Page 33 - Understandinging Forensic Technology Landscape

Tools and techniques blockchain data may require database analytics or
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big data approaches, especially if disparate data sets
Analyses of blockchain activity typically focus on the and/or off-chain activity analyses are required.
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flow of activity throughout the blockchain ledger and
activity at certain points in time. Analysis could, for Blockchain and cryptocurrency technologies have come
example, trace cryptocurrency transactions among under increasing scrutiny of regulators, including the
addresses and determine — to the extent possible, SEC, the Commodity Futures Trading Commission, the
given the limitations of certain blockchains — the U.S. Treasury Department, and federal as well as state
cryptocurrency balance of an address as of a banking regulators. Additionally, new privacy regulation,
specific date. such as the GDPR, creates the opportunity for litigation
when applied to blockchain technology. Although
Blockchain explorers are interfaces that assist the blockchain technology, especially on public ledgers,
analyst in reviewing cryptocurrency transactional history. provides some measure of transactional transparency,
Blockchain explorers are readily available for many, managing the implication of global data privacy laws on
but not all, cryptocurrencies. They are specific to the blockchain-related transactions is complex.
blockchain for which they are designed and can be found
by an internet search. The amount of data that can be Some blockchain ledgers address privacy by
displayed by or exported from a blockchain explorer may incorporating more anonymity into the transactions.
be limited, restricting the ability to perform certain types For example, the Monero cryptocurrency blockchain
of analysis needed to investigate particular activity. was developed so that an outside party can never
know whether transactions have been sent to the same
Although certain cryptocurrencies allow for the pseudo- public address or the value of those transactions. Other
anonymity of the parties involved in a transaction, many blockchains store information off-chain or outside of
of these technologies were developed with transparency the blockchain. The design of each individual blockchain
in mind. As such, it may be possible to determine the technology may require deep scrutiny to understand the
owner(s) of blockchain or wallet addresses if that investigative limitations posed by the architecture itself.
information is publicly available. These complications can have significant implications
for investigators and litigants.
Many blockchain technologies are still under
development and relatively immature, which frustrates
the rigor of inquiry and limits the ability to rely on Common uses for blockchain
these tools to confirm activity or test ownership. As a
result, practitioners may consider developing tailored Due to the decentralized nature of many blockchains,
approaches to specific investigative and litigation especially as it relates to cryptocurrencies, users of a
tasks, while carefully considering the sufficiency of blockchain ledger may attempt to take advantage of
those approaches in context of their engagement the lack of regulatory oversight. In the first half of
requirements. The use of experts in software 2019, cryptocurrency-related crime totaled more than
development may be beneficial. In addition, the size of $4.2 billion. 35

33 Through the first two quarters of 2019, the average number of daily Bitcoin transactions was approximately 340,000, ranging from approximately 226,000 to 450,000 per day. blockchain.com,
accessed November 27, 2019
34 Off-chain activity is information that is stored outside of the underlying blockchain itself. Reasons for storing information outside of the blockchain include reducing the amount of data
transmission and/or preserving privacy (by managing certain transactional details “offline”, as it were). Examples of information that can be stored off-chain include negotiation terms,
internal communications, healthcare information protected by HIPAA, and/or personal or proprietary information.
35 Cryptocurrency Anti-Money Laundering Report, 2019 Q2, CipherTrace Cryptocurrency Intelligence July 2019. ciphertrace.com/q2-2019-cryptocurrency-anti-money-laundering-report/,
accessed November 27, 2019

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