Talis Putnins and Jonathan Karlsen, Professors at the University of Technology Business School in Sydney, together with Dr. Sean Foley from Sydney University, have been jointly working on a research whose results are shocking. In their yet to be published document ”Sex, Drugs, Darknet and Bitcoins,” the nearly half of all bitcoin transactions involve illegal trading either directly or indirectly on the dark web, a section of the internet that cannot be accessed using the a standard search engine.
Access to the dark web is made possible via the “Tor browser” that allows the users to surf without giving away the identity of the location from where the login has taken place and hence a safe marketplace for criminals. Individual logins and all transactions are masked and not indexed.
With the help of the dark web and bitcoin anonymity, Bitcoin is being used actively in buying and selling of illegal goods and services. This includes money laundering, cybercrime activity, illegal Drugs and weapons trading, terrorism financing, human trafficking, child pornography, illegal internet and software gambling and theft of the Bitcoins themselves from their anonymous owners’ virtual wallets.
The researchers used forensic finance techniques and blockchain technology which still has greater promise in almost all industries. They established a unique method of filtering out illegal bitcoin transactions by first analyzing the trade networks of already known illegal activity; using information scraped from the darkweb. The team then went about a study of dark web and bitcoin cases that have been closed, by tracking criminal activities of bitcoins users from a global database since 2009, and who had in the past been arrested by law enforcers and other federal agents in online crimes.
“Most people believe that bitcoin is highly untraceable and that its anonymity is by far beyond law enforcers but looking from a closer distance and digging a little dipper is astonishing,” says Prof. Putnins. “We were able to come up with characteristics that can be used to clearly differentiate [between a bitcoin used in a] user’s involved illegal activity from those using legally,” he added.
“The main reason for our research is to aide law enforcers and regulators to at least have an idea of what is expected of them and how to control, monitor and regulate bitcoins used globally and how to do it as it becomes mainstream,” says Putnins.
This method developed by professionals can be used by law enforcers and authorities to trace online criminals, surveillance activities on the dark web and to analyze other blockchains. It is now possible to analyze the extent at which one tries to hide and conceal their identity and their transaction records. Using these two methods makes it possible to approximate the size of the darknet market facilitated and associated to illegal activities involving Bitcoins. “In the hands of regulators or federal police, our methods potentially provide a lot of value in understanding what is going on and cracking it down,” Putnins concluded.