[Art made by myself]
On 17 October 2023, US Senator Elizabeth Warren and 101 other US Senators signed a letter to US security officials, raising concerns about The Hamas and other Terrorists being financed with cryptocurrency. The letter further asked what the Biden Administration was doing, would do, and would need to do about it.
I wrote about this in more detail here.
This news had me reading the signed letter itself, then I found myself scrolling through the reactions of crypto enthusiasts on social media to the news, and then I ended up reading what Chainalysis, a Crypto-analytics firm, had to say about the whole thing.
Here is the full article they made in reply.
What Chainalysis had to say was very interesting. As an analytics firm, they specialize in investigating and tracking crypto transactions, finding out the identity behind wallets and related information.
In their reply, they talked about how the amounts the Senators believe, from reports, to have reached Hamas's hands through cryptocurrencies were overstated. They also talked about how their analysis has led to seizures of assets from Hamas and Hezbollah, and how it can lead to more.
This whole thing further had me reading about crypto analytics firms, and coming to realize and appreciate even more, how traceable cryptocurrency transactions can be, and how our identities are not as hidden as we think they are.
I found out that when investigations dive deep, it's usually only a matter of time before the identities behind wallets are uncovered.
I was happy it could lead to the capture of criminals, but as a very deep thinker, I started wondering how reliable these analytics can be and whether there was a certain way criminals could avoid getting caught.
I took hold of all the knowledge of cryptocurrencies and Blockchains I have amassed over the years, turned it over in my head, and something absurd struck me.
I've Used this Absurd Means of Transferring Cryptocurrencies in the Past
In 2020, I introduced some newbies to cryptocurrencies, and showed them how to earn from some Social Media platform called 1up (it is closed down now). After they earned, they wanted to sell their earnings, but because the token earned was ERC-20, they needed to pay gas fees.
They didn't have any Ethereum for gas fees, neither did they have any money to buy. After a lot of deliberation, I decided to buy the wallet from them. That is, the entire wallet, with the tokens in it.
It was the well-known Trust Wallet, so all I did was ask them to uninstall the app and give me the paper where they saved their Mnemonic phrase. There was some level of trust between us, so I knew they hadn't saved the password anywhere else.
They simply uninstalled the app, gave me the phrase and their hands were completely off the wallet. I logged into the wallet on my own device and paid them off for the tokens.
Very unusual transaction, isn't it? But funds changed hands, you see?
The Usual Way Crypto-Analytics Catches-up with A Person
It is usually because someone along the line before the Cryptocurrency got to you or after the Cryptocurrency has left you has his identity linked to his wallet. Simply identifying that person can lead up to you.
For example, a wallet on an exchange with KYC sends funds to A, A sends to B, and B sends to C. Investigations are trying to find C, so they look at where the funds C got came from, it came from B, and then from A, and finally from the wallet with KYC.
Investigations get in contact with that wallet with KYC, and the person behind it is made to reveal who he sent it to, he reveals A. A is then made to reveal who he sent it to, he reveals B, and then B reveals C. And C is caught all because of that one wallet that had an identity tied to it.
This is not exactly how it works all the time, but this is one way it works. A single wallet with an identity can fish out everyone else who held the funds at one time.
This Absurd Means and its Untraceability
This means is 100% untraceable! The only condition, though, is that the funds should have been sourced anonymously. That is, from a source that can't be linked to a person's identity. This condition can be fulfilled if the funds didn't come from an exchange with the person's identity, or from a source that doesn't know the person's identity at all.
So, say I buy Cryptocurrency from a person without disclosing my identity anywhere along the transaction, even if that person is contacted, they can't reveal my identity because they don't know it. So, investigations would have to wait for me to send the Cryptocurrency elsewhere so they'll keep following it until it reaches someone they can identify and then they'll work their way back to me.
But that can't happen if I never transfer the funds. That can't happen if I simply give the buyer the wallet keys/password and hands off the wallet.
Changing of Keys on the Blockchain
When I took that wallet from my friends, I thought I could simply change the Mnemonic phrase and ascertain I was the only one who'd ever seen the password and there's no chance those guys could access the wallet as a result of having the keys saved somewhere else.
But to my surprise, there was no way to change the phrase. Such an option is not available on Trust Wallet and most wallets, so I had to live with it.
Why then do I think this absurd means of transferring crypto is workable?
That's because I found out the reason I thought I could change the keys was because the first Blockchains I ever interacted with, the Steem Blockchain and the Hive Blockchain, had the option to change your wallet keys.
I googled further and I couldn't find any other Blockchain with an option to change keys. But since the Steem and Hive Blockchain originated from Dan Larimer, I thought Larimer's other Blockchains would have this option. So I checked Eos and Bitshares, and there it was!
So right now, I know 4 Blockchains with the option to change your keys. Steem, Hive, Eos, and Bitshares. This means a person can anonymously get funds and then never transfer them out of the wallet for it to begin a trail that might lead back to him.
Instead, the person can transfer the crypto by simply selling the wallet and the keys to the buyer, the buyer can then change the keys and have the only access to the wallet.
Conclusion
As absurd as this is, this can be done if other options are not easily available.
For example, Chainalysis said in their report that Hamas has stopped receiving Cryptocurrency donations because their donors and others linked to their transactions are being sanctioned and exposed.
Imagine they still have some Bitcoins in their wallet but they can't sell because no one would risk being exposed by buying from them/being linked to terrorist transactions in any way.
If this is the case, they can create a Hive account, send the Bitcoin to the Hive Dex known as Tribaldex, convert the Bitcoin to Hive, convert the Hive to Hive-Backed Dollars (HBD) which is the stablecoin of the Hive Blockchain, save the HBD in the Hive Wallet and keep passing that wallet from person to person for ages.
It works too well in this scenario, I almost feel like it's possible they find this article and follow what I've explained, so I have to add that the authorities should be on the lookout. Funds on Tribaldex are controlled by Tribaldex.
All I wanted was to make an academic dive into this whole thing.
The End
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