Bitcoin’s immutable transparency and anonymity, while enabling a gateway for uncensored transactions, allows analysts to identify unique trends within the ecosystem. Given the ongoing war between crypto-adoption and regulatory requirements, blockchain analysis company Elliptic published an MIT-IBM Watson AI Lab-funded paper to detect various anomalies around illegal Bitcoin transactions.
Source: arxiv.org
While the study was based on a data set with over 200,000 transactions, the paper highlighted involvement of banking institutions in helping fund illegal businesses, “which ultimately cost taxpayers enormous sums.” While existing measures to counter money laundering have not successfully stopped the bad actors, report suggests that blockchain technology can be used to reduce the cost of anti-money laundering measures and in parallel, increase the accessibility of banking.
The report stated,
“In the model-based layout illicit nodes are less scattered but more concentrated, which seems to be a desirable property.”
Source: arxiv.org
As evidenced by the above graph, users can navigate through time-sliced transaction data and observe transaction patterns and patterns of change, out of which illicit transactions are dyed red. So while it seems possible to identify illegal transactions through Bitcoin much more reliably than in conventional banking, there is still some room for improvement in the methodology.
