Blockchain analysis has been used by a UC Berkeley PhD candidate to identify sex trafficking rings, through the linking of Bitcoin payments made for online adult advertisements.
Could automation and Blockchain analysis help law enforcers crack down on human traffickers?
Stylometry and Blockchain analysis
Human traffickers often reach their customers through advertisements in sources like Craigslist and Backpage.com.
The research uses two tools – analyzing the writing style (stylometry) and Blockchain analysis to try and identify human trafficking rings. Machine learning is used to identify adult ads with similar writing styles, which could indicate that they are likely to come from a single source – a trafficking ring.
American Express stopped processing payment for Backpage in 2014, while other credit card processors like Visa and Mastercard stopped in 2015, leaving Bitcoin as the only viable source of payment.
Blockchain analysis is used to link payments made for various ads, again indicating a single source. Demasking these Bitcoin addresses would, however, require enforcement officials taking up additional investigation.
The problem with the above method is that it is useful only as long as the traffickers pay from the same wallet and do not attempt to cover their tracks.
Bitcoin mixers can easily obfuscate the Blockchain train and prevent linking of transactions. We can expect traffickers to be extra careful and take additional precautions, now that this research has been published.
Moreover, the possibility of false positives is also high. Bitcoins sourced from a particular vendor and then used at Backpage could lead to false suspicions about a trafficking ring.
Linkage of Bitcoin transactions only increases the likelihood of a trafficking ring being present and is not conclusive evidence.
Silk Road experience
While human trafficking is a worldwide issue which is always on the radar of law enforcers, drugs are a bigger problem.
When Silk Road, the darknet marketplace for drugs was flourishing, it primarily used Bitcoin as a medium of payment.
However, the Blockchain trail did not help law enforcers track drug peddlers and shut down the website. Silk Road had its own tumbler which was used to mix Bitcoins.
Law enforcers could still theoretically find out who bought Bitcoins from exchanges (primarily Mt. Gox at that time) and sent it to Silk Road, but that wouldn’t help catch the drug peddlers.
So the utility of Blockchain analysis in the Silk Road case was limited.
The increased focus on using the Bitcoin Blockchain to unmask users, for activities ranging from tax evasion to sex trafficking, raises concerns about the privacy of ordinary users.
Altcoins like Monero and Dash with a focus on protecting privacy of users could gain prominence in this scenario.
Apart from mixers and CoinJoin transactions in Bitcoin, these altcoins provide cryptocurrency users an easy way to improve privacy.