How to Trace Bitcoin Transactions (and avoid yours being traced)

today we're going to take a look at chain analysis or blockchain forensics whatever you want to call the practice of mapping cryptocurrency transactions on the blockchain specifically to try and identify any cryptocurrencies or wallets that are associated with criminal activity so cryptocurrencies like bitcoin they have been used by criminals for a while now to do things like sell drugs on the deep web and launder money now that's not their exclusive use there's obviously plenty of legitimate uses for them but so many criminals choose bitcoin because for some reason they think that it's this super private super anonymous thing uh but despite what so many people mistakenly assume about bitcoin it's actually one of the most open and transparent currencies in existence literally every single transaction that has ever been made is on the blockchain for anybody to see so for example we can look at this transaction here where about 7 000 bitcoins were sent out um about 322 million dollars in today's money and this was actually a heist so this was a hack on binance uh where 322 million in bitcoin was stolen from them so we can look at just how this transaction is made up and this is how we can sort of figure out what's going on so we see uh several inputs i think all of them are 100 bitcoins yes so many many inputs gonna be about 70 in total and then outputs going to various other addresses now we can tell that this is a crypto exchanges address by clicking into it uh and just taking a look at what's going on with it so we can see that there's been about eight 800 000 transactions made and a total of i think there's about 12.5 million bitcoin received and then also about 12.5 million bitcoin sent so there's a whole lot of crypto that's go flowing in and out of this address based on that you can assume that this actually is belonging to an exchange and if we go back to what's going on over here and then also you can just look at transactions it's made like if you've ever bought bitcoin from binance your transaction might be in the history there but then if we look at the wallets that it's being transferred to so you see that there's a big difference in these wallets if you look closely at them so some of them are getting larger transactions like 400 and 500 bitcoins and then other ones are getting really small insignificant transactions there's also a difference in the wallet addresses so the ones getting larger ones are what we call segwit addresses you can tell because they begin with bc1 and usually these are going to be associated with a software or a hardware wallet uh and not associated with an exchange so you're not gonna get a bc one address by signing up with coinbase or binance kraken or whatever these are going to be i guess what you would say call anonymous wallets because you don't have to give any of your personal details to create them so pretty smart of the hacker to transfer the majority of the funds to these because obviously if they transferred it all to a wallet built with coinbase the funds would probably get frozen almost instantly and since coinbase has his personal information they would probably notify law enforcement of what he was up to so you can't really freeze the funds that are in uh these wallets because they're probably being managed by software like electrum or something like that but what you can do is you can monitor these addresses so we can check uh like let's go to this one i think this one got the biggest transaction um so we can monitor this and see what other type of transaction it makes so you can see all of its transaction history here and you can just go through and follow this transaction after transaction but this would take a long time to do this way so what's much smarter to do and what law enforcement and any companies that are trying to audit the blockchain will do is they'll use a tool like oxt dot me to basically be able to discover what's going on a little bit easier so even in this representation here you can see that it tells you right here that it's a binance wallet that it belongs to an exchange so you don't have to you know kind of go through and figure it out like i just showed you and they also put this um little and non next to the bc1 addresses so i'm pretty sure they're doing that to indicate that this is indeed an you know anonymous address created through a wallet and not something like this which is a wallet belonging to an exchange we can go to tools on oxt dot main and this is going to give us a more visual representation of the transaction so it's going to freak out a little bit here um because this first transaction was a really big one there were a lot of inputs and outputs but once this loads i can sort of start explaining what's going on with the graph alright so you see that there's a whole lot of blue arrows that are going in so these are the inputs to the transaction and then there are some black arrows well they were black a second ago blue arrows that are also going out and these are indicating the outputs and they're also different sizes so like if we look at um like this really skinny one here going out that probably went to oh well this is in a non-address as well but you can see it's 0.0015 bitcoins but then if we look at like this big black one here that is 607 bitcoins so this is how you can better analyze where everything is going and then of course you get uh the wallet info uh for where it's going and this is what law enforcement would typically be using when they're trying to see where one of these transactions is going you can mark it as read so that you know you've already taken a look at that and you could just continue expanding these transactions more and more so like let's do this to expand it so you can see this is where the hack went out and then these wallets they're all going to be making additional transactions to other wallets like if we do the same thing here we're gonna see again that there's multiple transactions that are being made we just keep on following this and you'll notice that there's a certain trend that's going on so this is a large transfer of bitcoins from one address to another but there's other wallets that kind of get a little bit of bitcoin sent to them as well right so you're sending off a large chunk and then like here there were smaller chunks uh going out well some of them are going out and some are going in like this is a small chunk that's going out and what this indicates is that this these transactions this bitcoin is being sent through a mixer right now so mixers it's basically laundering bitcoin it's trying to obfuscate exactly where it came from but it's not as clean as laundering money you know if you think of like the mafia they would have restaurants or they would have laundromats basically businesses that are going to be dealing in cash a lot and then they would take drug money or money from whatever scams or whatever they were doing and then mix it in and it's pretty much impossible to indicate whether say a 20 bill came from a cocaine transaction or whether it came from somebody buying lunch uh with bitcoin though we can see everything that's going on so we can see that these smaller transactions um might be legitimate things but we're able to still follow that okay this is mostly just trying to cover up or you know change the size of the amount of the bitcoin like right now it's 706 bitcoin and let's see what was it when we started yeah 670 so they're trying to make it look like it's something else that it's not um and then also sending it sending smaller amounts off to different wallets but again this whole thing can be traced and this is what we're talking about um when we refer to dirty bitcoins you know any bitcoin can be traced back to that original binance heist or any type of illegal thing that was done with it so see there's one against one output and then another input that's being mixed in with it keep going and then we see again this one is uh so this might be where now they're sort of starting to siphon it off into some of their wallets because it looks like these are just some outputs now and it's easy to create a whole bunch of wallets if you're using something like electrum for example you could just create thousands of wallets in a matter of minutes really easy so it's not even like you need to have one single wallet that just has a whole bunch of bitcoin in it um looks like yeah that was another another input from a random wallet and then another output now this is something that's accessible to everybody and in fact this um tool made by samurai wallet originally was created for you to sort of try and defend against this because samurai wallet they create a lot of privacy tools for bitcoin so if you were trying to launder bitcoins or let's say mix let's you know any time you're going to launder your crypto we're going to assume is for legitimate reasons you want to mix them and this way you can track your very own transaction to see every single place that it goes now with law enforcement there's an additional layer that they could have here that uh civilians don't have which is identifying the wallets with personal information because the majority of crypto wallets out there that are being used by single individuals they have personal information connected to them when you sign up with an exchange you have to give them all your personal info a picture of your id so on and so forth so the moment that one of these cryptocurrencies hits one of those wallets and then they try to exchange it for cash the transaction's going to get flagged and then the exchange is going to inform law enforcement and then they're going to come to your house and say hey you have uh you know crypto that was originally stolen from finance a year ago we need to uh we need to look through your transactions we need to know uh you know they might ask you who different addresses belong to so that they can sort of try and figure out what's going on now there's a number of ways that you can avoid this one that a lot of criminal enterprises are going towards is simply using cryptocurrencies that cannot be analyzed in this way such as monero so as you know with monero you have different send and receive addresses so you can't really track where everything is going if you don't have somebody's private address and another thing that you can do is you can try to avoid um selling any bitcoins if they uh or selling any bitcoins in a way that requires you to identify yourself so let's say for example you wind up possessing dirty bitcoins right some bitcoins that were stolen or you know used for a bad thing you're not really going to be able to sell those on coinbase anyway in fact if you put them into coinbase there's a chance that they might just get seized by law enforcement because technically you'd be in possession of like stolen property or you know property that was using for something illegal you know whatever legal reason they give for taking it you could go through some type of over-the-counter transaction like through local bitcoins so you would meet up with somebody in person and then exchange crypto for cash now if your bitcoins are dirty you're probably going to have to sell them for less money it's just like if you are buying stolen property in the hood right it's going to cost less than if you bought it at walmart because it's stolen so same idea there uh except obviously not every bitcoin is gonna technically be a stolen one it might just be one that was obtained by selling drugs and in general it's going to be a good idea to use wallets that are generated without your personal information being connected to them because you can see as we keep expanding this that it pretty much looks like small amounts of bitcoin gets sent off to a random wallet so if this was to be one of your bitcoin wallets you can avoid awkwardness with talking to law enforcement uh if it's something that's created through electrum anyway i hope you found this video useful i'll leave a link to oxt dot me in the description so that you can play with it a bit try to trace any crypto transactions or cr trace your own crypto transactions see if you can find where they're going hope you enjoyed the video have a great day

Channel: Mental Outlaw

Views: 36,843

Keywords: Mental Outlaw, mental, outlaw, how bitcoin is traced, how to trace bitcion, binance hacked, tracing illegal bitcoin transaction, how illegal bitcoins, how to trace bitcoin, oxt.me, trace bitcoin transactions, anonymize bitcoin, how to use bitcoin anonymously, bitcoin, btc, ethereum, monero, how fbi traces bitcoin, how cia traces bitcoin

Id: nAezK4L5Ias

Length: 14min 24sec (864 seconds)

Published: Fri Feb 26 2021