Blockchain analysis has become a booming industry over the past few years. Companies active in this industry 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. The company’s whitepaper details how it can thoroughly analyze transactions 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 big fans of blockchain analysis firms. This additional scrutiny of cryptocurrency transactions could have major repercussions in the long run. It would not be a bad thing if the illegal activity associated with currencies such as Bitcoin were finally 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 crime proceeds or tax evasion, Bitcoin is not the tool for those 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 about those as well. As BlockSci’s whitepaper explains, there are very few cryptocurrencies which have eluded their scrutiny. 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 an “unsupported blockchain due to it not following the one-input one-output paradigm.” That is an interesting point which shows how Monero may be the only cryptocurrency providing full privacy and anonymity right now.
Some people may wonder how Monero is any different from Dash or even ZCash in this regard. While it is true the latter two cryptocurrencies have focused 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 like 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 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 pointing 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 into Dash, Bitcoin Cash, and a few other cryptocurrencies right now.
It is unclear what all this means in the bigger scheme of things, though. While blockchain analysis is not something most everyday users will be concerned about, it highlights that cryptocurrency is not necessarily providing any degree of privacy whatsoever. This could prove to be a big problem for specific cryptocurrency users moving forward. Then again, it also validates the fact that no one should use Bitcoin or altcoins to conduct illicit activities in the first place.