Using the Blockchain Trail to Track Stolen Bitcoins

By Clay Michael Gillespie Jan 17, 2015 6:54 AM EST

Tracking bitcoins

NEW YORK (InsideBitcoins) — Recent bitcoin hacks serve as yet another reminder that bitcoin is still in a nascent state when it comes to security. The blockchain may be a public ledger, but it’s not as easy to track stolen funds as some people might think. Innovations like mixers and tumblers can move digital currency holdings to multiple bitcoin addresses, allowing privacy-seeking users to obscure their trail.


Fabio Federici

Due to repeated and significant security lapses, governments all over the globe are beginning to consider tighter legislation on cryptocurrencies. According to Fabio Federici, CEO of Coinalytics, if people within the bitcoin community can create tools that help keep users safe from hacks, government regulators might be appeased – or perhaps of a mind to invoke less rigorous restrictions.

“Security and regulation are going to be two big topics this year. Even though the blockchain is secure, vulnerabilities in other spaces, like we have seen with the Bitstamp case, could potentially cause major damage,” Federici told Inside Bitcoins.

Coinalytics compiles data from the blockchain and converts it into user-friendly analytics. After Bitstamp had been hacked, the blockchain data analysts at Coinalytics decided to plug in available information and visualize the direction of where the coins were heading.

“I think it’s good that we’ve shown that we can handle those issues,” he said. “Being able to show the regulators that we can deal with the bad actors, that we have tools to track fraudulent behavior and keep the end user safe, is going to put us in a favorable environment.”

At its core, bitcoin allows anonymous transactions by not linking specific identities to public keys. So tracking bitcoin through Coinalytics doesn’t bring users to a person, but rather a still anonymous public key.

Federici noted that the platform isn’t being built for them to de-anonymize the blockchain; it’s being developed as a tool for businesses that fall victim to theft.

“Our framework allows people to add additional information, like proprietary data, supercharging that data with insights from the blockchain,” Federici explained. “They can combine that with our insights from the blockchain and get a better look at what’s going on. Basically doing that last step, for example, is connecting an address or an output to an identity on their side.”

Coinalytics graphic


It’s a controversial notion: the fact that there are ways to allow for de-anonymizing bitcoin transactions. Recently, ChangeTip came under fire for their ability to connect Facebook, Reddit and Twitter profiles directly to bitcoin addresses. A Cornell professor was highly concerned that eventually, ChangeTip would sell that information to interested parties.

“In terms of de-anonymizing it, I think we should really focus on making sure that we don’t go too far.”

“The only way ChangeTip can command a higher revenue than a measly few thousand per year on their current business plan is by selling our information,” the professor said. “And they have two pieces of amazing information that no one else has.”

ChangeTip says they will never sell customer information.

Federici too, says Coinalytics has no interest in linking people to their public keys via there service; they simply want to develop tools to study the data that the blockchain already allows.

“The data is there. The blockchain is public and we’re really just building tools to give people the best possible access to that information,” he said. “In terms of de-anonymizing it, I think we should really focus on making sure that we don’t go too far.”

Facebook Comments

  • Sara D

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  • Sara D

    try, they are professionals and company


    Can you help me?


    Are you able to track my scammed money transferred via bitcoin?

  • Mark Wolfe

    I fear I will be ridiculed for this question but I implore readers to understand that I feel as if I’ve been ripped off multiple times since the MTGOX fiasco in which I lost 10 bitcoins

    I was furious. I tried to read the class action suit PDF and could not make sense of it. I didn’t sign it.

    After a year or so I read that authorities were fairly certain where the coins were. In a wallet that had not been accessed since the hack… this news caused me grief and bitterness once more.

    Then when an announcement apparently went out to former MTGOX users that they could log in again and be compensated in some way, I shook my fists again because no notice of this in plain English came to my email inbox. I found out about it by sheer accident, and upon reading that I had missed the deadline by mere weeks, it was as if I was re-victimized again.. as it is each time I read anything about MTGOX.

    My question is, can these new analytics locate my ten missing bitcoins?

    I have all the emails that show when they were purchased, with what payment method, etc…

    Is there a way to finally regain my stolen property, if not now, then when these tools are developed further?

    I don’t think it is at all fair that anyone who lost even one coin or fraction of a coin should not be reimbursed with at least the value of the Bitcoins at the time the hack was revealed… given that BTCs just broke $1,500 and back then they had just broken $500, I don’t see any reason why we can’t be compensated.

    Well, of course I can see at least a dozen reasons why, but that doesn’t mean I think it’s at all fair.

    Am I crazy to hold out a sliver of hope that the complex technology that went into the Bitcoin can finally be used to retrieve them?

  • Mvelo

    Blockchain. My friend lost bitcoins from blockchain hacker’s this morning. It’s saddening because I’m the one who introduced him to blockchain. How can he recover his bitcoins?

  • Bitcoins Rsa

    Hi gatomalo2…
    “I wish I had a case study but if someone hires me I can track down most any BTC transfer to a wallet”

    Is it possible to have a private dscussion?

  • gatomalo2

    I wish I had the time to track some of these TX down I’m kinda busy working on my Bitcoin HD-BIP32 business wallet and paying the bills -or — But Jon you of all people know that the blockchain is an open ledger and the cogs in Bitcoin service has only one purpose – the TX -transaction -transfer ownership from one wallet to another wallet’s PrivateKey- Every coin TX has an unlocking and locking service to transfer coins – so by finding and decoding TX we will find every transfer of coins in the blockchain. Now if you add the Tor factor and they use public Nodes then we have a chance to track down IP to wallets, now if we add a Private Tor Node then we have to look harder to find IP but the unlock still has to work to spend or transfer any coins so the wallets can be found. Even a cold storage wallets need funding and that hits the blockchain. I wish I had a case study but if someone hires me I can track down most any BTC transfer to a wallet- Like me buddy say’s -Ït’s all about the Blockchain baby and the data inside.

  • Can you please cite any of the many stolen bitcoin or bitcoin hacks that have been tracked to the perpetrator?

  • gatomalo2

    You can look at your competitions Bitcoin TX traffic pretty easy. tags IP to Company names. ANy good Bitcoin detective can find the needles, sometimes many needles and that’s when these great tools come in. It’s about time these tools become real.

  • Nemesis

    Monero, my friend.

  • Eric Voskuil

    “Being able to show the regulators that we can deal with the bad actors… and keep the end user safe, is going to put us in a favorable environment.”

    On the other hand, the ability to track *anyone* means that *everyone* can be tracked – by anyone else, so implying it’s limited to “bad actors” being tracked by presumably good actors is a very misleading if not dangerous assumption. There is no bright line between good and bad actors, as there is no limiting the tracking to good actors.

    It’s a service to the world to show how weak privacy can be, which encourages better privacy behavior and solutions. But the lack of privacy for *everyone* does not create a “favorable environment” except for the surveillance state and other criminals.

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