The blockchain industry has always been shrouded in an almost mystical aura. Technology is not easily understood, cryptocurrencies are intangible coins and therefore out of physical control, and this inspires fear in the general public. Making the situation even more difficult are the rumors that claim that everything is on the blockchain anonymous and therefore all untraceable.
Cryptocurrencies
What can be done in concrete with the blockchain
by Adriano Marconetto
This is the biggest misconception about the distributed and cryptographic systems industry: the blockchain is a pseudonymous, not anonymous system. Using examples used a lot in the industry, if Alice sends 1 BTC to Bob a then Bob sends 0.5 BTC to Charlie, Bob knows both Alice and Charlie, and both Alice and Charlie know at least Bob. In the dynamics of exchanging money between two or more individuals, individuals can trace payments made by and to everyone they know directly.
The guide
The glossary of the blockchain
by Giacomo Barbieri
With the growth of users in the blockchain industry, the need to easily recognize the addresses of important individuals, companies and applications has become increasingly relevant, to allow everyone to more easily track both their own transactions and those of others. To be able to analyze the blockchain in search of fraud, hacks and anomalous market dynamics.
A transaction on Avalanche with a known address (source: avascan.info)
This is one of the tasks of a explorer, which is a website that shows detailed information on all transactions, tokens, NFTs and addresses. The more addresses are properly labeled in an explorer, the easier it is to understand what is actually going on in the blockchain. The explorer is a tool used mainly by users and developers for specific blockchains, and for this reason its primary objective is not to label the highest number of addresses, but to make sure that all information shown is correct.
Nft, so popular, so unknown
by Adriano Marconetto
Instead, there are crypto companies born for the sole purpose of investigating blockchains, creating powerful automatic analysis tools and labeling the highest number of addresses to understand what is happening. The largest company is Chainalysisactive since 2014.
Chainalysis has cataloged tens of millions of addresses across all popular blockchains, including over 100 million addresses on Ethereum alone. With these analyzes it is possible to answer some fundamental questions about the industry. Ethan McMahonEconomist at Chainalysis, commented on some of the latest trends through the lens of the forensics firm.
The most sensational was certainly that of NFT’s trading volumes, which reached a peak of 16 billion dollars. The popularity of NFTs skyrocketed in 2021, with over $ 44.2 billion traded through NFT-related smart contracts. Instead, from the beginning of the year until April 2022, the figure reached is 36.5 billion dollars. But how much of this volume is genuine and how much is artificially generated? “Two main categories of manipulation can be identified in the NFT world: wash trading e money laundry. Wash trading attempts to artificially inflate the value of an NFT by selling it to itself from a number of other self-funded crypto wallets. As for recycling, on the other hand, to date, most NFTs are traded on Ethereum, thus making them technically traceable, just like with Bitcoin and other cryptocurrencies. This feature should discourage NFT manipulation, but money laundering can certainly still occur. In fact, illicit addresses sent $ 3.2 million worth of cryptocurrencies to NFT markets in 2021. The vast majority of this activity took place in the third quarter of 2021 ($ 1.27 million) and in the fourth quarter of 2021 (1 , 38 million dollars). “
As can be seen from the numbers declared at least for money laundering, the volumes of NFT exchanges linked to criminal activities are less than 1%. And the criminals are targeting the most cutting edge areas in the crypto market, so right now Nft and DeFi. The reason these tools are hotbeds of crypto crime is “because there has been a large influx of capital, with users often less scrupulous about the investments they are making as everything seems to be going so well,” continues McMahon. “In addition, DeFi currently has fewer regulatory practices than centralized services. Vulnerabilities in DeFi projects are protected through code checks, but we shouldn’t rule out exploits and hacks in this space from occurring from time to time. Thanks to the introduction of further regulations governing the DeFi space, the number of hacks will decrease. “
In its annual report, Chainalysis states that beyond 900 million dollars have been transferred to or from addresses involved in criminal activity, an increase of approximately 2000% compared to the previous year. An important portion of these activities take place through centralized exchanges, mainly used by individuals, states and companies to circumvent international sanctions. Without too many surprises, however, the funds stolen through hacks to decentralized protocols are directly laundered using the same decentralized protocols, to confuse their tracks.
A new report on the state of the web3 released in June instead analyzes how the activity of all users has tended to shift from exchanges centralized (Binance, Crypto.com, Binance) to those decentralized (Uniswap, SushiSwap, Curve) to try as much as possible to escape the controls of governments who want to force KYC (Know Your Customer) and AML (Anti Money Laundering) controls for blockchain transactions.
The latest report, however, the one that answers many questions about criminal activity on blockchains, is the Crime Report. In the 2022 edition, Chainalysis states that over 97% of thefts in the first three months of 2022 occurred on DeFi platforms, up from 72% in 2021 and 30% in 2020.
Of all the thefts, it is interesting to note that the most used type of attack has changed over time, from security attacks to exploits on the protocol code that in many cases is developed superficially or incompletely. Knowing how to read these analyzes on the one hand, and knowing how to compare them with transaction data on the other, is the most complete way to understand how the blockchain works not from a purely technological point of view, but above all from an economic and social point of view. .
Chainalysis recently concluded a $ 170 million Series F funding round that brought the company to a $ 8.6 billion valuation, making it the largest SaaS company in the cryptocurrency industry. In the short term, in the words of a spokesperson, “Chainalysis will continue to invest in product innovation to expand its global operations and meet customer demand, taking advantage of all the opportunities that this ever-changing market will offer. In the long term, the funding round will be critical to Chainalysis’ global growth. Suffice it to say that more than 450 people have been hired in the last year, bringing the total to over 700 employees worldwide. The number of customers also grew by 75%, with over 750 customers in 70 countries. This funding will be used to continue the growth of Chainalysis, with the aim of making the world of cryptocurrencies a safer place for everyone. “