In the digital age, information itself is a currency. ‘Knowledge is power’, as they say, and this phrase rings true for Decentralized Finance (DeFi).
With the cryptocurrency market still being quite inefficient, new information is not always immediately incorporated into market prices. Providing you are quick enough, and know where and what to look for, anyone can capitalize on information that has been overlooked or gone unnoticed to make big bucks.
You don’t need deep pockets to take advantage of new information arising in the area of DeFi, as a lot of it is out there and available for free. But the sheer amount of data being generated by on-chain activities is not always easy to digest. With the rapid growth of DeFi in the past couple of years, breaking down the data and translating this into actionable alpha is becoming ever easier.
In this guide, we’ll explain how to use 8 of the top DeFi tools to ensure you are on top of your game, the market and up to date with the latest trends.
With enough knowledge of these tools and how to use them, as well as some practical experience, any investor can up their game, become more agile and efficient in finding potentially profitable opportunities while also sharpening their edge.
1. Nansen
The first tool on our list is a full suite of on-chain intelligence and one of the most popular platforms for DeFi analysts and traders: Nansen. The free plan offers limited features, but the paid plans are more comprehensive, providing actionable data and rich on-chain insights across 10 different chains (including Ethereum, Polygon, Avalanche and others).
One benefit of using Nansen is that they label addresses, designating them into different categories such as smart money, funds or whales, making it simpler to copy trade the big guys.
But what are some other things you should look for? Before diving in and buying a subscription, it’s worth checking out the project’s YouTube series known as Office Hours for some ideas and inspiration. The Office Hours series demonstrates the various ways you can use Nansen (as well as how people have been actually using the platform to find alpha) so you can analyze the markets like a pro and uncover hidden gems.
Aside from Office Hours, we’d also recommend subscribing to their fortnightly newsletter, The Compass, which highlights new features and helps you to become more familiar with the platform.
Hot tokens, hot contracts, hot NFTs and a market news feed are all available for free. If you want to go further and gain access to some of the more advanced features (such as DeFi Paradise, smart alerts, smart money flows, and token god mode), then you’ll have to purchase one of the subscription plans.
Even if you don’t have the budget for a paid plan, the features offered for free are useful in taking the pulse of the market. It’s possible to monitor the most active DeFi contracts, tokens, or NFTs over the past 24 hours, as well as a curated news feed, to stay on top of the latest developments.
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2. Parsec Finance
Parsec Finance can be described as the cryptocurrency equivalent of the Bloomberg Terminal, providing the most important charts and data for each chain and protocol, as well as a portfolio tracker. The default layout shows trending assets, trades in real time, trades above $1000, a news feed, liquidation prices, a trollbox, and more.
One unique aspect of this platform is that you can customize your layout so you can combine charts and information for the tokens or sectors you’re focused on. If you go to the elements menu, you can see what else you can add to your dashboard, covering market data such as trade size charts, correlations, liquidations, token holders, and address token flows.
The only downside is that Parsec Finance is not free. You can sign up for a free trial, but once it expires, you’ll need to purchase a subscription. As well as creating your own layouts to help you track the market, paid subscribers can explore other layouts, get customized alerts and download the data provided in CSV format.
3. DeFiLlama
DefiLlama provides a comprehensive overview of the entire DeFi sector, tracking over 1,900 protocols across 145 different chains. All the data is open source and users can download data to do further analysis.
You can easily rank the top projects on a particular chain or in a certain sub-sector of DeFi, allowing you to keep up to date with market trends and dig deep into protocols.
Some of the standout features include:
- The trending contracts tool, which shows you the smart contracts that are most popular over very small timeframes (such as 60 minutes) for Ethereum and Polygon.
- Stablecoin yields so you can earn the juiciest return on your stables. There’s also a more generic yields section for investors with a higher risk appetite that includes all token pools (both stable and non-stable).
- Liquidation levels for a variety of assets, which can help you to assess the risk of downward momentum, where large liquidations often precipitate large swings to the downside in a token’s price.
- Discover new DeFi protocols before the crowd does with the recently listed protocols tool. Use this tool to monitor newly launched projects and form a foundation for your own further research.
- DeFiLlama also maintains a list of tokenless protocols that may do an airdrop in the future.
For more tips on getting the best out of DeFiLlama, you can also join their Discord server and follow their DeFi Updates Telegram channel.
4. chainEDGE
As a relatively new platform launched by On Chain Wizard, chainEDGE is currently in public beta and covers smart money flows across different chains. Smart money flows are defined as the top 0.10% of traders, which are updated with live data as these addresses generate more profit. You can filter the smart money flows to see which tokens are being bought by the most profitable addresses.
For example, we see below that ETH, aUSDC and wstETH saw the largest inflows over the past 30 days on Ethereum. The platform also allows you to filter the flows by the 1-day and 7-day change. Filters can be applied to a specific chain too so you can see what smart money is doing in a particular ecosystem, including Ethereum, BSC, Arbitrum, Polygon, Avalanche, Optimism, and Fantom.
By selecting a certain token, we can also see the individual wallets that are accumulating, and rank them by the largest flows in the past day, 7 days and 30 days. For example, the address 0xdbf5e9c5206d0db70a90108bf936da60221dc080 is labeled as a ‘sharp trader’ and has accumulated $5.2 million worth of APE in the past 30 days.
We can then dig deeper into this particular address to see what other tokens this trader is bullish on. In this case, the trader has also accumulated large positions in Wrapped BTC (WBTC), USDC, Hashflow (HFT) and Lido (LDO). One advantage of chainEDGE is that it is a lot easier to track historical token flows in comparison to some other platforms.
chainEDGE is one platform to keep an eye on in the coming month, as more functionality will be added. Eventually, you’ll be able to look up any addresses and get a similar dashboard to the one shown above. Other features in the pipeline include wallet alerts, analytics on positioning in perpetual swaps and time-based labels to see how long an address typically holds an investment. With no need to sign up or log in with an email, you can start using this platform right away!
5. Dune Analytics
We can find tons of alpha on Dune Analytics and if you know SQL, you can write your own queries to do some research. Even if you’re not that familiar with SQL, there’s a burgeoning community of wizards creating awesome dashboards, providing deep insights into tokens, DeFi protocols.
We’ve covered Dune before, so if you want to learn more about how to extract value from this platform, check out the article below.
As we’ve mentioned before in our blog, one way to find alpha is to look at the new and trending dashboards, which ensures you’ll never miss the next big thing. We’d also recommend following this Twitter list of Dune wizards to be well informed of new dashboards and what’s making waves in Dune’s community.
Dune also puts in a lot of effort to educate budding analysts, through initiatives such as the 12 Days of Dune, so check out their YouTube channel to start analyzing blockchain data like a wizard.
6. Flipside Crypto
Flipside Crypto is an interesting platform that, like Dune allows you to use SQL to extract insights from different blockchains, but it also has an earn-to-learn feature where you can get paid for completing MetricsDAO bounties.
As well as looking for the most popular or most recent dashboards to source some inspiration for your trading ideas, you can also create your own queries or fork existing ones to get the information you need.
One of the biggest advantages of Flipside Crypto is that it is entirely free and they also have a YouTube channel to educate users on how to analyze different areas of DeFi, so check that out if you want to bolster your knowledge.
7. Candlestick
Candlestick is another on-chain analytics project that’s in beta but provides a wealth of data on the largest gainers, biggest losers and tokens with the highest trading volume. Like Nansen, most of the alpha is only accessible with a paid plan, which unlocks smart money mode, more custom alerts, live large orders, early access to new features as well as more charts.
For insights into how Candlestick can help you formulate highly profitable trading strategies, check out their Medium blog, which provides tips for crypto investors and often explores how to find a trading edge using the platform.
8. DeFi Safety
Finding alpha is one area of focus for crypto investors, but another area (and just as important) is security. For any smart contract you frequently interact with, it’s essential to be aware of the risks and avoid any protocols with sub-standard security. DeFi Safety helps you to do exactly that, which scores projects based on how closely they follow best practices.
The Process Quality Reviews (PQRs) are available for free, which generates a score for different smart contract applications. You can view the methodology used to generate the scores here. The website allows you to filter by category or chain, so if you’re interested in AMMs for example, you can see the projects that are rated the most secure (as shown below).
With dozens of exploits and hacks in the past year totalling more than $3 billion, DeFi Safety can help you to insulate yourself from any potential future exploits. Filter out the least secure protocols and reduce your exposure to these projects, while also keeping the majority of your investments in protocols that are deemed to be the most secure.
Using these 8 tools at your disposal, you should now have a better understanding of how to process and take advantage of on-chain information to make informed investment decisions.
What are your favorite DeFi tools and why? Are there any that you frequently use that we’ve missed? Let us know in the comments below!