Blockchain Analysis – A Path Towards Achieving Cryptocurrency Transparency

Cryptocurrency needs a great deal of trust and transparency to realize its full potential. Thus, in a bid to make this achievable, there comes the need to build systems that can ensure transparency so that investors can willingly adopt it without entertaining fears. To that effect, the idea of blockchain analysis came up, with several analytical firms today cropping up and rendering this service .

This article would examine to an extent what blockchain analysis is about, innovations aiding the service, the ugly side to the service, it’s current impact in the cryptocurrency ecosystem and the likely outlook it will take in the coming years. 

Blockchain Analysis; What About This?

Blockchain analysis involves identifying, inspecting, gathering, clustering, tracing and analyzing crypto transaction information on the blockchain. 

The analysis is carried out in order to enhance transparency through the monitoring of on chain trades, which in  turn is a preventive or reductive measure geared towards the likelihood of illicit transactions.

Trust Building

So far, blockchain analysis has been able to  create transparency for a global economy built on blockchains, enabling banks, businesses, and governments to have a common understanding of how people use cryptocurrency.

Chainalysis; for instance a blockchain partnership programme builds on a mission to promote the adoption of cryptocurrency by building trust among financial institutions, government, and cryptocurrency businesses. It’s Partners include companies that specialize in compliance software, cryptocurrency investigation and training specialist, core banking infrastructure, cryptocurrency wallet services  and more.

By  developing these partnerships, they amplify their reach across jurisdictions and provide the investigative and compliance technology the cryptocurrency ecosystem needs.

Also, Chainalysis’ software has only allowed customers to analyze transactions retroactively. Its new tool, dubbed Chainalysis KYT (for “know your transaction”), helps provide transaction analysis in real time.

This gives exchanges, for example, the capacity to instantly know if they are dealing with a trusted financial institution or with suspicious entities. 

Hedera as an analytical tool, enhances customer trust and loyalty by bolstering existing fraud detection systems through real-time and publicly auditable timestamped logs.

In addition, to ensure that blockchain analysis helps the industry remain trusted, product feedback is gathered from investigators and analysts daily and are acted upon with talented developers and designers working on it and improving loopholes. 

Generally, all these procedures, softwares or systems are being adopted by blockchain analytical firms to constantly ensure a security tight system hence making it more trustworthy.

Complementing Innovations?

As regards complementing innovations, Malcolm Tan, Advisor at Kingswap pointed to Coinstituency that; some similar innovation in times past, arose  to provide similar services to website Domain Name Services mainly attaching names to wallet addresses, which are basically unintelligible strings of characters thus making it hard to identify who the addresses belong to. 

He explained that if such standards are eventually accepted and widely used, they will help with the adoption of cryptocurrencies and make them more mainstream, which in turn will  complement blockchain analysis types of efforts and innovations.

Impact So Far….

The concept of blockchain analysis is one that started on a rough scale and though hated by many cryptocurrency holders for being perceived as a mere tool for surveil that hampers privacy, has no doubt remained and made remarkable impact in it’s business of ensuring transparency in the industry. Its efforts  and techniques are not new and so is its impact on crypto markets.

The service through analytical companies has undoubtedly proved its ability as being “up and doing” in carrying out the task for which it was conceived. 

It has handled cases where it aided efforts to find lost Bitcoin as in the peculiar case of Mt. Gox hack in 2014 where Chainalysis was contracted to help. Indeed, three years later this firm found 650,000 of the missing bitcoin stolen from Mt. Gox.

CipherTrace, another blockchain analytics software firm, deployed a predictive risk-scoring system that provides real-time alerts on suspect crypto transactions for its exchange, investor and investigator clients.

The tool assigns risk based on the on-chain histories of transacted funds, inbound cryptos with unseemly ties (from sanctioned countries or a fraud campaign, for example) getting a “high risk” score under the system. This high risk alert is seen as a cause for close scrutiny as the said transaction is marked “suspicious” hence, a preventive measure in cases of actual illicit perpetration.

There are analytical software provisions that help to prevent, detect and investigate cryptocurrency money laundering, fraud, ransomware and compliance violations hence largely contributing to the security and thrive of the digital industry. Pattern recognition, machine learning and millions of open source references are used to also identify and categorize thousands of cryptocurrency services.

Apparently, another impact is the software provision that has the ability to monitor customer deposits and withdrawals for signs of “tainted” coins that have been involved in money laundering, terrorism or drug dealing which is very helpful as traces can be made to it’s holders.

Furthermore, certain blockchain platforms have been used in a number of recent high-profile law enforcement cases. Teaming up with a number of both service-oriented and technical-oriented partners to heighten its transaction monitoring task. 

This is a useful and important social good as it’s effort is geared towards stamping  out bad actors and the penalty of seizure or prosecution serves as  deterrence to others. However, as in cases of the seizure of illicitly obtained cryptocurrencies by the government, they are processed and auctioned in the open markets, or go through appointed agents who convert them for fiat value.

Blockchain analysis is big business. As at 2019, it was reported that the U.S. government alone spent $6 million on transaction mapping tools, while cryptocurrency exchanges routinely partner with compliance companies that promise to track and trace the origin of customer funds. Due to its service of social good, it is said to be fastly growing in the cryptocurrency space. 

Any Dark Patches?

Concerning dark sides to this service, Tan believes that the only dark patch to this innovation or analytical service is the Over-emphasising of negative aspects of risk-assessed pools such as cryptocurrency exchanges which in turn is likely to impede on such exchanges not being able to connect properly to the fiat currency world.

In the majority of cases, however, blockchain forensics tools can only make probabilistic connections. As a consequence, innocent cryptocurrency users can have their funds frozen or seized by these centralized platforms.


Every blockchain analysis company pride themselves on being equal parts curious, honest, and passionate; daily focused on solving complex problems that make the world safer thereby laying a foundation for the cryptocurrency economy to flourish.

So far we see the effects of this service blossoming and achievements tremendously attained. Hopefully, if more analysis companies keep cropping up and keeping up to the task as with this present  trend of preventing money laundering, illicit activities, amongst others , then like Barbarians speak, all with one voice and at the same time, we will too. This time saying; “Oh dear, we just want some more; more blockchain analytical firms”.


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