Team Project (FSS 2022)

Cryptocurrency forensics: Tracing and identifying payments in public ledgers

Bitcoin and other cryptocurrencies have seen a sharp increase in popularity over the past years. While the concept of Bitcoin and its promise of a decentralized, user-controlled currency is highly appealing, cryptocurrencies have severe implications regarding user privacy. It is a common misconception that Bitcoin is anonymous. In fact, Bitcoin and similar cryptocurrencies are pseudonymous, meaning they operate on cleary identifiable and trackable entities. For example, Bitcoin's public ledger means that the flow of currency within the network is completely transparent to any external observer. If individual Bitcoin addresses can be identified, external observers are able to profile user behavior and can potentially infer sensitive information.

During this project, you will gain hands-on experience of how blockchain analysis works. Your task will be to trace payments made with funds of illegal origin, such as Darknet Markets, Ransomware, Extortion etc. In particular:

  1. You should collect Bitcoin addresses related to criminal activity and flag thos addresses in our database (You can use services like the Bitcoin Abuse Database and/or build on the work of previous team projects)
  2. You should identify Bitcoin addresses belonging to interesting services, e.g. cryptocurrency exchanges, gambling, mixers,...
  3. Given the two sets of addresses, check if there is a direct flow of currency between them, i.e. determine if those services are used for money laundering
  4. If you find such payments, you should attempt to reverse the laundering by analyzing the service and perhaps track the currency flow across ledgers
    1. Reverse engineer the payment system of the service and try to match payments to activities on the service (e.g. using service APIs)
    2. If time permits, build a blockchain database of a second cryptocurrency (e.g. Litecoin) to perform large-scale analysis

You will receive help from the chair during all stages of the project, but you will have of opportunities to implement your own ideas, approaches and analyses.