Blockchain forensics comprises a variety of practices used to find, track, and trace the origins, history, and ownership of cryptocurrency assets by looking at transaction data. It is the equivalent of a forensic accountant for cryptocurrency; they are often called upon to deliver expert witness testimony in courts of law. Blockchain forensics, also known as cryptocurrency forensics involves a close examination of transaction history which can be used to identify fraud, hidden assets, money laundering, embezzlement, or theft.
Blockchain or cryptocurrency analytics, on the other hand, involves discovering and interpreting data points to assess past, present and future trends and patterns. For example, increasing transaction volume, price, and search requests for a cryptocurrency may be used to predict price changes in the future.
What is Cryptocurrency Forensics Used For?
Cryptocurrency is a form of money, regardless of whether governments elect to classify it as such or not. Cryptocurrency forensics is used for the same thing traditional forensic accounting is used for including cases involving fraud, money laundering, theft, tax evasion, bankruptcy, divorce, property, embezzlement, terrorist financing, and drug trafficking to name just a few.
Forensics wouldn’t exist without transparency and access to data. Forensic accountants dig deep into bank account statements, transaction history, invoices, and money transfers to uncover key information and attempts to obfuscate assets. Forensic accounting for cryptocurrency has some similarities to this. The main difference is that all the transaction history is already freely and publicly available on the blockchain for anyone to see, indefinitely.
For this reason, some would argue that cryptocurrencies are far more transparent than legacy financial systems. This transparency is a crucial aspect allowing cryptocurrency forensics firms to find funds, track transaction history, and demonstrate ownership of crypto assets.
Cryptocurrencies without Transparency
Transparency is also a crucial aspect that makes cryptocurrencies more secure. If cryptocurrencies don’t have public transaction history, how can users be sure no one is cheating the system by spending currency they don’t have? Public transaction history allows users to validate all transactions to ensure users haven’t manipulated the system.
There are a few privacy-focused cryptocurrencies that some would argue have achieved privacy and reduced transparency while maintaining security. However, there are extremely few cryptocurrencies that meet these criteria, and none of them are frequently used. Furthermore, none of the privacy coins is a catch-all solution that will enable individuals to evade detection, although they certainly may help.
Tracking Crypto Assets Yourself
One of the most common ways to track cryptocurrency assets is by using a block explorer. Once you know the applicable cryptocurrency, look up either the wallet address or transaction hash to find more information. Blockchain.com is a great blockchain explorer for Bitcoin, while Etherscan.io is a great blockchain explorer for Ethereum. There are also publicly accessible block explorers for almost all other cryptocurrencies such as Litecoin, Stellar, and XRP.
Depending on what you’re attempting to track along with your level of expertise and forensics tools at your disposal, you may want to hire a blockchain forensics firm.
It’s important to differentiate between a blockchain forensics software firm and a blockchain forensics investigation firm. Forensic software firms tend to have more name recognition and include firms like Chainalysis that are focused on developing, maintaining, and licensing their blockchain forensics software, primarily to goverment agencies, law enforcement, financial institutions, and cryptocurrency exchanges. A blockchain investigation firm like CipherBlade, does the actual groundwork and investigation, utilizing blockchain forensics tools as part of their arsenal.
Our Focus Areas
As previously mentioned, there are certain fields and types of cases Cryptforensic Investigators tend to focus on, while there are other fields and types of cases we do not work on. While Divorce and Separation is our largest area of focus, it is not our only focus area.
Types of Cases We Take On
- Divorce and Separation
- Child Support
- Other Family Law Cases
- Trust and Estate Law
- Bankruptcy Law
- Property Law
Types of Cases We Do NOT Take On
- Money Laundering
- Terrorist Financing
- Tax Evasion
- Commercial Theft
- Drug Trafficking
- Fraudulent ICO’s
Cryptocurrency accounting is simply forensics accounting for crypto assets. As knowledge and adoption of cryptocurrency increases, it’s likely a lot more firms will arise in the future, as currently there are extremely few.