Behavioral Analysis of Bitcoin Users on Illegal Transactions

Abstract

Bitcoin is a popular crypto currency that is used as a mode of investment and a medium for trading goods and services. The features such as anonymity, security and decentralization are the significant characteristics of Bitcoin. These features attract different types of users to adapt to this payment mechanism since 2009. In particular, it create several opportunities for criminals to involve in illegal and fraudulent activities. Thus, this research is based on the negative discussion around the Bitcoin. The thesis pays particular attention on identifying user behavioral patterns and significant facts among illegal incidents that are of varied nature. The study examines each illegal incident of different nature so that it is able to identify common spending patterns among illegal users. The motivation for choosing this study lack of literature that covers illegal incidents of various nature and analysis for patterns and significant facts in patterns. The analysis recognized spending pattern, popular exchanges used, and notable techniques used to cash out tainted Bitcoins. It shows that the illegal users utilize several techniques to cash out tainted Bitcoins. One way is to directly transfer to exchanges or Bitcoin washers or services which is an evaluation of a previous research. Another way is to transfer the Bitcoins in small amounts to several other their own addresses or to fresh wallets in subsequent transactions and thereafter transfer to exchanges. Bitcoins are transferred to fresh wallets in small amounts. They either transfer a constant amount of Bitcoins or in a certain proportion. These attempts are taken by illegal users with the intention of prevent being tracked by investigators. In addition, popular services such as Xapo.com, Helix Mixer and Poloniex.com were discovered as frequently used services.