blockchain analysis
{{Short description|Process of inspecting cryptographic blockchains}}
Blockchain analysis is the process of inspecting, identifying, clustering, modeling and visually representing data on a cryptographic distributed-ledger known as a blockchain.{{cite book |last1=Meiklejohn |first1=Sarah |last2=Pomarole |first2=Marjori |last3=Jordan |first3=Grant |last4=Levchenko |first4=Kirill |last5=McCoy |first5=Damon |last6=Voelker |first6=Geoffrey M. |last7=Savage |first7=Stefan |title=Proceedings of the 2013 conference on Internet measurement conference |chapter=A fistful of bitcoins |date=23 October 2013 |chapter-url=https://dl.acm.org/doi/10.1145/2504730.2504747 |series=Imc '13 |pages=127–140 |doi=10.1145/2504730.2504747 |isbn=9781450319539 |s2cid=2224198}}{{Cite book |last=Sarah |first=Kappos, George Yousaf, Haaroon Maller, Mary Meiklejohn |url=http://worldcat.org/oclc/1106297947 |title=An Empirical Analysis of Anonymity in Zcash |date=2018-05-08 |oclc=1106297947}} The goal of blockchain analysis is to discover useful information about different actors transacting in cryptocurrency. Analysis of public blockchains such as Bitcoin and Ethereum is typically conducted by private companies like Arkham Intelligence, Chainalysis, TRM Labs, Elliptic, Nansen, Blockpliance, Elementus, Dune Analytics, CryptoQuant, and Ormi Labs.{{Cite book |last=Greenberg |first=Andy |title=Tracers in the Dark: The Global Hunt for the Crime Lords of Cryptocurrency |publisher=Doubleday |year=2022 |isbn=978-0593663677}}
Cryptocurrency exchanges
Cryptocurrency exchanges are often required by law to address the source of funds for crypto traders. For example, Singapore, Japan, and the United States have all passed laws that require exchanges to track the source of the crypto funds.{{Cite web |last=Team |first=Chainalysis |date=2021-10-26 |title=Cryptocurrency Regulation: How Governments Around the World Regulate Crypto |url=https://blog.chainalysis.com/reports/cryptocurrency-regulation-explained/ |access-date=2023-01-05 |website=Chainalysis |language=en-US}}{{Cite web|url=https://www.pwc.com/us/en/industries/financial-services/regulatory-services/library/cryptocurrency.html|title=Carving up crypto: Regulators begin to find their footing|last=PricewaterhouseCoopers|website=PwC|access-date=2019-05-28}} In the United States, the Bank Secrecy Act requires cryptocurrency businesses to implement know-your-customer and anti-money laundering programs, including registering with FinCEN as a money service business.{{Cite web |title=Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies {{!}} FinCEN.gov |url=https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-persons-administering |access-date=2023-01-05 |website=www.fincen.gov}}
Blockchain analysis enables law enforcement to trace cryptocurrencies back to individuals wallets on exchanges, which can then be subpoenaed for information on criminal actors.
Method
Because blockchains are typically public, anyone can view the contents of transactions by querying a node or block explorer site (such as Etherscan.
Law enforcement and blockchain surveillance
Blockchain analysis has helped produce evidence in several high interest cases.{{Cite journal |last1=Alden Pelker |first1=C. |last2=B. Brown |first2=Christopher |last3=M. Tucker |first3=Richard |date=2021 |title=Using Blockchain Analysis from Investigation to Trial |url=https://www.justice.gov/usao/page/file/1403671/download |journal=Department of Justice Journal of Federal Law and Practice |volume=69 |issue=3 |pages=59–100}} In 2018, an analysis of bitcoin transactions uncovered a link between major cryptocurrency exchange BTC-e and Fancy Bear.{{Cite news|url=https://www.bloomberg.com/news/articles/2018-09-04/bitcoin-suspect-could-shed-light-on-russians-targeted-by-mueller|title = Bitcoin Suspect Could Shed Light on Russian Mueller Targets|newspaper = Bloomberg.com|date = 4 September 2018}} In 2019, a major website hosting child sexual abuse material was taken down by law enforcement using blockchain analysis techniques.{{Cite magazine|url=https://www.wired.com/story/dark-web-welcome-to-video-takedown-bitcoin/|title = How a Bitcoin Trail Led to a Massive Dark Web Child-Porn Site Takedown|magazine = Wired|last1 = Newman|first1 = Lily Hay}}
In 2021, the US Department of Justice used blockchain analysis to recover most of the ransom from the Colonial Pipeline ransomware attack.{{Cite news |last1=Bing |first1=Christopher |last2=Menn |first2=Joseph |last3=Lynch |first3=Sarah N. |last4=Bing |first4=Christopher |date=2021-06-08 |title=U.S. seizes $2.3 mln in bitcoin paid to Colonial Pipeline hackers |language=en |work=Reuters |url=https://www.reuters.com/business/energy/us-announce-recovery-millions-colonial-pipeline-ransomware-attack-2021-06-07/ |access-date=2023-01-05}}{{Cite web |last=Team |first=Chainalysis |date=2022-02-10 |title=Chainalysis In Action: How FBI Investigators Traced DarkSide's Funds Following the Colonial Pipeline Ransomware Attack |url=https://blog.chainalysis.com/reports/darkside-colonial-pipeline-ransomware-seizure-case-study/ |access-date=2023-01-05 |website=Chainalysis |language=en-US}} In 2022, IRS Criminal Investigations used blockchain analysis to seize over 50,000 bitcoin stolen from the Silk Road dark web marketplace.{{Cite magazine |last=Greenberg |first=Andy |title=IRS Seizes Another Silk Road Hacker's $3.36 Billion Bitcoin Stash |language=en-US |magazine=Wired |url=https://www.wired.com/story/silk-road-bitcoin-seizure-james-zhong/ |access-date=2023-01-05 |issn=1059-1028}}{{Cite web |date=2022-11-07 |title=U.S. Attorney Announces Historic $3.36 Billion Cryptocurrency Seizure And Conviction In Connection With Silk Road Dark Web Fraud |url=https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction |access-date=2023-01-05 |website=www.justice.gov |language=en}}
References
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