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Insight Into Cryptocurrencies - Methods and Tools for Analyzing Blockchain-based Ecosystems

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This talk introduces graphsense and stakeholder use cases.

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Insight Into Cryptocurrencies - Methods and Tools for Analyzing Blockchain-based Ecosystems

  1. 1. INSIGHT INTO CRYPTOCURRENCIES Methods and Tools for Analyzing Blockchain-based Ecosystems Austrian Economic Chambers 2018-02-28 Dr. Bernhard Haslhofer Senior Scientist Center for Digital Safety & Security
  2. 2. • Cryptocurrency Analytics • Stakeholders and Use Cases • Future (Research) Directions • Q & A MY PLAN FOR TODAY 2
  3. 3. CRYPTOCURRENCIES | BIRD’S EYE VIEW Real-world actors: Exchanges, Organizations, (Darknet) Marketplaces, Payment Providers, etc.
  4. 4. Investigate and develop scalable quantitative methods, tools and services that contribute to a better understanding of the structure and dynamics of cryptocurrency ecosystems. CRYPTOCURRENCY ANALYTICS | GOALS 4 Macroscopic AnalysisMicroscopic Analysis
  5. 5. CRYPTOCURRENCY ANALYTICS | APPROACH 5 A A A AA C T BlockchainAddress Graph Address Cluster Tags Enrichmentprocess Statistics (as of Sept. 2017) Transactions: 249,408,683 Addresses: 296,862,290 Clusters: 30,645,426 Address graph - nodes (= addresses): 296,862,290 - edges (= aggregated transactions): 1,567,227,841 All data points are pre-computed and stored in a de-normalized form
  6. 6. 6
  7. 7. CRYPTOCURRENCY ANALYTICS | IMPLEMENTATION 7
  8. 8. CRYPTOCURRENCY ANALYTICS | TOOL 8
  9. 9. • Cryptocurrency Analytics • Stakeholders and Use Cases • Future (Research) Directions • Q & A MY PLAN FOR TODAY 9
  10. 10. STAKEHOLDERS 10 Science
  11. 11. • Ransomware has become dominant cybercrime threat • Over 500 families • Ransom payments almost exclusively in Bitcoin • More comprehensive, evidence-based picture still missing SCIENCE | RANSOMWARE STUDY 11
  12. 12. STAKEHOLDERS 12 Public Authorities
  13. 13. PUBLIC AUTHORITIES | LAW ENFORCEMENT 13 “Bitcoin is […] accounting for over 40% of all identified criminal-to-criminal payments.” - Europol 2015 Internet Organized Crime Threat Assessment Report
  14. 14. PUBLIC AUTHORITIES | LAW ENFORCEMENT 14 Suspect Address Ecosystem Exit Point (e.g., Exchange) Use Case: Follow the digital trace of criminal cryptocurrency payments.
  15. 15. PUBLIC AUTHORITIES | LAW ENFORCEMENT 15 2014 20202017 BITCRIME EU H2020 TITANIUM Legal, Societal, Ethical Aspects Tool and Service Ecosystem Darknet Marketplaces Cross-ledger Analytics Mixing-Service Detection Information Sharing Post-Bitcoin Cryptocurrencies Blockchain-based Electronic Markets GRAPHSENSE EU H2020 DANTE
  16. 16. STAKEHOLDERS 16 FinTech
  17. 17. • Anti Money Laundering: analytics procedures to ensure that customers are not aiding in money-laundering activities. FINTECH | AML 17 Darknet Marketplace Mixing Service Exchange Wallet Provider Use Case: Check incoming/outgoing cryptocurrency payments for AML compliance.
  18. 18. • There is a strong discrepancy between • expectations in blockchain technologies • current technical realities and scientific findings • Major issues • Anonymity / Privacy • Scalability • Degree of decentralization / Tamperproofness • Security • Trustworthiness of Smart Contracts • Blockchain – public + editable ≈ Distributed Database FINTECH | BLOCKCHAIN TECHNOLOGY Our focus: Technical grounding of ideas and business cases.
  19. 19. • Cryptocurrency Analytics • Stakeholders and Use Cases • Future (Research) Directions • Q & A MY PLAN FOR TODAY 19
  20. 20. • Cybercriminals increasingly turn their attention to services in cryptocurrency ecosystems • Major target: cryptocurrency exchanges • Attacks are conducted in the same way as targeted attacks on banks with similar or sometimes identical tools and tactics • Comeback of fraudulent schemes • Ponzi scheme • Investment / ICO scams • … FINANCIAL CRIME FORENSICS 20
  21. 21. • Technology for scalable, instant Bitcoin / Blockchain Transactions • Machine-to-machine payments, Micropayments • Channel ”entry” and settlement transactions on public blockchain • Intermediate payments off-chain • Uses of multisignature addresses and smart contracts OFF-CHAIN TRANSACTION CHANNELS 21 The Bitcoin Lightning Network http://lightning.network The Lightning Network is a decentralized system for instant, high-volume micropayments that removes the risk of delegating custody of funds to trusted third parties. Bitcoin, the world's most widely used and valuable digital currency, allows anyone to send value without a trusted intermediary or depository. Bitcoin contains an advanced scripting system allowing users to program instructions for funds. There are, however, some drawbacks to bitcoin's decentralized design. Transactions confirmed on the bitcoin blockchain take up to one hour before they are irrevesible. Micropayments, or payments less than a few cents, are inconsistently confirmed, and fees render such transactions unviable on the network today. The Lightning Network solves these problems. It is one of the first implementations of a multi-party Smart Contract (programmable money) using bitcoin's built-in scripting. The Lightning Network is leading technological development in multiparty financial computations with bitcoin. Instant Payments. Bitcoin aggregates transactions into blocks spaced ten minutes apart. Payments are widely regarded as secure on bitcoin after confirmation of six blocks, or about one hour. On the Lightning Network, payments don't need block confirmations, and are instant and atomic. Lightning can be used at retail point-of-sale terminals, with Alice Bob Source: https://lightning.network/lightning-network-summary.pdf
  22. 22. bernhard.haslhofer@ait.ac.at

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