One of the most effective ways to track money laundering, terrorist financing, and other financial crimes, is by following the money with blockchain analysis . The tech has been used to great effect already in many criminal cases—and will continue to be an integral part of catching criminals in the future. How does blockchain analysis work? Here’s what you need to know about blockchain technology, why it’s important, and how law enforcement officials use it in their investigations. How to use Blockchain analysis to follow the money
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Why Follow the Money?
It’s a question that surfaces in every investigation, whether it be a murder or fraud case: Who benefited from whatever happened? In some cases, following a dollar trail can uncover motive and prove guilt. Understanding how blockchain works is essential for understanding how bitcoin has been used to hide money—and where law enforcement is closing in on offenders. When you know how bitcoin’s pseudo-anonymity works, you can see how forensic investigators can (and have) tracked down suspected criminals. And then we’ll show you what they found and why they were successful.
3 steps to make your own blockchain analysis
First, you will have to create a transaction (an entry in blockchain ledger) that has Bitcoins leaving your wallet and entering into your recipient’s wallet. Once you have created your own transaction, it will be included in all subsequent blocks on Bitcoin blockchain making it irrefutable proof of ownership. It’s like an ownership certificate for a car or house that is entered into public records once it is purchased. Now you can share your blockchain analysis with others and they can verify that you indeed own said coins without revealing any identifying information.
STEP 1
Uncovering dark web marketplaces and their users: Diving into a dark web marketplace such as AlphaBay or Hansa Market is a good first step, but it can be difficult for investigators to unearth any identities. In an undercover sting operation, police purchased drugs from sellers on AlphaBay. By searching through those messages, they were able to uncover email addresses tied to PayPal accounts and even names tied to Facebook accounts that were often different than what was used on the darknet. Connecting real-world identities with online ones can help authorities make arrests later in their investigation by providing leads.
STEP 2
Develop a blockchain analytic capability for an investigative or intelligence purpose. A blockchain analytic capability is not just about building a link graph, but rather being able to draw information from and relate data within multiple blockchains. When it comes to following the money – there’s more than one blockchain you need access to. Using different types of cryptocurrencies could be a red flag for government investigators looking at black markets, terrorism financing, and organized crime. The ability to effectively investigate cryptocurrency crimes can be greatly enhanced with collaboration between law enforcement agencies and private companies that build products based on blockchains (such as those mentioned above). For example, DHS has developed its own case management system called eCares that combines information from Customs and Border Protection with U.S.
STEP 3
Analyze and Investigate. In a world full of cryptocurrency scams, it’s vital that you analyze every piece of information as thoroughly as possible. Put your investigator cap on and research like you’re investigating an explosive political scandal. The best way to do so is by following these steps
Example of how blockchain analysis works
In a typical blockchain, transactions happen in groups called blocks. Each block has its own transaction history, but it also links to other blocks that have been created before it. All of these blocks are kept in what’s called a block chain. In order for one group of transactions (i.e., one block) to be added to another group of transactions (another block), a cryptographic signature is required. This means that every participant must agree on who actually sent or received Bitcoin, Ether, etc., and when they did so. For example, if you’re attempting to send $25 worth of Ether from your wallet app on your smartphone to an online vendor’s digital wallet, each step along that transaction must be verified by everyone else using blockchain technology before it can take place.
How do I follow a blockchain transaction?
When a transaction happens on a blockchain, it is assigned a unique ID. This number can be then traced and observed by anyone who has access to that particular blockchain. The transaction isn’t anonymous in that it’s recorded publicly (on something called a public ledger), but you don’t have any personal information about who made or received it. So if you wanted to follow the money, for example, you would need only trace your transactions back through their records until you got back far enough to get some personally identifiable information (name and address). Unfortunately, thanks to cryptocurrency there is more complexity than just following an ID—you also have addresses that can receive funds and don’t need public documentation or identification before they are created.
How do you use blockchain money?
This series will help you understand what a block chain is, why it’s an important new tool for businesses, and how it can be used today. Part 1: How does blockchain work? The blockchain protocol enables secure online transactions that do not require a trusted intermediary. Blockchains are in most cases distributed peer-to-peer networks. They use cryptography to allow secure transfer of digital assets, including cryptocurrencies like Bitcoin and Ether. Blockchains are well suited for many applications beyond just cryptocurrency transactions—they have significant potential outside of financial services as smart contracts or distributed autonomous organizations (DAOs). In theory, a blockchain could be programmed to run any application where there is an enforced relationship between different parties, such as auctions, registries of property ownership and voting systems…
How do you track money flow in cryptocurrency?
One common tool that some blockchain analysts use is called a blockchain explorer. These tools help track transactions and movements in cryptocurrency. Some of these are like more traditional search engines—you type a series of keywords into a search bar and get a list of results. For example, if you’re trying to find out where cryptocurrency funding is coming from, you might plug in something like funded_by_address. This tells you whether that address has been involved in other transactions connected with those keywords (e.g., do they appear on donation lists?). It can also tell you if that address has been linked to any other addresses by users or organizations who are looking to identify activity on specific accounts. The best part?
How does Blockchain analysis work?
You’ve heard about blockchain technology and cryptocurrencies. Everyone is talking about it and big banks, tech companies, and governments are working on implementing it in one way or another. But you may be wondering how blockchain analysis actually works. Here’s a detailed breakdown
