Researchers propose new scheme to help courts test deanonymized blockchain data

A team of researchers from the Friedrich-Alexander-Universität Erlangen-Nürnberg recently published an article detailing the methods that researchers and courts can use to determine the validity of de-anonymized data in Bitcoin (BTC) blockchain.

The team's preprint paper, "Argument Outlines for Blockchain Deanonymization," establishes a plan to conduct, verify, and present investigations into crimes related to cryptocurrency transactions. While the paper focuses on the legal systems of Germany and the United States, the authors state that the findings should be of general application.

bitcoin-related criminal investigations revolve around deanonymizing suspected criminals, a process made more challenging due to the pseudonymous nature of blockchains. Users conducting blockchain transactions are identified by wallets (unique software addresses) instead of legal names.

However, blockchains are inherently transparent. Every time data is added to a blockchain ledger, the transaction is recorded and made available to anyone with blockchain access to view.

Researchers trying to determine who is behind a specific wallet use the information hidden in blockchain transactions (blocks) as data points that, when combined, form a digital paper trail.

According to the research team, the current bottleneck when it comes to these investigations is no longer technological; it is a legal problem.

Law enforcement agencies have access to the tools necessary to perform a preliminary blockchain analysis, but these early data points represent circumstantial evidence.

This evidence is based on certain raw assumptions that can only be validated by connecting on-chain activity with off-chain activity, such as forcing an exchange to reveal the identity or bank account information of users suspected of being involved. in criminal activities. for the role:

“In legal practice, those assumptions are critical to infer the probative value of deanonymizing a perpetrator. However, no standard practice has yet been proposed for deriving and discussing the reliability of those test results."

If done correctly, blockchain investigations can reveal the perpetrator of a crime. The researchers cite the case of Wall Street Market as an example. There, US Postal Service investigators identified the operator of an illegal dark web marketplace by connecting multiple data points that were corroborated by law enforcement through surveillance operations.

Related: German Police Seize Six Figures In Crypto From Suspects Involved In Dark Website

However, the investigators claim that such investigations risk affecting the rights of suspects due to legal requirements. Prosecutors (in Germany and the US, according to the newspaper) must show a certain degree of evidence of guilt before a warrant is issued for intrusive investigations, such as surveillance or arrests.

To help investigators and prosecutors while ensuring that the law is applied fairly to suspects, the researchers propose a standard framework containing five argument schemes designed to ensure proper reporting and explanation throughout the legal process.

The image above shows two of the schemes, each of which uses a defined set of premises to frame a specific conclusion, and then provides a set of critical questions to assess the strength of the argument.

The researchers state that “by using the schemas, an analyst can clearly articulate the heuristics employed, their individual strengths, and potential weaknesses. This increases the comprehensibility of said analyzes and judicial procedures for decision makers, and also facilitates documentation for later verification by an expert”.