Sex, Drugs and Bitcoin:
Almost half of all transactions in bitcoin are associated with buying and selling illegal goods and services, including drugs, weapons and pirated software, according to analysis using forensic finance techniques.
Research from the University of Technology Sydney and Sydney University suggests that cryptocurrency is being misused.
Talis Putnins, a Professor at the University of Technology Sydney, says blockchain technology underpinning bitcoin holds significant promise for revolutionising many industries.
“But this sort of illegal activity risks stunting the adoption of this technology and limiting the potential benefits to society,” he says.
“We exploit the fact the transactions in Bitcoin are all publically available. The blockchain can be downloaded by anyone.
“We obtain a sample of some of the known illegal activity that’s been happening in Bitcoin, and we use that sample, that insight, of some of the illegal activity to estimate how much of the other Bitcoin activity is associated with illegal activity.”
“The aim of our research is to help regulators understand the size of the task they face in attempting to monitor and regulate bitcoin.” says Putnins.
“Users involved in illegal activity are very active in terms of buying, selling and trading, whereas legal users are largely buying and holding the cryptocurrency.”
The researchers developed ground-breaking methods for identifying illegal bitcoin transactions. Their starting point was tracing the activity of bitcoin users who had been caught by the FBI and other authorities in online criminal activity.
“A lot of people think bitcoin is highly anonymous and untraceable, that it is outside the view of regulators and authorities, but once you start digging into it it’s surprising how much sense you can make of it,” says Professor Putnins.
“The techniques we have developed can be used by legal authorities in surveillance activities, but more broadly, much of what we develop is transferable to analysing other blockchains,” says Professor Putnins.
“In the hands of regulators or federal police, our methods potentially provide a lot of value in understanding what is going on – and cracking down on it.”
The paper describes how bitcoin has become the PayPal of the dark web, which is estimated to contain 30,000 domains.
Source: Sex, Drugs and Bitcoin: Cryptocurrency used to finance illegal activity