The Project that Revolutionize Central Banks: Insight or Control?

Introduction

Decentralized finance (DeFi) is a rapidly growing sector of the cryptocurrency industry, with new projects and platforms emerging every day. However, the lack of reliable data and analytics has made it difficult for regulators and policymakers to fully understand the implications of DeFi on the financial system.

That’s where Project Atlas comes in. In this blog post, we will explore the key elements of the report “Mapping the world of DeFi” by Project Atlas (a BIS project), which provides a data platform that sheds light on the macroeconomic relevance of cryptoasset markets and DeFi.

What Project Atlas is?

Project Atlas is a collaborative initiative within the Eurosystem, involving the Deutsche Bundesbank and De Nederlandsche Bank, aimed at creating a data platform that provides insights into the macroeconomic relevance of cryptoasset markets and decentralized finance (DeFi). The project focuses on addressing the challenges associated with gathering reliable and granular data on crypto and DeFi markets, which are often opaque and operate outside the regulatory remit.

Project Atlas consists of a data platform, data ingestion, processing, and visualizations in dashboards. The platform is designed to provide a user-friendly tool that yields intuitive insights, allowing central banks to assess the significance of crypto and DeFi markets and enabling policymakers to make better-informed decisions. By leveraging advanced analytics and visualization techniques, Project Atlas aims to empower better predictive modeling for assessing systemic risks, thereby enhancing the safety and soundness of the financial system.

In summary, Project Atlas is a pioneering effort to address the challenges of mapping the world of decentralized finance by providing tailored and reliable data on crypto markets, supporting structural analysis, and offering a user-friendly tool for policymakers and analysts.

The need for tailored and reliable data on crypto markets

The motivation for Project Atlas stems from the need for tailored and reliable data on crypto markets, particularly in the context of DeFi. The report emphasizes that reliable and granular data on crypto and DeFi markets are difficult to obtain, as these markets are often opaque and operate outside the regulatory remit. This lack of reliable data poses challenges for regulators and policymakers in understanding the macroeconomic relevance of cryptoasset markets and the implications of DeFi on the financial system.

Furthermore, the report highlights the importance of gaining first-hand knowledge of crypto and DeFi, as these markets present both risks and opportunities to the financial system. The motivation for Project Atlas is to address these challenges by providing a starting point for solving the data-related challenges associated with crypto and DeFi markets, ultimately empowering central banks and policymakers to make better-informed decisions ,[object Object],.

Architecture of the data platform

Project Atlas’s platform consists of data ingestion, processing, analytics environment, and dashboards. The platform, implemented as a cloud sandbox, is designed to provide a scalable data storage and processing infrastructure that can handle the velocity and variety of protocols and data sources within crypto and DeFi markets. It allows users to access the outputs in an analytics environment.

The main applications of Project Atlas’s platform are:

1. to prepare statistics from raw data for the Atlas dashboards
2. to host structured granular data for users to perform their own analyses.

The dashboards provide a user-friendly tool that yields intuitive insights, allowing central banks to assess the significance of crypto and DeFi markets. It allow users to visualize on-chain transactions, exchange-based cross-border flows, and on-chain and off-chain comparisons.

The platform also supports analytics and visualization techniques that empower better predictive modeling for assessing systemic risks, thereby enhancing the safety and soundness of the financial system. The platform is designed to be expandable to new data sources and analytical methods, allowing for the incorporation of further data sources in the future.

Project Atlas’s platform works by providing a scalable data storage and processing infrastructure that supports analytics and visualization techniques.

Data sources and first proof of concept

Project Atlas aims to collect granular and aggregate data relevant to central banks’ mandates from public and proprietary sources. The platform is designed to ingest and transform on- and off-chain data into a data lake hosted in a cloud sandbox and it is configured to support the loading of data from any source in their native data formats.

The data sources for Project Atlas include on-chain data from public blockchains, such as Bitcoin and Ethereum, and off-chain data from centralized exchanges, decentralized exchanges, and other sources. Moreover, it integrates diverse data sources, which are enhanced and fused together, enabling adaptable data analysis.

The data are structured in layers in a medallion architecture:

• The bronze layer ingests the raw data and is equivalent to a landing zone for incoming data
• The silver layer includes transformed data that are formatted, cleaned, and normalized
• The gold layer includes granular and aggregated data in line with the data model specifications that are ready to use for analysts and researchers and serve the dashboards.

Project Atlas also offers a tool to vet data and calculate statistics based on granular data, which can help inform regulatory initiatives. The platform is designed to provide a user-friendly tool that yields intuitive insights, allowing central banks to assess the significance of crypto and DeFi markets and enabling policymakers to make better-informed decisions.

The Project Atlas dashboards

Project Atlas’s dashboards are designed to visualize the results of data aggregation and analysis that are of interest to policymakers and central bank analysts. The dashboards showcase insights derived from the processed and aggregated data, providing a user-friendly interface for users to explore and understand the dynamics of crypto and DeFi markets.

The dashboards leverage modern single-page application web frameworks, such as React, and versatile data visualization libraries like D3.js. These technologies enable the creation of interactive and dynamic visualizations that allow users to explore different aspects of the data, such as on-chain transactions, exchange-based cross-border flows, and on-chain and off-chain comparisons.

Furthermore, the dashboards are designed to provide near-real-time visualizations by integrating with data sources, fetching and processing the data to generate visualizations. This capability allows users to stay informed about the latest developments in crypto and DeFi markets and make timely decisions based on the insights provided by the dashboards.

Next steps

The next steps for Project Atlas involve expanding its capabilities and incorporating feedback from the central banking community to further enhance its utility for regulators and policymakers. Some of the key next steps outlined in the report include:

1. Incorporating Further Data Sources: Project Atlas aims to prioritize the incorporation of additional data sources in the next phase, including extracting and analyzing data from a blockchain node in the Ethereum network as DeFi markets expand. This expansion of data sources will enhance the platform’s analytical capabilities and provide a more comprehensive view of crypto and DeFi markets.
2. Seeking Feedback from the Central Banking Community: The project team plans to seek feedback from the central banking community on which statistics would help them fulfill their mandates. This feedback will inform the development of additional features and visualizations, ensuring that the platform meets the specific needs of regulators and policymakers.
3. Making the Data Platform and Dashboards Available to Test Users: Project Atlas intends to make the data platform and dashboards available to test users in order to gather feedback on functionality and data needs. This user feedback will be instrumental in refining the platform and ensuring that it effectively supports the analytical and decision-making requirements of central banks and regulators.
4. Building a Comprehensive Cryptoasset Analytics Environment: Atlas offers a starting point for building a comprehensive cryptoasset analytics environment for regulators and the central banking community, which is expandable to new data sources and analytical methods. This initiative aims to provide a robust and adaptable platform for analyzing and understanding crypto and DeFi markets.

Conclusion

In conclusion, the report “Mapping the world of DeFi” by Project Atlas provides valuable insights into the challenges of gathering and analyzing data in the DeFi ecosystem. The lack of reliable data and analytics is a major concern for regulators, and Project Atlas aims to provide a data platform that sheds light on the macroeconomic relevance of cryptoasset markets and DeFi.

The report highlights the importance of gaining first-hand knowledge of crypto and DeFi and the risks and opportunities they present to the financial system. The Project Atlas dashboards provide a user-friendly tool that yields intuitive insights and allows central banks to assess the significance of crypto and DeFi markets.

Overall, the report provides a valuable resource for anyone interested in understanding the implications of DeFi on the financial system.