Researchers devise new method to track stolen Bitcoins
Cambridge University researchers have found a way to track stolen bitcoins [BTC]. According to a recent issue of the MIT’s technology review, a team of researchers said that they have found an algorithm that could track the stolen cryptocurrency on the Bitcoin blockchain.
The algorithm is based on a UK law from the 19th century which dictates the allocation of the money that is left in a banks coffers after the bank winds up. Researchers claimed that when they applied the same method to the public ledger containing BTC transactions it revealed patterns of criminal money laundering activity.
The process of money laundering on the blockchain is done by mixing up clean Bitcoin and stolen bitcoins and then sending them to a wallet. Therefore stolen coins cant be differentiated from the clean coins. Once these coins spread further on the blockchain the stolen coins can never be found.
The new algorithm called Taintchain follows the principle of Bitcoin wallets. For example, if first three Bitcoins paid into a wallet are considered stolen the algorithm will consider the first three Bitcoins which are paid out of the wallet as stolen too. This method can map suspicious patterns of behavior on the blockchain.
One of the patterns identified by the researchers shows the way criminals split their share in a “splitting pattern”. “These may occur close to the time of a crime as criminals try to cover their tracks by feeding their loot into systems that divide their winnings into hundreds of tiny transactions,” said the researchers.
They also observed other patterns such as collection pattern and peeling pattern. “We observed similar patterns many times; in some of the instances, we were able to connect the collection address to illegal gambling sites,” declared the researchers.
Bitcoin transactions on the dark web are rising. The first digital coin is demanded as ransom by kidnappers and crypto hackers alike. It is difficult to identify stolen coins on Bitcoin blockchain which sees over a million transactions a day. This new research might just be the answer to regaining all stolen Bitcoins.
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