Overcoming Complexity in Crypto Investigations
Instead of a mundane intro, let me offer an example of crypto-sphere’s growing complexity. This is from Visual Capitalist’s research in 2019. Here’s the link to the source article: https://www.visualcapitalist.com/visualizing-the-new-cryptocurrency-ecosystem/
The choice of dated content was deliberate — to help demonstrate that crypto-sphere was already complex several years ago. It was also a deliberate choice to avoid relationship charts because this format is not suitable when we are dealing with disparate blockchains.
Crypto investigators today are trying to move at the speed of change in blockchain development, coin taxonomy, the rise and fall of exchanges, and fraud typologies. Here’s a great report on this, by the way: https://www.elliptic.co/hubfs/Typologies-2022-Preventing%20Financial%20Crime%20in%20Crypto-NH.pdf
My point is that complexity in the crypto-sphere is a real threat to successful investigative outcomes.
Complexity on Blockchains
Let’s say you’ve successfully navigated your way to wallets and transactions of interest. Unless these are connected with exchanges, fiat off-ramps, or other known entities, information about humans behind wallets and transactions of interest is obscure by design on any blockchain. Even more complexity is added when transactions pass through so-called mixers and blenders (also known as tumblers) — wallets or collections of wallets receiving and sending hundreds of thousands of transactions. In the case of mixers, the incoming coin is not linked with the outgoing coin — basically a crypto-hawala.
Complexity in our tools
While crypto investigators have multiple products which could be aimed at the totality of the crypto-sphere with the objective of uncovering meaningful intelligence, we are often held back by lack of user-centric design.
For example, in order to arrive at basic answers using current on-chain investigation products, analysts have to spend quite a bit of time manipulating the user interface. Product designers, therefore, have an opportunity to help automate basic and even more advanced search techniques to help optimize their products for efficiency and effectiveness. They can also give users ways of creating their own automations. All this is quite achievable and the tech can certainly support it. Investigators just need to collaborate with product designers a bit more.
“Design is really an act of communication, which means having a deep understanding of the person with whom the designer is communicating.”
― Don Norman, The Design of Everyday Things
Solving Complexity
So how do investigators work through this complexity? There are two basic principles:
- Catch transactions on exchanges, wallets belonging to known entities, and fiat off-ramps. Then, in cooperation with a good lawyer, seek disclosure about receiving wallets and bank accounts.
- Find and follow leads in the physical world. There are instances when crypto-fraud victims have contacts and events in their life which may help solve the case. For example, a few victims have been lured into scams via messaging apps, meaning a fraudster engaged in direct communication with the victim. If victims could be lured, so can the fraudsters. At the very minimum, fraudsters almost always leave a trail in the physical world.
To conclude, there are ways of reducing complexity in crypto investigations. You can do so by carefully assessing the user-friendliness and utility of the tools for on-chain analysis, looking for points of possible disclosure along transaction paths, and extending your investigations into the physical world.
Let me know what you think.
Soar above mediocrity.
