SBIR Phase I:Comprehensive Blockchain Transaction Monitoring for Illicit Funds and Actors

The broader impact/commercial potential of this Small Business Innovation Research (SBIR) project is that it will result in powerful technology for detecting illicit cryptocurrency accounts and funds in close to real time. The commercial and market impact of the technology will be substantial with its ability to trace illicit accounts and funds to a depth and breadth never before possible and to accomplish this in seconds to minutes, as compared to the long to indefinite time it would take conventional network tracing technology.For society at large, the ability to uncover the most complex money laundering and fraud schemes will help cut the flow of funds to the worst actors using cryptocurrency: organized crime, narcotics dealers, child pornographers, human traffickers, terrorists, and rogue nations. With the platform created in this project, governments in conjunction with the private sector will have tools that can effectively address the sophistication of the criminal schemes.This will in turn result in greater growth of the cryptocurrency-based economy as businesses and individuals gain greater confidence that they are dealing with legitimate entities that are not seeking to defraud them.This SBIR Phase I project will bring to light the most sophisticated illicit schemes involving cryptocurrencies. In doing so, it will secure cryptocurrency systems and advance the fields of network analysis and visualization, which will be needed to understand the schemes. There are three major technical hurdles in the Phase I project. First, the proposed implementation and infrastructure for the network tracing algorithms need to be scaled up to trace the entire Bitcoin and Ethereum blockchains in real-time. Second, to be able to trace addresses to known illicit accounts, a sufficient number of these accounts need to be identified. The proposed project will develop software for cross referencing account addresses with both on-chain and clear and dark web activity to build the lists of known bad actor addresses.Third, for customers to believe the results of the analysis, a network visualization tool to show the chains of custody linking a suspect account to a known illicit account must be created. Because the algorithms can detect the schemes involving thousands of fund transfers between accounts, visualizing the links in a clear manner presents unique challenges. The project will therefore also build the foundation for its novel visualization tool in Phase I.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.