Topic: IBM Find Only 2% Of Bitcoin Transactions Are Unlwaful (Read 488 times)

IBM Find Only 2% Of Bitcoin Transactions Are Unlwaful


But the FBI is going to shut down the Internet anyway, just to get rid of it (Bitcoin).

Complete and utter BS!!! There is no way to find out what transactions are used for. What counts as "unlawful" different countries have different laws. Buying cannabis products here it totally 100% legal but in some other countries, it is a "crime" and "unlawful" so that is why I ask my question. Slavery was once part of the law as well so I have 0 belief in the law or those that make them.

2% is way way too high it is probably more like 0.1% Unless you counting drugs then perhaps it is more but I hardly think drugs should be considered something "bad" the most common drug sold is cannabis anyway.

I guess you probably mean most transactions happening on the "dark web" The clear web has had anything that you get on the darkweb since the beginning of the internet so it's nothing new at all. Just using bitcoin to pay is new.

Also, many people consider the silkroad "unlawful" but Ross Ulbricht should never have gotten the punishment he did. All he did was provide a free market. Most open-minded logical people will understand this.
The best way to deal with the failed "drug war" is to simply legalize it. Black markets would no longer work and criminals would lose massive amounts of money overnight. Drugs would no longer be "cut" or "laced" with such things as rat poison which is why there many OD. Pure drugs don't make you OD the way street filth does. The drugs will also be produced by professionals and not some hill billies shake and bake from the back of his van.

Besides 99.99% of the drugs in the world are paid for with fiat. More people trade drugs for other items then they pay for them using bitcoins.

On one hand, 2% is a low number. However, we have to keep working to keep this number decreasing because the more legitimate use of Bitcoin around the world, the faster it will grow and propagate among all the countries and be used on an everyday basis.

Agreed.

In addition, as I mentioned earlier in this thread, the figure of 2% provided in the OP’s referenced article, even if we were to assume for a moment that they had classified correctly each TX into one of the three categories (2% illicit, 21% licit and 77% unclassified) is still short. The unclassified group is a large indetermination, and the ratio between the illicit and classified groups (illicit+licit) would render an 8,7% of illicit TXs in the context of those classified assertively.

Note: Their dataset really bears 203.769 records, out of which 4.545 are tagged as illicit, which would really be 2,23% of the study group. The data is anonymized, so it is not possible to neither retrieve the addresses being used in their study, nor interpret what any of their derived attribute values in their model mean (the downloadable dataset provides little use then really).

The majority of the transactions in dark markets are still being done in Bitcoin or Bitcoin Cash (BCH). The problem with anonymous coins such as Monero and Zcash is that it is not very easy to obtain these coins. You can't purchase them from the exchanges, as they need the KYC verification (which defeats the very purpose of purchasing an anonymous cryptocurrency). Right now most of the users are getting the coins by doing peer-to-peer transactions, but that is also not 100% safe.

To their credit, the implementation of Kovri has made the transactions almost 100% impossible to trace. But always remember that a large fraction of the node syncing is occurring in the clearnet, as I2P doesn't have a large bandwidth. Monero requires constant updates and bug-fixes to retain its position as the no.1 anonymous coin, and I hope they won't scale back the development.

Even so, there remains huge steps of hasty generalizations here which make their findings still inconclusive. If they immediately consider wallet providers, exchanges, tumblers, etc. as licit categories, they are committing non sequitur. It simply doesn't follow. A Bitcoin moving from one legit wallet exchange to another legit wallet exchange does not automatically mean the Bitcoin is not earned through a scam, or hacked, or plainly stolen. Moreover, I could send some BTC from my wallet categorized as licit to another still licit wallet but it is for buying illegal drugs.

It took me a while, but I managed to find their definition:
Illicit is a bit broader that I would have thought beforehand, but there you go.

Each TX had up to 166 attributes of data, 94 direct and 72 derived. They have released the dataset if anyone wants to take a look at it, although there is no thorough explanation due to alleged intellectual property issues: https://www.kaggle.com/ellipticco/elliptic-data-set

Didn't we already saw it coming ever since the authorities officially stated that Bitcoin is now being used less by criminals ever since they have shift to a more anonymous cryptocurrency such as Monero or Zcash. Anonymity based cryptocurrencies has been a thing to talk about in the crypto regulation space where even countries like Japan and Korea are planning to delist (if they haven't already delisted them yet) them on exchanges. The fact that Bitcoin's transaction now only consist of 2% of them being illegal on shows that crimes didn't stop in the industry they just shifted to another kind of cryptocurrency where the authorities would have a harder time on tracking them. Rather than be happy about the decrease we should be alarmed by it because we don't know how it will affect the future regulations we will have if this thing worsened.

I think this puts to rest the negative reportage of the media who always claim that majority of the users of Bitcoins and cryptocurrencies are using it for nefarious and illegal activities.I really hope that this reports gets the needed attention am sure that it will undoubtedly help bring more investors.

This inevitably depends on people reporting criminal activity associated to certain addresses. For example in the Binance theft, if Binance gave IBM the list of addresses. Someone somewhere (maybe even IBM themselves) need to keep a database of tainted addresses.

As for darknet transactions, when done well maybe you immediately cannot identify the buyer/seller, but you can probably match the purchase and flag it, and start seeking connections to/from that address all over.

Darknet is not automatically illegal, some people simply like the anonymity, just like mixers. You could buy things there that would have normally done via Ebay or Amazon... I remember someone had a bot running doing random purchases and they made a museum with the many weird and mundane things bought.

Which brings me to wonder what "unlawful" really means to them. And regardless of what they mean by "unlawful", do we really care? At the end of the day, lawful can neither be equated to moral nor right. Lawful simply means you are abiding with the law, meaning you are treading on the legal path. But then, again, legal cannot be equated to good. The example given is clear.

I am more interested with "77 percent were left unclassified" more than the 21% legal or to the 2% unlawful. The unclassified percentage is too high, which makes the 21% and 2% findings inconclusive. It could also mean that Bitcoin transactions are a new wine to an old wineskin. The old laws are obsolete and cannot encompass to the new advancements in technology.

it is of note how these numbers that keep being reported about bitcoin usage for illegal things in general or specific cases differ a lot. they range from 1-2% and up to 90%.
this shows how bad the techniques that these different groups are using to "analyze" the bitcoin blockchain are. which is yet another proof of their unreliability when it comes to their business model.

Exactly what I look for, if not to sabotage the cryptocurrency world or Bitcoin, if they are interested in cryptocurrency why don't they at first start with fiat currency? Basically this article is not from the said IBM rather they are impersonating the real company and should not be taken seriously, bullshit.

You are missing something. According to this report 2% of transactions are unlawful. But we cannot say only 2 of 100 transactions are unlawful. 77% of transactions are unclassified. So, these transactions must be deducted from all the transactions. If deduct 77 from 100, only 23% remains. So we can say 2 of 23 transactions are unlawful.  It's about 9%.

and what of IBM's reputation?


IBM collaborated with Nazi Germany during the 2nd World War, but they did not break any German law whilst doing so (many large companies, both German and American did so in fact)

I am actually happy that a reputable platform is coming out with figures and verifiable evidence about the real transactions carried out with the intention of breaking the law. However, the 2% so low, when it comes to value, its something that can still be beaten down to the barest minimum and the reason why it seems its alarming is that, it seems so impossible to nab the perpetrators of such act which is why there is more to be done in sanitizing the crypto space to the envy of large corporations who are ready to bring in funds and the required publicity in other to ensure the penetration is done at a high level.

I'd like to see what percentage of fiat currency transactions are unlawful so we can finally break this stigma that Bitcoin and other cryptocurrencies are mainly used for crime.

I can understand cryptos like Monero and Zcash, but Bitcoin?! It's about as transparent as it gets, even more so than banks.

That's true, when posting I was kind of thinking 2%! That can't be right but I mean maybe it's just really well worded in the article

For outsiders perhaps, but not for the government or bank itself.

I'm pretty sure that they can show us a pretty detailed compilation of all transaction activity we participated in throughout the last years or even decades. They technically can even reverse your transactions from years ago if they so wish. It's a private database. Very transparent to them, but no to us.

Only when banks are providing banking services to the underworld they miraculously 'lose' transaction data and whatnot. How surprising. 

I'm not sure how IBM is able to classify transactions as unlawful. It's BTC, not bank transactions, and no-one knows who has what address, etc.

If they are classifying these transactions by how what has been detected to be a darknet/illegal wallet, this would be very false due to a large amount of undetected criminal activities.

Not really, it's not real statistics and their research is likely extremely far from the truth.

The fact alone that this kind of research can be done easily and publicly is a huge factor for bitcoin legitimacy . And this is the thing that most people do not understand, everything is public, all the transactions. In contrast it is very hard to map bank transfers.

In fiat economy the share of shadow economy is 15-40% and sometimes even more, I think thinking that only 2% of Bitcoin transactions are unlawful is quite naive. You don't need to sell drugs or weapons to make illegal transactions, simply working or running a business without a license already counts as unlawful, I believe that trading is the biggest use case of Bitcoin at the moment, but after that there's a huge amount of services that very likely belong to shadow economy.

However we get to know good about cryptocurrency usages there is negative news regarding the same. This can't be stopped, the change can't be experienced overnight. The change happens slowly and what we have with this analysis about the unlawful transaction between bitcoin and fiat is the reality which people find it hard to believe.

It's great that we are trying to use AI more, but this study does not seem to be talking in favor of it. The catastrophic part is that the vast majority of transactions (77%) were unclassified. This means we don't know the percentage of legal transactions to illegal ones even roughly, and it can be that Bitcoin is largely used for illegal stuff. And the very fact that we cannot be sure shows why the authorities might not be happy with it.
On the other hand, what kind of illegal are we talking about here? 'Cause financing terrorism is one thing and not paying taxes because the system in your country is confusing is another.

I figure the goal was to classify each TX as either unlawful or legal. Alas, only 23% managed to get one of those tags, whilst 77% were left unclassified, meaning, I figure that they could not trace nor tie these to either unlawful or legal senders/receivers.

If the wording in the article is as intended (and I’ve checked multiple sources and found nothing better), it means that the phrasing should state that “at least 2% were deemed unlawful”, since there is an immense unclassified 77% of the TXs in the study sample.

We could play the devils advocate here, and just play around with the classified TXs. That would lead to saying that the classified sample group is of 46.000 TX (2%+21% of 200.000). Out of this classified sample universe, 8,70% would be unlawful (4.000 TXs / 46.000 TXs) and 91,30% legal (42.000 TXs out of 46.000 TXs). I don’t particularly like this focus, but it goes to show that the unclassified group is important in size, enough to make the numbers shift wildly from the “only 2%” range provided by the title of the article.

Note: It would also be interesting to know how the 200K TX sample was selected, in order for it to be representative and sparce. For comparison reasons, the current number of BTC TXs/day is around 348K, and the historical total of nearly 444M.

I wonder what parameters have they used in order to come up with such a conclusion. Don't get me wrong, AI is a really interesting and useful technology although sometimes I doubt whether what it spews out are really of factual nature. For my understanding, the AIs of today are still largely controlled by its human engineers, and algorithms are also constructed by humans, so the results can still be biased in some way though again, there's not much discussion regarding the parameters used in the article. 77% of unclassified data is still a huge margin of error to conclude that only 2% are really illicit transactions, and so the research may stumble upon something but for now, it's not really that useful to say the least.

Any transaction may have unlawful things not only with bitcoin and other cryptocurrencies there are sure unlawful things that need to be confirmed under fiat money as well But Any kind of currency has unlawful things that haven't been check by the radar of the authority or government, and one thing is certain criminals would surely want a payment method that is off track the radar and Bitcoin and other cryptocurrencies is best fit that category because of its anonymity but as you have said there are just 2% tracked bitcoin transaction that is unlawful, well maybe the 77 classified ones were pretty certain to have things more anonymous but we can not know for sure.

Interestingly they do not do this kind of research for fiat currency. It's like unlawful act never happened with fiat.

How about the coins those were hacked? They should fall in the category of unlawful.

2% is still a lot, i guess. It will be intresting too know % of unlawful fiat transactions

Maybe you're talking about this one: https://info.elliptic.co/whitepaper-fdd-bitcoin-laundering

This study (from the same people, Elliptic, who helped IBM in the new one) was released in 2018 but it took place from 2013-2016 and it pretty much says that, in those 3 years, less than 1% of btc transactions were coming from illicit activities. Most of the volume from the illicit transactions came from Europe, and the main source for all the illicit transactions was (and probably still is) darknet maketplaces.

This isn't the first such publication by Elliptic. Can't really be bothered to dig up older ones but I can almost swear there is at least 1 in 2016 that mentions an even lower number (1%). Might have been another study from another firm but the methodologies have likely improved.

2016 was already when they noted the trend moving to other coins, this was just fresh after Silk Road.

To note, unlawful doesn't necessarily mean illicit.

it's 77% you made a typo, I feel like they rushed to publish the result even if it is not conclusive. 77% unclassified transaction is too high to claim that the study is a success.

There was nothing in the article in terms of an explanation on how they arrived at the results. There should have been some information regarding the methodology used for classification.
What are the 71% unclassified transactions? When those many are unclassified, how can they claim that "only 2% are unlawful".

There is additional information available regarding the methodology on the website of Elliptic. Seems like they use their "forensic tool" to trace origin of bitcoin transactions with a proprietary set of addresses whose owners are known to be associated with dirty bitcoin. Dirty bitcoin refers to those addresses that were at any time associated with the Darknet marketplaces of yore.

Interesting!
I suspect a large % of fiat transactions are unlawful in one way or another, ranging from tax avoidance, money laundering, drugs etc, pretty much the same with any means of payment. People do illegal shit & that’s that.

A London based company called Elliptic recently made a claim that only 2% of Bitcoin transactions are unlawful. To respond to that a partnered study was created by IBM and MIT to check whether the statement was actually true. It "utilized Artificial Intelligence and deep learning algorithms to reach its conclusions, represents something of a landmark for the use of AI in the blockchain and cryptocurrency industry. Of the 200,000 transactions analysed throughout the study, two percent were deemed unlawful, 21 percent were considered legal, while the remaining 77 percent were left unclassified. A key element in the success of the recent study is the utilization of artificial intelligence throughout the procedure. The integration of AI into the process of AML(Anti Money Laundering) protocols is significant in that it highlights how far the technology has come. Artificial intelligence is now sophisticated enough to both analyse and navigate the complexities that the blockchain presents.
Artificial intelligence’s role in the world of cryptocurrency and the prevention of criminal behaviour is already fairly well defined at this point, but the integration of the technology into the blockchain industry could be a game-changer of significant proportions." Especially considering the reputation Bitcoin is creating for itself for unlawful and illegal activities despite the evidence this research has created against it. "Today there is still a lot of skepticism of the blockchain and crypto worlds, more so the latter, but that is to be expected of an industry that is still relatively young and finding its feet. What cannot be denied is the vast potential that blockchain technology offers, and the integration of AI is yet another facet of this industry that could change the way we go about business in the future.
The Elliptic report isn’t the first time we’ve seen AI technology used in the blockchain and crypto world. Companies such as Singapore-based DeepBrain Chain and Velas, a startup based out of Europe have been forging a path for quite some time now.
For Alex Alexandrov, CEO of both Velas and crypto payments gateway CoinPayments, the role of artificial intelligence in the blockchain industry is simple: To solve problems. “Here at Velas, our purpose is to address and fix existing issues and challenges faced by most existing Blockchains, such as centralization for example, or 51% attack, nothing at stake problem, scalability, security, high upfront expenses and so on. This is done by using neural networks optimized by artificial intelligence to enhance its consensus algorithm.”
In a recent interview with a leading cryptocurrency news outlet, DeepBrain Chain CEO He Yong explained that DeepBrain Chain aimed to “connect all the idle AI computing resources globally so that the entire network can share computing power.”
We are seeing the technology gain more and more acceptance from academics and developers alike, which can only be a good thing for overall progress within the space. The work carried out thus far by companies like Velas and DeepBrain Chain is shining examples of what is possible when AI is utilized alongside blockchain technology."
-Source https://www.investing.com/analysis/elliptic-data-ibm-find-only-2-of-bitcoin-transactions-are-unlawful-200453542