The challenge of product analytics in web3

As a product manager of DeFi product that has entered a growth stage, I started asking a lot of such questions recently while aiming to find out where should we scale next:

How can we know if a user is a newbie or an expert? How can we find behavioral patterns to understand our users and improve our product? How can we customize our product UI to different cohorts of users?***

When I started trying to put our data together, a lot of challenges came up. When you’re building a Web3 product, the name of the main challenge is - Decentralization.

Decentralization is beautiful, but it also fragments user identities across multiple wallets and chains, making it difficult to get an accurate picture of users' profiles and segments. When it comes to data in Web3, it's relatively easy to collect and analyze everything about transactions, volumes, tokens, and wallets, thanks to the public nature of on-chain transactional data. But behind every wallet address and transaction stands a user. When you buy an NFT on Opensea or swap tokens on Uniswap, there's a lot of context leading to this action. And it's extremely hard to link on-chain behavior to this context.

The truth is, not all engagement data comes from the blockchain. Analyzing only on-chain data is not enough for making decisions and building a complete picture of users. They still use Web2 interfaces in between interactions with the blockchain, so missing all the stuff they do on Web2 is like being blind.

Although Web3 users don’t have to sign-up or complete a KYC, they still share a story with the dApps when they connect their wallets. It’s not a demographic story like in Web2, but a behavioral story: the story of their wallet.

Web2 analytics tools do not work as well with Web3 products, and they are not secure and not private enough. I believe that new, hybrid data analytics solutions will be required to unify data fragmented across Web3, trace it back to Web2, provide an accurate picture of users' profiles, and segment them properly — all while preserving their privacy.

I'm really excited to see what these new tools will look like and what they will offer to Web3 product teams striving for data-driven growth. What are your thoughts? Please, share.