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If reports are to be believed, a team of Computer Science students from Trinity College, Dublin has designed a database to track fraudulent Bitcoin activities.
According to a paper published in science news website phys.org, the aforementioned team of staff and students have literally created a “Bitcoin regulator” that could watch over patterns between multiple Bitcoin addresses and their relationship with each other. For instance, if an individual is operating multiple Bitcoin accounts, the new mechanism will be able to connect dots between these accounts. This will eventually lead trackers to the account holder himself, supposedly.
The Method behind Tracking Bitcoin Users
As per the available reports, Cian Burns – a Master student at Trinity College – spent hours to auto-trawl Bitcoin blockchain with the help of multiple online sources. By that means, he was able to build a database of all accounts so as to understand their interconnectivity with each other. For instance, if someone goes public with their Bitcoin address, his other addresses could also be traced accordingly and the database updated.
“The big benefit of such a picture is that if an address is involved in fraudulent activity, tracing related addresses could protect other users from further fraud,” explained Burns. “Our trawl gave us a unique insight into some very high-profile Bitcoin fraud cases that were being conducted across the world. Regulation is further down the line, but a database of accounts could certainly protect people and raise the appeal of Bitcoin for legitimate businesses.”
While the aforementioned procedure seemed a little outdated, possibly because of too-much human intervention, the Trinity College team is hoping to drive this project towards more advanced levels. In the same paper, the team discussed creating an online database from where businesses could double-check the Bitcoin “credit” of their future partners. The database could also be used by law enforcement agencies to keep an eye on inter-country Bitcoin movements, especially those with nefarious intentions.
The feasibility of this project is still a topic that requires a broader debate. Especially as the reuse of addresses is usually strongly discouraged anyways. We will try to get in touch with the team to know their plans in details. Stay tuned!
Image Credits: Trinity College, Dublin and Flickr.
Jean-Mouloud 
endmathabusenow 
It's Bitcoin Time 
So if a “fraudulent” guy sends me a coin, I’m also in your blacklist even if I didn’t do anything wrong?
And so are all the people I sent coins to? Brilliant!
Time to send satoshis!
Does this pose a risk to a business accepts a Bitcoin payment? Later that “coin” gets traced to a fraud and the business is forced to surrender the Bitcoin because the government views it as “stolen property”? Note in the US the Internal Revenue Service does not count Bitcoins as currency.
The concept of blacklisting is actually bad because blacklists are centrally created by some individual or group. And any centralized point can be attacked, corrupted and manipulated. It defeats the purpose of decentralization and will come to be abused, even if the intentions are good.
I think this kind of project is inevitable though, but because of things like this, it will also inevitably force the creation of easy-to-use and automatic anonymizing and mixing services which will make this eventually irrelevant. I imagine most wallets will incorporate this in time, but we could be talking years before this is common practice.
Personally speaking, I see complete anonymous use of digital currency becoming standard in time. The technology exists to do it, so it will happen.