Blockchain Security Technologies

Hi, Geektimes! With this post, we at Wirex , a blockchain-based money transfer service, would like to talk about the technology for tracking sources of cryptocurrency transactions proposed by the Elliptic blockchain project. Solutions of this company to fight the bad guys are integrated into all major cryptocurrency exchanges and other services.

Blockchain is a social phenomenon, since the physical responsibility for creating a product and shaping its value lies with each participant, because any entry in the registry must be officially registered. “Information belongs to everyone” - this is the blockchain ideology expressed in specific technical solutions. Even if machines interact in a chain of processes and contracts, the ultimate interest is with a person. And in any social group, sooner or later, attempts to deceive and, consequently, attempts to control occur.

Attempts to cheat gave rise to the imaginary anonymity of the first cryptocurrency, since the random numbers generated by the transaction keys are difficult to identify. However, in any chain with many closely related and duplicate events, one thread helps to unravel a huge tangle.

Bitcoin antifraud?

Tom Robinson, James Smith and Adam Joyce launched the Elliptic startup in October 2013, when the bitcoin price was at a maximum of $ 1,147.15. The company was opened in London - Fintech, the capital of the Old World.
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Recently, a startup received a $ 5 million investment from a number of well-known companies interested in the development of cryptocurrency and financial technologies. Among them were Digital Currency Group, KRW Schindler Private Ventures and Santander Innoventures, Paladin Capital Group and Octopus Ventures. The last fund also participated in the 2014 round, when $ 2 million was invested in Elliptic.

Initially, Elliptic intended to create a Bitcoin repository, for which the first two million dollars were received. But it is quite natural that the plans of the founders of the startup have changed after researching the demand in the segment of financial technologies, where for several years there has been a great need to create projects at the interface of security expertise, big data analysis, machine learning and financial management itself. If all of the above helps to protect capital or make a profit, you are in queens. “Why not add another breakthrough theme?” Thought the founders of Elliptic and concentrated on the blockchain issues, of course, taking Bitcoin as a model. Here you have both finance and technology.

However, this startup does not seem to be another “bubble” that is diligently inflated by interested owners of big capital. It seems that it has practical application, starting with expert assistance to investors in a very “hot” market. As a result, when Elliptic specialists, for example, train former federal “security guards”, investors expect to get a serious team and priority in the growing innovative segments. In addition, the team is developing IB solutions related to Bitcoin for private companies and is thinking about creating its own API - as stated by startup analyst Kevin Beardsley, banks are already filing applications.

Due to darkweb-mud - to riches banking

Thus, with a successful set of circumstances, Elliptic hopes to become a Mecca for legal entities and individuals who want to protect themselves from fraud during operations with cryptocurrencies or entering into contracts based on the blockchain.

Attracts many and fashionable system of predictive analytics. A London-based startup uses transaction tracking technology from a public Bitcoin registry. There, he detects and marks suspicious transactions, forming machine learning patterns in a distributed cryptocurrency system due to the logical connections between the marked groups. Artificial intelligence is trained on these patterns, simulating possible scenes of fraud, money laundering and other criminal activity. Using and analyzing big data that has accumulated over seven years of the obvious existence of blockchain registries seems like an obvious idea, but the founders of a startup did not immediately come to this useful idea. In turn, the machine patterns and the learning process itself are corrected by a specially trained analyst. Naturally, the system also has a data visualization tool:



Cryptocurrency is "growing up," says Elliptic CEO James Smith. This means that banks and reputable financial institutions are interested in it, because, in addition to investing in startups , coinns and blockchain technologies around the world, the money-shifters of the old formation are not averse to legalizing operations with cryptocurrency. As we remember, recently we thought about it in Russia. One problem: most financial institutions are obliged to follow strict anti-money laundering policies , while Bitcoin and other cryptocurrencies have some difficulties with this. According to the Internet Watch Foundation (IWF), which tracks sites with illegal and violating ethical content, Bitcoin's pseudo-anonymity has made it a popular means of black-market and criminal circles for two years.

Quo vadis?

And here the question arises: what does the legalization of cryptocurrency and the "green corridor" for big business on the protected lands of decentralized transactions mean?

As a result, banks will rush into the open door, financial regulators will follow them, and we will not harbor any illusions, the state. How to treat the supervisory authority - it does not matter, federal or private - on the territory free from centralization and censorship?

Of course, the participants of the blockchain and Bitcoin communities ambiguously perceive the initiatives of Elliptic. According to one of the editors of the Reddit resource, the investor hype around Elliptic has split the masses: lovers quietly and anonymously "pin the cue-other" clearly against. The startup is supported by responsible users focused on the initial ideology and transparency of the blockchain.

Even John Matonis, one of the founders of the Bitcoin Foundation, was skeptical about the idea of ​​financing Elliptic, posting on Twitter a link with the comment “War on Financial Privacy Escalates”, which can be translated as “War of secret financial transactions”.

At the same time, representatives of Elliptic argue that they intend to move away from Bitcoin and look at the situation more broadly. Predictive big data analysis technologies are successfully applied in various antifraud and information security systems. Here, the very fact of building and analyzing a network picture is important - something for which people work with big data.

According to Smith, Bitcoin was created as an uncensored digital currency, and it’s not worth interfering in this by tracking every transaction at any point on the planet. In addition, people do not realize that their actions with Bitcoin are not at all anonymous, and with a strong desire you can learn a lot about transactions and the owners of encrypted accounts themselves, he says, stressing that the company's goal is to track and eliminate criminal, dangerous for all communities. Elliptic analysts collect a lot of data from the darkquab, the usual Internet and cooperate with all possible organizations - from cryptocurrency exchanges to law enforcement. The latest startup helps to recognize cases of drug trafficking, theft and money laundering. By the way, the aforementioned IWF fund recently transferred to Elliptic all its work in curbing the activities of illegal websites. The association database contains, among other things, an impressive list of Bitcoin addresses.

Between enmity and friendship

Elliptic enemy or defender in this case?

For noise and hyip, the community forgets an obvious fact. Someone, sooner or later, would still raise the issue of monitoring security, transparency and reliability of transactions with cryptocurrencies and contracts in the blockchain. Not this startup, so different or, what is worse, a federal agency. It is important that this someone has friendly intentions, a good reputation and is one of the effective members of the IT community.

There is another fact: oversight initiatives give rise to competition and stimulate the growth of technology. Perhaps this whole story will provoke an active development of the tools of secrecy.

Meanwhile, James Smith expects that the activities of Elliptic will become a catalyst for the development of blockchain space by honest and serious businesses and will entail a lot of safe transactions.
Who is right - time will tell.

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