Researchers propose new scheme to help courts test deanonymized blockchain data

A team of researchers from the Friedrich-Alexander-Universität Erlangen-Nürnberg recently published a paper on methods investigators and courts can use to determine the validity of anonymized data on the bitcoin (BTC) blockchain.

The team’s preprint paper, “Logic Schemes for Blockchain Denonymization,” lays out A blueprint for investigating, verifying and presenting crimes involving cryptocurrency transactions. While the paper focuses on the German and United States legal systems, the authors say the findings should be generally applicable.

Bitcoin-related crime investigations revolve around the anonymity of suspected criminals, a process made more challenging by the pseudonymous nature of the blockchain. Users conducting blockchain transactions are identified by wallets (unique software addresses) rather than by legal names.

However, blockchains are inherently transparent. Whenever data is added to a blockchain ledger, the transaction is recorded and made available for viewing by anyone with access to the blockchain.

When investigators are trying to determine who is behind a specific wallet, information contained in blockchain transactions (blocks) are used as data points, which when combined create a digital paper trail.

According to the research team, the current bottleneck when it comes to these tests is no longer technical; This is a legal issue.

Law enforcement agencies have access to the tools needed to conduct preliminary blockchain analysis, but these initial data points represent circumstantial evidence.

This evidence relies on some crude assumptions that can only be validated by correlating on-chain activity to off-chain activity, such as allowing an exchange to disclose the identity or bank account information of users suspected of criminal involvement. To force According to the paper:

“In legal practice, those assumptions are important for estimating the evidentiary value of a criminal’s anonymity. However, no standard practice has yet been proposed to derive and discuss the reliability of those analysis results. “

If done properly, blockchain investigation can trace the perpetrator of a crime. Researchers cite the Wall Street market case as an example. There, US Postal Service investigators linked various data points to identify the operator of an illegal dark web marketplace, which law enforcement officials confirmed through surveillance operations.

Connected: German Police Seize Six Figures in Crypto from Suspects Involved in Dark Web Site

However, the researchers point out that such tests impinge on the rights of suspects due to legal requirements. Prosecutors (in Germany and the US, according to the paper) must demonstrate certain evidence of guilt before coercive investigation, such as surveillance or issuing a warrant for arrest.

To assist investigators and prosecutors in ensuring that the law is applied fairly to suspects, the researchers propose a standard framework containing five rationale schemes designed to ensure proper reporting and explanation throughout the legal process.

The above image shows two schemes, each using a set of defined premises to draw a specific conclusion and then providing a set of key questions to assess the strength of the argument.

The researchers claim that “by using the plans, an analyst can clearly articulate the planned estimates, their individual strengths and potential weaknesses. This enhances the understanding of such analysis and court proceedings for decision makers, and It also facilitates documentation for later verification by an expert witness.