Extract from an article by Rachel Wolfson
Tracing Criminal Activity Across The Bitcoin Blockchain
Interestingly enough, many of the digital currencies examined in the study conducted by Elliptic and the Center on Sanctions and Illicit Finance could be linked back to the perpetrators. For example, it was found that 95% of all the laundered coins tracked came from nine dark-web marketplaces, including Silk Road, Silk Road 2.0, Agora and AlphaBay.
By examining blockchain activity closely, companies focused on combating cryptocurrency related crimes can pinpoint accounts that appear to belong to the same Bitcoin wallet and are controlled by the same entity. This process is known as “clustering.”
According to Kyrylo Chykhradze, head of Bitfury’s Crystal, a software solution designed to track activity on the Bitcoin and Bitcoin Cash Blockchains, Crystal collects information about all the transactions recorded to the blockchain to determine which addresses belong to the same entity to identify criminal activities.
“Using a unique clustering algorithm, Crystal can determine which bitcoin address belongs to certain users. The solution also utilizes web crawlers and manual registration on various services to name the entities and assign them a risk score based on the type of service. Crystal, which has assisted financial institutions and law enforcement in identifying and tracing criminal activities such as extortion and money-laundering, assigns a risk score based on every bitcoin address that has ever appeared in the blockchain.”
As financial institutions and law enforcement begin to use tools such as Crystal, organizations can start to easily detect illegal activities happening across blockchain networks.
- Legal Education Webcast: Blockchain and eDiscovery (Part Two): Investigations from Bitcoin to Blockchain
- eDiscovery and the Global Legal Blockchain Consortium
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