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A group of researchers from the Friedrich-Alexander University Erlangen-Nuremberg recently published a paper detailing methods that investigators and courts can use to determine the validity of deanonymized data about the Bitcoin (BTC) blockchain.
The team’s draft paper, Argumentation Schemas for Blockchain Deanonymization, outlines a plan for conducting, reviewing, and presenting investigations into crimes related to cryptocurrency transactions. Although the paper focuses on the legal systems of Germany and the United States, the authors state that the findings should be generally applicable.
Bitcoin crime investigations revolve around the deanonymization of suspected criminals, a process made more difficult by the pseudonymous nature of the blockchain. Users conducting blockchain transactions are identified by wallets (unique programmatic addresses) and not by legal names.
However, blockchains are inherently transparent. Whenever data is added to the ledger of the blockchain, the transaction is recorded and made available for viewing by anyone with access to the blockchain.
Investigators trying to determine who is behind a particular wallet use the information contained in blockchain transactions (blocks) as data points that, when combined, form a digital paper trail.
According to the research team, the current bottleneck in these studies is no longer technology related; it’s a legal issue.
Law enforcement agencies have access to the tools needed to conduct a preliminary analysis of the blockchain, but these early data represent circumstantial evidence.
This evidence is based on certain raw assumptions that can only be confirmed by connecting online activity with offline activity, such as forcing an exchange to reveal the identity or bank account information of users suspected of criminal involvement. According to the paper:
“In legal practice, these assumptions are critical to inferring the probative value of deanonymizing a criminal. However, a standard practice for obtaining and discussing the reliability of the results of such an analysis has not yet been proposed.”
When done properly, a blockchain investigation can uncover the perpetrator. As an example, the researchers cite the case of the Wall Street Market. There, U.S. Postal Service investigators identified the operator of an illegal darknet marketplace by connecting various data points that law enforcement officials confirmed during surveillance operations.
On the subject: German police confiscated six figures in cryptocurrency from suspects involved in a dark website
However, researchers say that such investigations risk infringing on the rights of suspects due to legal requirements. Prosecutors (in Germany and the US, according to the paper) must show some degree of evidence of guilt before warrants can be issued for aggressive investigations such as surveillance or arrests.
To assist investigators and prosecutors, and to ensure 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 trial.
The image above shows two diagrams, each using a set of specific premises to formulate a specific conclusion, and then providing a set of critical questions to evaluate the strength of an argument.
The researchers argue that “using schemas, the analyst can articulate the heuristics being applied, their strengths and potential weaknesses. This increases the clarity of such analyzes and litigation for decision makers, as well as simplifies documentation for later verification by an expert witness.”