How transactions are tracked in the Bitcoin network

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What are the addresses on the Bitcoin network

Bitcoin addresses are a series of Latin letters and numbers and do not contain information about the names of their owners, thereby creating a false sense of complete anonymity for users. However, transactions are recorded on the Bitcoin network without encryption, which means that they can be tracked.

Much depends on how the address is used and what traces of activities with its use remain on the network. For example, transactions by a bitcoin address posted in the owner’s signature in e-mail or on forums are pretty easy to track.

And if it was created in a separate system with access to the Internet via the anonymous TOR network and credited bitcoins exclusively from a mining pool like Eligius, which does not require registration to get started, the task is much more complicated.

However, using serious analytical tools and spending some time and resources, you can get close to the owner of bitcoins.

What can any user track

The simplest transaction tracking solutions are provided by numerous Bitcoin blockchain block observers. Usually they are used when they want to make sure that the operation was successful, and not hung in unconfirmed.

At the same time, everyone can become a little detective and using these online platforms in a few clicks get information about previously completed transactions with a specific bitcoin address, its current balance, the amounts passed through it or address lists for input and output ) operations. Enter the transaction identifier data (TXID, TxHash), address, hash, or block height in the search box of the block explorer and you will instantly know their status.

Try to get started with block browsers from Block Explorer or Blockchain.com. OXT, Token View, Blockcypher, Insight, Sochain and Blockstream Bitcoin Explorer also provide similar data with different display options. Using Cryptocurrency Alerting, you can set up activity alerts for yourself from the address of interest, and the Blockseer tool will allow you to “follow Bitcoin” by visualizing the relationships between the addresses involved in the transaction.

What can any user track

The simplest transaction tracking solutions are provided by numerous Bitcoin blockchain block observers. Usually they are used when they want to make sure that the operation was successful, and not hung in unconfirmed.

At the same time, everyone can become a little detective and using these online platforms in a few clicks get information about previously completed transactions with a specific bitcoin address, its current balance, the amounts passed through it or address lists for input and output ) operations. Enter the transaction identifier data (TXID, TxHash), address, hash, or block height in the search box of the block explorer and you will instantly know their status.

Try to get started with block browsers from Block Explorer or Blockchain.com. OXT, Token View, Blockcypher, Insight, Sochain and Blockstream Bitcoin Explorer also provide similar data with different display options. Using Cryptocurrency Alerting, you can set up activity alerts for yourself from the address of interest, and the Blockseer tool will allow you to “follow Bitcoin” by visualizing the relationships between the addresses involved in the transaction.

Are there any commercial tools for tracking BTC transactions

When transactions need to be tracked very quickly or if they need to be done on an ongoing basis, manual data analysis becomes inefficient. In this case, commercial solutions come to the aid of researchers, which add a layer of additional information over publicly available data that reflects who interacts with whom on the network. Let’s look at the most popular of them.

Chainalysis

Perhaps the most well-known company in the field of tracking transactions with Bitcoin is the American analytical blockchain startup Chainalysis. Since 2015, he has been assisting the United States Federal Tax Service (IRS) in uncovering tax evaders from cryptocurrency transactions. The company cooperates with Europol, law enforcement agencies of different countries and cryptocurrency exchanges.

The main products of the company are Chainalysis Reactor and Chainalysis Know Your Transaction (KYT). Reactor allows you to start an automatic investigation from any moment in the presence of at least a small clue with cryptographic data. Users of KYT, designed as a tool to counter the laundering of illegally obtained funds, use the API to monitor huge amounts of information and identify high-risk transactions in real time. For example, since the fall of 2018, the Binance cryptocurrency exchange has been working with Chainalysis KYT to “create a blockchain ecosystem where everyone feels safe”.

At the same time, Chainalysis tools do not require public access, and therefore do not provide an opportunity to evaluate the methodology used and exclude false positive results. There have been cases in which litigants, because of this, questioned the accuracy of transactional data provided by Chainalysis.

 Crystal

In January 2018, the Bitfury Group (one of the world’s largest developers and providers of blockchain solutions) introduced the Crystal tool to financial institutions and law enforcement agencies, which it created specifically for Bitcoin investigations.

Crystal analyzes information in the Bitcoin blockchain, focusing on the given addresses and sets of transactions, and also goes beyond the network and collects data related to the request from all available sources: websites, thematic forums, etc.

The tool visualizes the movement of funds up to the final address and the withdrawal of crypto assets in fiat currency and sends the results to the client’s mail. At the same time, if during manual tracking you can encounter the problem of a large branching of funds flows, the result of Crystal’s work is a list of specific addresses to which the money has arrived, as well as the determination of all ways of their delivery.

The investigation may delve deeper into the assessment of transaction risks and track suspicious transactions at the BTC address, but the developers claim that ultimately, using a unique clustering algorithm, Crystal is able to identify the real name of the coin holder.

In version 2.2 Crystal, for the convenience of investigators, several more features have appeared. For example, customers can set up activity notifications at a specific address with the ability to add to the monitoring and visualization a list of addresses involved in the transaction with one click, as well as track transactions between addresses using intermediaries.

As an example of Crystal’s effectiveness, its creators cite an investigation into the WannaCry ransomware virus. In May 2017, for 4 days, he inflicted damage on his victims by almost $ 1 billion, he suffered from the British Public Health Service, Spain’s largest telecom company Telefónica, the American logistics giant FedEx and users from 150 countries. Using their tool, the creators of Crystal for three hours tracked the movement of funds from the attacker’s bitcoin wallets (to the withdrawal points through the Changelly and ShapeShift crypto exchanges) and determined who was behind the attacks.

Bitfury also conducted an investigation into the hacking in September 2018 of the Japanese bitcoin exchange Zaif, which lost as a result of hackers $ 60 million in crypto assets, including 6,000 bitcoins.

The researchers determined that part of the stolen funds was sent for withdrawal through the Binance cryptocurrency exchange, another part was split into small amounts and distributed to numerous addresses through mixers, game services and other crypto exchanges, and 30% remained at previously unlit addresses on the network, presumably Owned by the cracker. After that, the addresses registered to unknown persons were transferred for further observation to Crystal.

Elliptic

The Elliptic blockchain analytics solutions provider, created in London in 2013, once served as a cold wallet for storing private keys to bitcoin addresses, but then it refocused on providing services to cryptocurrency exchanges and financial services in the field of combating money laundering.

Elliptic has also developed software that law enforcement agencies track the terrorist financing of bitcoins. Elliptic collaborates with the FBI and the CIA and is known for investigating criminal activities on the darknet.

According to the company, using web-scraping of “clean” web resources and darknet, as well as monitoring the registry of court documents, you can obtain data mentioning crypto addresses, analyze them, and then try to enter into interaction with them or repeat their logic on the darknet.

Elliptic uses machine learning algorithms to calculate the real owners of wallets on the darknet: the software focuses on addresses that are precisely used on a particular site, and then using this technology determines other addresses and transactions on the same marketplace. For law enforcement, the information received is visualized graphically in the transaction explorer.

Information on the cooperation of a London startup with the FBI and the CIA is not subject to disclosure. However, it is known that the company played a significant role in the affairs of a 16-year-old darknet drug dealer from Portsmouth, UK, who traded ecstasy for bitcoins, as well as a businessman who tried to import firearm parts bought in the darknet for Bitcoins into the UK.
In addition, in July 2018, Elliptic experts said that Russian military intelligence officers (GRU), accused of interfering in the 2016 US presidential campaign, conducted bitcoin transactions and also laundered money using cryptocurrency via the BTC-e exchange.

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