- CryptoCON Australia

-

Coinometrics

- The Dark Economy Assessed

1.  Anonymity / Pseudo-anonymity what model is the most appropriate for

Bitcoin?

2.  What has happened in the past? The Silk Road, Scams and thefts

3.  What can we expect for the future of Bitcoin’s dark activities?

Contents

New privacy model

Party Transactions Trusted Third Party Counterparty Public

Pseudonyms

Traditional Privacy Model

Party Transactions Public

New Privacy Model

Counterparty

Pseudonyms are cryptographic keys that are used to sign transactions in Bitcoin

A Bitcoin Transaction

{ "hash":"a6d9c176ecb041c2184327b8375981127f3632758a7a8e61b041343efc3bcb6e", "ver":1, "vin_sz":1, "vout_sz":2, "lock_time":0, "size":257, "in":[ { "prev_out":{ "hash":"b5045e7daad205d1a204b544414af74fe66b67052838851514146eae5423e325", "n":0 }, "scriptSig":"304402200e3d4711092794574e9b2be11728cc7e44a63525613f75ebc71375f0a6dd080d02202ef 1123328b3ecddddb0bed77960adccac5bbe317dfb0ce149eeee76498c19b101 04a36b5d3b4caa05aec80752f2e2805e4401fbdbe21be1011dc60c358c5fc4d3bedd1e03161fb4b 3a021c3764da57fee0d73570f3570f1b3dd92a1b06aae968846" } ], "out":[ { "value":"300.00000000", "scriptPubKey":"OP_DUP OP_HASH160 0331e5256416bc11ecf9088091f8424819553a10 OP_EQUALVERIFY OP_CHECKSIG" }, { "value":"699.99950000", "scriptPubKey":"OP_DUP OP_HASH160 4186719d739ae983d8c75a0cb82958e94b7ae81e OP_EQUALVERIFY OP_CHECKSIG" } ] } http://codesuppository.blogspot.com/

-  Commercial activity – paying for a shopping basket, booking flights,

-  P2P Transactions – exchange of value between parties

-  Security – ensuring funds are still accessible

-  Obscurity – concealing identities, gambling websites

-  Speculation – depositing or withdrawing from exchanges

-  Mining – miners are paid newly minted coins for contributing computing power

Motivations for making transactions

The Silk Road

Sarah Meiklejohn et al (2013)

Botcoin

Sarah Meiklejohn et al (2014)

Beware of the middlemen

Moore and Christin (2013)

Cryptolocker saw the benefits

…..and reaped them

Moore and Christin (2013)

-  Collect information propagation data from the network (Connected to over 90% of

nodes, +10X blockchain.info)

o  Accurate time of transaction

o  IP location of transaction

o  Propagation times of transactions and blocks

-  Collect transaction data

o  Run Bitcoin nodes

-  Maintain database of known addresses

o  Fire transactions into commonly used Bitcoin services to trace how they

manage their received funds

o  Scrape addresses from websites and forum posts

Data

-  Transaction graphs quickly become exponentially large trees. Use limiting heuristics

to limit size of trees and present relevant data

o  Time – Unique data on time of incoming and outgoing transactions

o  Hops – How many transactions from the one of interest to move

o  Size – some transactions may be deemed small enough to be excluded

from the analysis

-  Combine information from all of our relevant data sources but display 2 different

graphs

o  Transaction graph

o  User graph

Visualizations

Transaction graph

Diagram shows a snippet of money trail from the view of block 300,000 Green dots are transactions in block 300,000 Red dots are transactions that have outputs that were spent in block 300,000 Blue dots are transactions that have inputs from transactions in block 300,000 This is a snippet of the transaction graph. Each directed edge is an output that is spent.

User graph

Diagram shows one address clustering strategy Any addresses that enter as joint inputs in a transaction with high probability are owned by the same user or service. Nodes of the same color means we have clustered those addresses so that when they appear we know it is the same entity. From this we can construct a user graph

What is in the tool drawer?

Harrigan et al (2012)

Shamir and Ron (2013)

Coin mixers

Looking to the future

-  Liquid markets could benefit as well as hinder Bitcoin

-  Blockchain analysis will become more sophisticated but only the naïve criminals will

get caught.

-  Malicious activity in Bitcoin mining may become more prevalent.

-  Other more anonymous technologies may absorb much of this market.