Blockchain analysis has become a booming industry over the past few years. Any company active in this industry will scour public blockchains to identify suspicious or illegal transactions. While most of these efforts focus on the Bitcoin blockchain, BlockSci is doing things a bit differently. Their whitepaper mentions how they can thoroughly analyze transaction on other blockchains, including Dash. That is not good news for the privacy-oriented alternate cryptocurrency by any means. Other currencies include ZCash, Litecoin, and a handful of others.
BlockSci Paints a Somewhat Worrisome Future
Many cryptocurrency enthusiasts are not a big fan of blockchain analysis firms. This additional scrutiny of cryptocurrency transactions can have major repercussions in the long run. It would not be a bad thing if the illegal activity associated with currencies such as Bitcoin can finally be put to an end. Everyone knows Bitcoin provides no privacy or anonymity whatsoever, yet criminals still think they can get away with using this currency.
Blockchain analysis firms can easily track these suspicious transactions in real-time. These efforts have been successful in aiding both law enforcement agencies and the IRS detect illicit activity involving Bitcoin. Whether we talk about proceeds of crime or tax evasion, Bitcoin is not the tool to get away with these things whatsoever. In fact, it only makes it easier for specialized firms to deanonymize users over time.
Criminals flocking to other cryptocurrencies may want to think twice as well. As the whitepaper by BlockSci explains, there are very few cryptocurrencies which successfully elude their scrutiny right now. One of those currencies is Monero, as it provides a degree of anonymity and obfuscation the group has not been able to crack just yet. Monero is officially labeled as an “unsupported blockchain due to it not following the one-input one-output paradigm.” An interesting addition which shows how Monero may be the only cryptocurrency providing full privacy and anonymity right now.
Some people may wonder why Monero is different from Dash or even ZCash in this matter. While it is true those latter two cryptocurrencies have been focusing on privacy and anonymity to a degree, their implementations are far from perfect. BlockSci describes how they successfully traced both ZCash and Dash transactions from beginning to end, regardless of features such as PrivateSend. This is anything but good news for people who value these currencies for their privacy or anonymity features.
If there is one big lesson to take away from BlockSci it is how blockchain analysis will become even more prominent in the years to come. Anyone who demands more privacy and/or anonymity in cryptocurrency will have to carefully read this paper and draw their own conclusions. The team has made a lot of progress which presents a lot of evidence in regards to how privacy is not necessarily present in the currencies people may like. While the main focus is on Bitcoin, Litecoin, Namecoin, and Dash, the team is also looking successfully into Dash, Bitcoin Cash, and a few other cryptocurrencies right now.
It is unclear what all of this means in the bigger scheme of things, though. While blockchain analysis is not something most common users will be concerned about whatsoever, it also highlights cryptocurrency is not necessarily providing any degree of privacy whatsoever. This can prove to be a big problem for specific cryptocurrency users moving forward. Then again, it also validates why no one should use Bitcoin or altcoins to conduct illicit activities in the first place.
from The Merkle