Identifying Illegal Cryptocurrency Activities via Blockchain Analysis

December 6, 2021

In use since 2009, blockchain is a secure, cryptographic, immutable, distributed ledger that is used as a system to record transactions and to track assets. In simple terms, a blockchain is a database that structures data in “blocks,” i.e., it collects information in groups and each group becomes a closed block that’s linked to the previous block. Hence, it’s a chain of data blocks.

Blockchain’s creators meant it to be a better, safer way to record transactions and activity, a system that would keep both the data and its historical trail intact. The idea was that this data couldn’t be corrupted or deleted by anyone, accidentally or willfully.

Blockchain: a benign technology turns into a criminal tool

As blockchain stores all data electronically, inevitably it has taken a leading role in digital cryptocurrency transactions. The most popular cryptocurrencies are Bitcoin, Litecoin, Ethereum, and Ripple. Their popularity can be attributed to their offering speedy low-cost transactions that avoid exchange rate losses and commissions.

Unfortunately, cryptocurrencies have also been used in the trade of illegal goods and services, as a way to receive ransomware payouts, or even as funding for terrorist activities. They have been used on platforms such as the Silk Road – a once highly popular black market on the dark web. Launched in 2011, Silk Road was a Tor hidden service, allowing for complete anonymity, providing an attractive marketplace to criminals across the world – until blockchain analysis ended this gangster’s paradise.

What’s blockchain analysis?

Blockchain analysis includes identifying, categorizing, and modeling the digital footprints that blockchain transactions leave behind – from volume to the network structure – in order to discover key information about the actors that transact in different cryptocurrencies.

The first “successful” blockchain analysis

Known as digital gold, Bitcoin has been the most popular cryptocurrency not just in legal circles but also in the criminal world. In 2013 a former FBI special agent Ilhwan Yum had to follow more than 700,000 bitcoins and trace 3,760 transactions over a whole year to be able to catch Ross Ulbricht, the notorious Silk Road creator. It was a superhuman effort, but it was worth it.

Today, blockchain analysis and dark web investigations are powered by advanced AI algorithms and digital tools in a fully automated system. The system constantly identifies the technical details of online activities, behavior, and other relevant information, to analyze and find connections, especially those that take place on the deep web and dark web.

Cobwebs Blockchain Analysis

Many financial institutions and law enforcement agencies turn to digital intelligence companies such as Cobwebs WEBINT solutions for AI-Powered blockchain analysis solutions to prevent and identify illegal cryptocurrency activities. In addition, legitimate crypto businesses use Cobwebs’ blockchain analysis to ensure regulatory compliance, prevent the illegal use of their currencies, and save themselves a headache.

The information that’s publicly available on the open web constitutes only some 5% of all information. The rest hides in the deep web and dark web, which is where Cobwebs’ AI-powered blockchain analysis solution crawls on an ongoing basis, in order to generate comprehensive and crucial real-time information and insights.

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