Best Blockchain Forensics Tools

Mt. Gox 2014: Massive Bitcoin Loss Sparks Bankruptcy and Cryptocurrency Turmoil

In 2014, Mt. Gox filed for bankruptcy, citing the loss of approximately 850,000 bitcoins, which were valued at hundreds of millions of dollars at the time. The exchange claimed that the bitcoins were stolen due to a security breach in their system. This incident led to considerable financial losses for thousands of Mt. Gox customers and had a significant impact on the cryptocurrency community as a whole.

After Mt. Gox’s collapse, a comprehensive forensic analysis of the Bitcoin blockchain was crucial to trace the stolen bitcoins. Investigators, law enforcement, and blockchain forensic experts used specialized tools to scrutinize transaction histories and track the movement of the stolen funds. The objective was to follow the digital trail within the decentralized ledger, identifying patterns and connections to reveal the individuals or entities behind the theft.

What is Blockchain Forensics?

Coming onto a brief about blockchain forensics, Blockchain forensics is a specialized field that involves the investigation, analysis, and interpretation of data on a blockchain to uncover evidence related to illicit activities. This discipline is particularly crucial in the realm of cryptocurrencies, where transactions are recorded on a decentralized and immutable ledger.

Some of the use cases of blockchain forensics tools include:

1. Investigating Cryptocurrency Theft
2. Money Laundering Detection
3. Compliance and Regulatory Reporting
4. Cybersecurity Incident Response
5. Fraud Prevention in Initial Coin Offerings (ICOs)

In this blog, we will have a look at some of the best blockchain forensics tools, delving into their crucial role in investigating, analyzing, and interpreting data.

Top Blockchain Forensic Tools

Below is a compilation of blockchain forensic tools:

1. Bitquery — Coinpath API

Bitquery provides blockchain data APIs, including tools for blockchain forensics. Bitquery is known for offering comprehensive data solutions for various blockchain networks. Bitquery’s API includes the Coinpath® API, which is designed for blockchain forensics and transaction analysis. This API allows users to track the flow of cryptocurrencies across different blockchain networks and provides valuable insights for forensic investigations by identifying patterns, relationships between addresses, and the visualization of transaction flows.

Figure 1: Bitquery Coinpath API

Key Features of Coinpath

1. Precise Transaction Path Analysis:Coinpath API offers a granular level of transaction path analysis, allowing users to follow the flow of cryptocurrency funds across multiple blockchain networks.
2. Multi-Blockchain Support: Versatile in supporting 40+ networks such as Bitcoin, Ethereum, other major cryptocurrencies, the API is equipped to handle diverse blockchain ecosystems.
3. Customizable Queries: Customizable queries that cater to specific needs. Investigators can tailor their queries to focus on particular transactions, addresses, or timeframes, providing a targeted approach to forensic analysis.
4. Real-Time Tracking and Monitoring: Coinpath API provides real-time tracking and monitoring capabilities, enabling investigators to swiftly respond to emerging patterns or suspicious activities. This real-time aspect is particularly crucial for proactive threat detection.
5. Visualization Tools for Enhanced Understanding: To enhance the interpretability of complex transaction data, Coinpath API gives you sankey graphs across multiple hops . These tools offer graphical representations of transaction paths and address relationships, making it easier for investigators to comprehend and analyze intricate blockchain data.

Figure: Illustration of Moneyflow

Coinpath API emerges as a specialized tool finely tuned for AML investigations. Its features, including customizable queries, multi-blockchain support, and real-time monitoring, empower investigators to navigate the digital landscape with confidence.

Coinpath has a detailed documentation about:

1. Ways of reading a Coinpath Graph: Where a vivid description about the Components of the Money Flow Graph and distinction between a Transaction and Transactions in Coinpath has been documented.
2. Fund Tracking in Different Chains: Such as for the EVM Networks, UTXO Networks, and Ledger Based Networks.

The Token Holders API is a powerful tool for accessing information about both fungible (ERC20) and non-fungible (ERC721) token holders, providing both current and historical data. For instance, if you seek details about the holders of a specific NFT, you can input the NFT’s contract address in the tokenSmartContract field, retrieving comprehensive information about these holders.

Additionally, the API facilitates the retrieval of the total number of token holders. Using the uniq field and obtaining unique Holder_Address values allows users to determine the number of token holders on a specific date.

For instance, effortlessly obtaining the token holder count for USDT on Ethereum is achievable by executing a query directly within the integrated development environment (IDE). The API’s versatility establishes it as a valuable asset for exploring and comprehending the dynamics of token holder ecosystems.

2. Chainalysis

Chainalysis is a leading blockchain forensics and analytics platform designed to empower investigators, law enforcement agencies, and financial institutions in understanding and analyzing blockchain transactions. Launched in 2014, Chainalysis has played a crucial role in bringing transparency and compliance to the evolving cryptocurrency landscape.

Figure: Chainalysis landing page

Its key features include:

1. Allows investigators to follow the flow of funds, identify patterns, and gain insights into the movement of digital assets.
2. Ability to attribute blockchain addresses to real-world entities. Through advanced clustering techniques and attribution algorithms, it helps in identifying the individuals or entities behind cryptocurrency transactions.
3. Offers real-time monitoring capabilities, allowing users to stay updated with the latest transactions on the blockchain. This feature is essential for tracking and responding promptly to suspicious activities or emerging threats.

3. Elliptic

Elliptic is a prominent blockchain analytics and forensics platform, recognized for its comprehensive tools designed to address the needs of financial institutions, law enforcement agencies, and cryptocurrency businesses. Elliptic specializes in blockchain forensics and compliance.

Figure: Elliptic landing page

Its key features include:

1. Excels in monitoring and analyzing cryptocurrency transactions in real-time. Its platform enables the tracking of funds across various blockchain networks, providing valuable insights into the flow of digital assets.
2. Employs advanced risk-scoring mechanisms which aids compliance efforts by helping businesses identify and mitigate potential threats related to money laundering, fraud, or other illicit activities.
3. Provides solutions for regulatory compliance, allowing businesses to adhere to anti-money laundering (AML) and know your customer (KYC) regulations.

4. CipherTrace

CipherTrace is a leading blockchain forensics and intelligence platform that specializes in providing solutions for cryptocurrency transaction tracking, compliance, and investigations. CipherTrace offers a range of tools designed to address the complex challenges associated with cryptocurrencies.

Figure: CipherTrace landing page

Its key features include:

1. Excels in tracing cryptocurrency transactions across multiple blockchain networks. Its advanced algorithms enable investigators to follow the trail of digital assets, uncovering details about transactions, addresses, and entities involved.
2. Offers comprehensive blockchain intelligence solutions. This includes the ability to analyze and interpret blockchain data, providing insights into transaction patterns, illicit activities, and potential vulnerabilities.
3. Instrumental in cryptocurrency investigations, assisting law enforcement agencies and cybersecurity experts in uncovering illicit activities such as fraud, hacking, and money laundering.

5. Crystal Blockchain

Crystal Blockchain, developed by Bitfury, is a cutting-edge blockchain analytics and forensics platform designed to provide comprehensive insights into cryptocurrency transactions. Launched as part of Bitfury’s suite of blockchain solutions, Crystal Blockchain stands out for its focus on transaction transparency, regulatory compliance, and investigative support.

Figure: Crystal Blockchain landing page

Its key features include:

1. Assist businesses and financial institutions in achieving regulatory compliance.
2. Assists compliance teams in identifying and mitigating potential risks related to money laundering, fraud, or other illicit activities.
3. Enable the visualization and tracing of funds, providing users with a detailed understanding of transaction histories.

6. TRM Labs

TRM Labs is a leading provider of blockchain intelligence and risk management solutions, specializing in helping organizations understand and mitigate risks associated with cryptocurrency transactions. Established with a focus on empowering financial institutions, cryptocurrency businesses, and law enforcement agencies.

Figure: TRMLabs landing page

Its key features include:

1. Transaction Monitoring and Analysis
2. Aids organizations in identifying and addressing potential threats related to money laundering, fraud, or other illicit activities.
3. Includes features for anti-money laundering (AML) compliance, helping organizations adhere to global regulatory standards and requirements.

7. BlockSci

BlockSci is a powerful open-source tool designed for forensic analysis and in-depth exploration of cryptocurrency transactions. Its primary aim is to provide researchers, developers, and forensic investigators with a flexible and transparent tool for unraveling the complexities of blockchain data.

Its key features include:

1. Multi-Blockchain Support
2. Visualizations are instrumental in identifying patterns, relationships between addresses, and overall transaction behaviors.
3. Methods to handle privacy-centric cryptocurrencies and ensures comp

8. Scorechain

Scorechain is a blockchain analytics platform designed to provide transparent and comprehensive insights into blockchain transactions. Targeting financial institutions, cryptocurrency businesses, and regulators, Scorechain aims to facilitate compliance with regulations, enhance risk management, and foster transparency within the cryptocurrency ecosystem.

Figure: Scorechain landing page

Its key features include:

1. Real-time transaction monitoring, allowing users to track the flow of digital assets across various blockchain networks.
2. Aids organizations in identifying high-risk activities, such as money laundering or fraud, and taking proactive measures to mitigate potential threats.
3. Helps in maintaining a secure trading environment, preventing illicit activities on the platform.

9. Elementus

Elementus is a blockchain analytics platform that focuses on providing comprehensive insights into blockchain transactions. Tailored for financial institutions, cryptocurrency businesses, and regulatory authorities, Elementus aims to enhance transparency, compliance, and risk management within the cryptocurrency ecosystem.

Figure: Elementus landing page

Its key features include:

1. Detects and prevents fraudulent activities, ensuring the security of financial transactions.
2. Offers features for analyzing smart contracts on blockchain networks like Ethereum
3. Helps investigators identify the real-world entities behind cryptocurrency transactions, contributing to enhanced transparency.

10. Coinfirm

Coinfirm is a blockchain analytics and forensics platform designed to provide in-depth insights into cryptocurrency transactions. Tailored for financial institutions, regulatory bodies, and cryptocurrency businesses, Coinfirm aims to enhance transparency, compliance, and risk management within the rapidly evolving world of blockchain and cryptocurrencies.

Figure: Coinfirm landing page

Its key features include:

1. Allows users to track and analyze the movement of digital assets, identifying patterns and potential anomalies in transactions.
2. Provides compliance tools, including features for anti-money laundering (AML) and know your customer (KYC) compliance, essential for regulatory adherence.
3. Provides detailed transaction analysis and forensic insights.

Tips for choosing the best forensic tool

Choosing the best blockchain forensics tool is crucial for organizations and professionals involved in investigating, monitoring, and ensuring compliance within the cryptocurrency space. Here are some of the key considerations:

1. Blockchain Network Support: Ensure that the tool supports the blockchain networks relevant to your investigation or monitoring needs. Different tools may specialize in specific
2. Comprehensive Transaction Analysis: Look for a tool that provides in-depth transaction analysis capabilities. This includes the ability to: trace funds, explore transaction histories, inputs and outputs.
3. Address Attribution and Clustering: Choose a tool that employs effective address attribution techniques and clustering algorithms. This feature helps in associating blockchain addresses with real-world entities, aiding investigators in identifying individuals or organizations involved in transactions.
4. Risk Scoring Mechanisms: Evaluate the tool’s risk scoring mechanisms. The ability to assess and score the risk associated with specific transactions is crucial for identifying potential threats such as money laundering or fraud.
5. Visualization Tools: Choose a tool with effective visualization capabilities. Visual representations of blockchain data, such as Transaction flows and address relationships and can significantly enhance the interpretability of complex information, aiding both investigators and compliance teams
6. Pricing: Evaluate the pricing model and cost structure. Choose a tool that aligns with the budget and provides value for the features and capabilities it offers. Consider whether the pricing model is scalable as the needs evolve. Bitquery offers a free developer plan, allowing users to explore and integrate the blockchain data APIs.

The article highlighted prominent blockchain forensic tools — Bitquery Coinpath, Chainalysis, Elliptic, CipherTrace, Crystal Blockchain, TRM Labs, BlockSci, Scorechain, Elementus, and Coinfirm. Each tool offers unique capabilities, including transaction tracking, risk scoring, compliance tools, and comprehensive analytics.

It provides insights into selecting the best blockchain forensics tool. Key considerations include blockchain network support, transaction analysis, address clustering, risk scoring and various others. These factors guide organizations and professionals in making informed decisions tailored to their specific needs.

Blockchain forensics tools are indispensable in the dynamic cryptocurrency landscape. Beyond post-incident investigations, they serve as proactive measures for compliance, risk management, and securing digital assets in the ever-expanding blockchain universe.

FAQs

Q1. Why is blockchain forensics essential in the cryptocurrency landscape?

Blockchain forensics is crucial for investigating, analyzing, and interpreting data on decentralized ledgers. It plays a pivotal role in post-incident investigations, compliance reporting, and securing digital assets in the cryptocurrency ecosystem.

Q2. Which blockchain forensics tool is renowned for its versatility and effectiveness?

Bitquery’s Coinpath API stands out for its versatility, offering features like precise transaction analysis, multi-blockchain support, customizable queries, real-time tracking, and visualization tools.

Q3. What are some use cases of blockchain forensics tools?

Blockchain forensics tools are used for investigating cryptocurrency theft, detecting money laundering, ensuring regulatory compliance, responding to cybersecurity incidents, and preventing fraud in Initial Coin Offerings (ICOs).

Q4. What considerations should one keep in mind when choosing a blockchain forensics tool?

Considerations include blockchain network support, comprehensive transaction analysis, address clustering capabilities, risk scoring mechanisms, visualization tools, and privacy handling features.

Q5. Why is real-time tracking important in blockchain forensics?

Real-time tracking is crucial for proactive threat detection. Tools like Bitquery’s Coinpath API provide real-time monitoring capabilities, enabling investigators to swiftly respond to emerging patterns or suspicious activities.