Blockchain analysis is the process of inspecting, identifying, clustering, modeling and visually representing data on a cryptographic distributed-ledger known as a blockchain.[1][2] 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 Chainalysis, TRM Labs, Elliptic, Nansen, Blockpliance, Elementus, Dune Analytics, CryptoQuant, and Ormi Labs.[3]
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.io or BitRef.com). By using common-spend clustering algorithms, it is possible to map the transactions of certain entities on the blockchain.[7] This is how criminals are being caught moving illicit funds using various cryptocurrencies.[8]
Law enforcement and blockchain surveillance
Blockchain analysis has helped produce evidence in several high interest cases.[9] In 2018, an analysis of bitcoin transactions uncovered a link between major cryptocurrency exchange BTC-e and Fancy Bear.[10] In 2019, a major website hosting child sexual abuse material was taken down by law enforcement using blockchain analysis techniques.[11]
^Meiklejohn, Sarah; Pomarole, Marjori; Jordan, Grant; Levchenko, Kirill; McCoy, Damon; Voelker, Geoffrey M.; Savage, Stefan (23 October 2013). "A fistful of bitcoins". Proceedings of the 2013 conference on Internet measurement conference. Imc '13. pp. 127–140. doi:10.1145/2504730.2504747. ISBN9781450319539. S2CID2224198.
