Study Reveals Nearly Half of Bitcoin Transactions Involve the Darknet

A recent study conducted by Talis Putnins and Jonathan Karlsen, professors at the Business School of the University of Technology Sydney, together with Dr. Sean Foley from the University of Sydney, has produced shocking results. In their yet-to-be-published paper, “Sex, Drugs, Darknet, and Bitcoins,” the researchers found that almost half of all Bitcoin transactions are linked to illegal trading on the darknet.

How the Research Was Conducted

The team used forensic financial analysis tools and blockchain technology, which continues to show promise across many industries. They developed a unique method to filter out illegal Bitcoin transactions, starting by analyzing trading networks on the clearnet (the regular, non-darknet internet). The researchers then focused on “dark Bitcoin deals,” examining all wallet addresses whose owners had been arrested for online crimes, as well as wallets that became known after darknet marketplaces were shut down.

Key Findings and Implications

“Most people believe that Bitcoin is untraceable and that its anonymity is far beyond the reach of law enforcement, but a closer look and digging into the details is eye-opening,” says Professor Putnins. “We were able to identify characteristics that can clearly distinguish between legal and illegal transactions on the Bitcoin blockchain. The main goal of our research is to help law enforcement and regulators at least understand what to expect, how to monitor and regulate Bitcoin use worldwide, and how to do so as it becomes mainstream,” Putnins explains.

The method developed by these professionals can be used by law enforcement and authorities to track online criminals, monitor darknet activity, and analyze other blockchains. It is now possible to assess the extent to which someone is trying to hide their identity and transaction records. The implications are unsettling.

Further Reading

P.S. Also, check out our translated article on how darknet users are identified through Bitcoin transactions.