Expanding blockchain analysis and investigation cross chains

The fourth part in a continuous series on how graph databases can be used to explore and analyse blockchains. How can investigation into money distribution and tracking funds cross the borders of blockchains? In the previous part of this series, we looked at distribution patterns on the XRP ledger. However, the “cryptosphere” is comprised of many blockchains, so how can we tackle that?

First, it is essential to understand the concept of gateways: to buy any cryptocurrency, you have to bridge FIAT to the cryptocurrency of choice, typically through an exchange – a gateway between FIAT and a cryptocurrency. To trade one cryptocurrency for another cryptocurrency, in a similar fashion you have to go through a gateway.

These gateways are the piece of the puzzle that makes it possible to widen the transparency from one to many blockchains – and trace funds cross chain.

The above illustration is a random graph. Here, it represents one blockchain: bigger nodes are wallets, and smaller nodes are payments.

Now we have two blockchains (one could be XRP and the other Bitcoin). If we can identify Bitcoin/XRP gateway wallets in both graphs, we can connect the graphs on these nodes.

Moreover, if all payment nodes have information about the estimated FIAT value at the time of the transaction, we have a common denominator, useful for finding distribution patterns, even without transparency of the gateway’s private ledgers.

Even though this transparency may seem scary, it is one of the great benefits of the public blockchains: for counterfeiting money laundering and fraud, thefts and more.

If gateways are required to make their wallet addresses available to authorities, e.g. as a part of AML requirements, joining the blockchains would be even easier – maybe even providing insight in non-personal identifiable information of deposits and withdrawals?

This theoretic approach can be extended to almost all blockchains, with exception to the privacy-focused blockchains: this is the exact traceability they are created to circumvent.