The journalists at Bellingcat showcased how to track down and trace transactions with only minimal data and a little bit of free time.
Anonymity in Blockchain
Since its creation in 2008, Bitcoin has been touted as a great way to move money around while remaining relatively anonymous. The perceived privacy of cryptocurrency transactions proved to be one of the most controversial features of the concept of digital money.
As the identity of Bitcoin senders and receivers is hidden behind their address wallets, anonymity can be a handy tool when someone needs to launder money or cover the tracks of their illegal activity. These assumptions have been the primary concern of governments and regulators all over the world when considering digital currency legislation and regulation.
Despite strong evidence otherwise, many people still believe that Bitcoin and virtual money in general, are the preferred mode of transactions for criminals and tax evaders.
The Myth is Busted
While blockchains contain personal details ciphered in long alphanumerical strings, thus enabling some types of illegal activities, their absolute anonymity is a myth. Each transaction leaves a digital footprint that can be traced in most circumstances.
Experts from an open-source investigation project Bellingcat provided a spectacular example of how Bitcoin transactions can be traced without the need for special tools or an academic degree in computer engineering.
The team tracked down a Bitcoin transaction specified in Robert Mueller’s indictment of 12 Russian agents published in July 2018. By analyzing the chain of blocks and the open source data, they discovered the Bitcoin address the money was sent from and found other transactions performed from the same wallet.
According to the indictment, 0.026043 BTC was sent from a particular address, allegedly belonging to the agents of the Russian Intelligence Service (GRU), on Feb 1, 2016. With no access to additional information and just a standard blockchain explorer at hand, Bellingcat found the transaction that the Special Council of the investigation into the Russian interference in the 2016 United States elections, had mapped to the hacks of the Democratic National Committee servers.
A How-to for Emerging Blockchain Detectives
Without going into technical details, they spotted the first block mined on Feb 1 — block #396049. They then scanned all blocks of the date looking for a transaction in the amount of 0.026043 BTC. Block #396123 contained the target amount, which was sent from the address 1LQv8aKtQoiY5M5zkaG8RWL7LMwNzVaVqR to 1NZ4MSeYcDKFiPRt8h7VK6XMhShwzhCzCp.
Moreover, the researcher scanned all blocks for Feb 1, as well as Jan 31 and Feb 2 to make sure that there were no other transactions in that exact amount.
1LQv8aKtQoiY5M5zkaG8RWL7LMwNzVaVqR looks very much like a one-off address as it has only received 4.56935047 BTC on Jan 27 and transferred the same amount between two transactions on Feb 1. The wallet address has been inactive with a balance of zero since that time.
Now we know the details of a transaction allegedly used by Russian Intelligence to finance their meddling with the U.S. presidential campaign. While we can only identify the address as a long string of numbers and letters, some tools allow retrieving the names of the real people behind the alphanumerical codes.
Companies like Chainalysis and CipherTrace use dedicated software along with publicly available resources to link transactions and wallets to real people.
That is how the U.S. Treasury managed to spot and sanction two Bitcoin addresses that belonged to Iranian citizens in Nov 2018.
Bellingcat is an online resource created by British journalist and blogger Eliot Higgins. It publishes the findings of journalist investigations into wars, high-profile criminal cases, and human rights abuses.
Recently, the chairs of the Commissions for Foreign Affairs in Estonia, Lithuania, and Latvia jointly nominated Bellingcat for Pulitzer Prize in journalism.
Critics of the project often accuse it of data falsification and conclusions based on allegations.
Do you think that cryptocurrencies should be anonymous in order to protect our privacy? What’s your attitude towards attempts to trace down transactions and link them to real people? Let us know your thoughts in the comments below!