Deanonymization Through Correlation; What Chainalysis Revelations Of Bitcoin Financing Of Capitol Rioters Mean For All Of Us


Last week there was a conflict between the suits and the Bitcoiners – already forgotten as events this week quickly overtook everyone. Last week, both Christine Lagarde and Janet Yellen were confronted for comments suggesting that Bitcoin is a vehicle for money laundering, payments for ransomware, pedophilia, and all kinds of unsavory activities. The crypto quota asked for her blood, suggesting that around 3% to 4% of all fiat transactions fuel money laundering and all kinds of prohibited activities. The main exhibition for the crypto defenders was numbers from the chain analysis, which suggest that the proportion of crypto-crime involving pseudonymous cryptocurrencies has fallen from 2.1% of all transactions in 2019 to 0.34% in 2020. Therefore, cryptocurrencies are not used as often in criminal activity as fiat, ergo cryptocurrencies no longer promote crime than fiat.

There is no point arguing about the numbers as the real numbers are unknown. Chain analysis is not the ultimate authority on the percentage of transactions that can be traced back to criminal activity. However, the publication of the details of the forensics used in a particular series of transactions reveals methods of de-anonymization. These transactions include funding well-known right-wing figures who were taped on January 6th to stir the crowd outside the Capitol. This article describes the exact steps in detail.

Just like the rioters who posted their images on Parler without realizing that Parler saved metadata about the media, including the latitude and longitude when they were created, went wild. It is naive to believe that transactions with Bitcoin using pseudonymous identities in a self-hosted wallet protect privacy. In media on Parler, both data to be correlated existed in the same transaction. One was immediately available, another if you look deeper. It might not be as obvious as the Parler example, but the correlation drives decanonymization and reveals details to hide.

Tracking donations to all correct groups in December 2020

From chain analysis findings

Research, which lists Bitcoin’s payment margin of more than $ 500,000, received from an anonymous French donor to alt-right groups, shows how the correlation uses data that is many years old. Well-known addresses for donations to right-wing figures are traced back to their source, which in this figure is referred to as the extremist donor wallet. A one-time payment of 21.79 Bitcoins flows from another wallet called the Extremist Legacy Wallet into the Extremist Donor Wallet, of which payments totaling 28.15 will finance the several extremist wallets on December 8, 2013, an early adopter signals. An address associated with the legacy wallet has been registered with NameID, a service that associates the address with an email, online ID, etc. with the Bitcoin address. Bingo, the donor’s online identity, has been revealed. Following this one more step will take you to a blog with a gruesome post a day after you donate. It was a farewell letter. The donation for his favorite occasions came just before he committed suicide. A seven year old indelible association leads to the actual person who made the donation before they killed themselves. The word “he” is used because people tracked down the man and his address and the morgue where his body was located. The data lives on even after the body is melted in the grave.

Digital exhaust is never issued, that’s the name of the lesson. In the immutable world of Bitcoin, some of this data is visible to the whole world. Once this data is correlated with other information available elsewhere, the donor’s privacy is violated. This is the world we live in now, there is a perfect memory and it is cheap to keep everything.