer.
As agency teams move onchain, analysts, technologists, and leaders can gain experience and develop skills in track-and-trace operations, data transformation and integration, and data visualization. With enterprise-scale blockchain analytics, agencies can position their analytical teams to adapt as developers and transactions move to emerging networks.?
Conclusion
As digital asset use cases continue to multiply in number, industry diversity, and complexity, the pace of development and adoption will only increase.?Federal agencies need faster, better data and more powerful analytical systems.
Fragmented data and tools are no longer enough. Agencies must think beyond the one-off solutions and bring in partners to help develop strategic plans, core skills, and mature processes in digital asset analytics. Only enterprise-grade solutions can meet the full scope of federal government needs at scale.?
The technology and consulting institutions make it possible for agency leaders to leverage the full scope of support available to protect the American people, reinforce economic security and competitiveness, and foster responsible financial innovation.
Authors
Software Engineer at Accenture Federal Services: Ready to Elevate the Tech Landscape
5 个月Liam, thank you for sharing your valuable insights into the cryptocurrency space. I agree that third-party data collection can often be inconsistent, and transitioning to Google Cloud is an excellent step towards ensuring clean and accurate data for federal agencies. These agencies urgently need reliable information to protect consumers. While Solana is beneficial, as you mentioned, there are other alternatives that could better assist the government. Moreover, any discussion on Central Bank Digital Currencies (CBDCs) must also address the issue of algorithmic stable coins, especially in light of the Terra and Luna crash. It's imperative that we regulate cryptocurrencies and improve data accessibility, ensuring that everyone feels secure as our new financial system emerges.