[Webcast Transcript] Considerations and Challenges for Blockchain, Cryptocurrency and NFT Investigations | HaystackID

This session, led by one of many world’s main cybersecurity, data governance, and authorized discovery digital forensics specialists, additionally introduced an examination of uncooked knowledge on blockchain ledgers, shared tips on how to analysis particular addresses and transactions as a part of an investigational course of, and thought of NFTs from an eDiscovery perspective.

Whereas the entire recorded presentation is available for on-demand viewing, supplied on your comfort is a whole transcript of the presentation.

[Webcast Transcript] Concerns and Challenges for Blockchain, Cryptocurrency and NFT Investigations

Presenting Specialists

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+ John Wilson, ACE, AME, CBE, Chief Data Safety Officer and President of Forensics, HaystackID

As Chief Data Safety Officer and President of Forensics at HaystackID, John supplies consulting and forensic providers to assist firms handle varied issues associated to digital discovery and laptop forensics together with main forensic investigations, cryptocurrency investigations, and guaranteeing correct preservation of proof gadgets and chain of custody.

+ Rene Novoa, Director of Forensics, HaystackID

As Director of Forensics for HaystackID, Rene Novoa has greater than 20 years of expertise expertise conducting knowledge restoration, digital forensics, eDiscovery, and account administration and gross sales actions.

Presentation Transcript

Moderator

Good day, everybody, and welcome to at the moment’s webinar. We’ve obtained an incredible presentation lined up for you at the moment, however earlier than we get began, there are only a few normal admin factors to cowl. Before everything, please use the web query instrument to publish any questions that you’ve got, and we are going to share them with our speaker. Second, in the event you expertise any technical difficulties, please tell us utilizing that very same questions instrument and a member of our admin workforce will likely be available to help you. And at last, simply to notice, the webinar will likely be recorded and we’ll be sharing a replica of that with you alongside the slides through electronic mail throughout the subsequent few days. So with out additional ado, I’d like at hand over to our speaker to get us began.

John Wilson

Properly, thanks. Good day, and good morning, afternoon, and night to at the moment’s worldwide viewers. I hope you’re all having an incredible week. My identify is John Wilson. On behalf of the complete workforce at HaystackID, I’d wish to thanks for attending at the moment’s presentation and dialogue titled, “Concerns and Challenges for Blockchain, Cryptocurrency and NFT Investigations”. At present’s webcast is a part of HaystackID’s common collection of academic shows developed to make sure listeners are proactively ready to realize their cybersecurity, data governance, and eDiscovery targets.

So the presenters at the moment have been speculated to be myself and Rene Novoa. Sadly, Rene Novoa will not be in a position to be with us at the moment, because of some unexpected circumstances, so that you’re caught with me, however we’ll get by way of it. I’m at present employed at HaystackID. Each of us are skilled veterans in digital investigations with particular experience in digital forensics, assortment of cellular units, and rising knowledge varieties, codecs, together with Blockchain, cryptocurrencies, NFTs, or different digital belongings. Having served as professional witnesses in investigations associated to at the moment’s subject, I’m excited to have the ability to share with you at the moment.

So from a proper introduction perspective, I’m John Wilson. I’m the Chief Data Safety Officer and President of Forensics right here at HaystackID. On this position, I present experience and professional witness providers to assist firms handle varied digital forensics and eDiscovery (digital discovery) issues, together with main investigations and guaranteeing correct preservation of proof gadgets and chain of custody. I repeatedly develop processes, create workflows, and lead implementation tasks for shoppers, together with main monetary establishments, Fortune 100 firms, and Am Legislation 100 companies. I’ve additionally been lucky to work on a number of the most vital issues on report in america and lots of the 39 international locations the place I’ve had the chance to work on circumstances.

At present’s webcast presentation is being recorded for future on-demand viewing. A replica of the presentation will even be accessible for the attendees as soon as the on-demand model is accomplished, and we anticipate these gadgets to be accessible on the HaystackID web site quickly after we conclude at the moment’s reside presentation.

At the moment, let’s transfer into our presentation on cryptocurrency and NFT investigations.

So at the moment, we’re going to speak by way of what’s a Blockchain for those who don’t have important data or understanding of what’s a Blockchain and what are digital belongings, what are the makes use of of these digital belongings? Then we’ll get into investigating and the forensics round digital belongings and Blockchain and cryptocurrencies, and all that enjoyable stuff, how have you learnt if digital belongings exist within the case that you simply’re engaged on, after which some ideas and tips or issues that assist advance these investigations.

So what’s a Blockchain? Actually, it’s troublesome to get right into a dialog about cryptocurrencies and digital belongings in the event you don’t perceive what a Blockchain is, to start with. So actually, from a simplistic standpoint, a Blockchain is a ledger of information that information transactions. In order that ledger is public. The Blockchain is public. Anyone that has entry to a consumer can entry the Blockchain for that individual ledger. The transactions are recorded. Most of them say anonymously, but it surely’s actually synonymous. Lots of the data may be tracked again, it’s not really nameless. The transactions are recorded to a hash or a crypto string, which is commonly known as the general public handle for any individual. I imply, it has no figuring out data, however there are methods to search for and discover a few of that data, however the important thing level is it’s an immutable ledger.

So it’s a ledger that after it’s written to, it could possibly’t be modified, as a result of as you write new blocks to the chain, it’s the older blocks, the validation, and the hash for the validation of these blocks, is what builds the important thing for the brand new block. So in the event you alter any of the earlier blocks, it could invalidate the complete Blockchain, and so therefore, it’s immutable, in the event you change something, it’s going to interrupt the Blockchain, new transactions, the brand new blocks, wouldn’t be capable of be efficiently mined or validated, and we’ll get right into a bunch of those phrases right here shortly. However once more, the transactions are on this public ledger, so they’re traceable. You possibly can comply with, “Hey, I’ve obtained this public handle, this hash key, that’s associated to a transaction or units of transactions”, and you may comply with that hash key and see the place these currencies have gone and the place they have been spent. Now, you’re solely in a position to perceive the hash key that it’s related to or the handle that it’s related to, and you must make the most of different methodologies to then perceive what that handle is or who it belongs to.

It’s actually additionally essential to know that there are lots of Blockchains and public ledgers. You get Bitcoin, Ethereum, Tether, Ripple, Dogecoin, advert infinitum. There are lots of of them within the market, or hundreds, actually. After which it’s also possible to have non-public ledgers. So you may have monetary establishments that may run a Blockchain or any type of entity, but it surely’s frequent in logistics and monetary establishments, the place a monetary establishment has areas in a number of international locations, as an illustration, and they also’ll use their very own non-public Blockchain to handle transfers to completely different accounts or completely different areas by way of their Blockchain, as a substitute of utilizing Swift or worldwide wires, and the methodologies that banks historically have used. It permits them to account for and monitor these transactions a lot sooner.

And so, numerous attention-grabbing issues are being executed round that, and we’ll discuss there are lots of extra makes use of than simply digital belongings and simply cryptocurrencies. You’ve gotten logistics. Corporations are utilizing the Blockchain to trace – there’s an enormous poultry firm, as an illustration, that tracks the eggs that they delivered to the grocery from the conception of the egg, what hen home it was made in, all over packaging, into cargo to the shop, after which truly shelling out on the retailer, who bought that dozen eggs. They’ve very concerned Blockchain techniques that monitor all of that data. And then you definately even have sensible contracts. You’ve gotten the NFTs. There’s simply numerous exercise, numerous issues that Blockchain may be very properly fitted to.

Once more, it’s this immutable public ledger. It turns into very intriguing for doing numerous these several types of issues. Good contracts are very attention-grabbing. To interrupt a wise contract down into easy phrases, a wise contract is type of like a merchandising machine, these old skool merchandising machines. It’s obtained all these items in there, after which it’s obtained a keypad with some letters and a few numbers. So that you stroll as much as the machine and also you punch in I need B2, and so B2 goes to drop you out these Bugles chips or no matter it might be in that individual slot. So you possibly can consider a wise contract as similar to that. So as soon as any individual goes as much as the machine, they meet the circumstances to set off the sensible contract. So like within the merchandising machine, the situation is that I’ve put within the acceptable quantity of foreign money into the merchandising machine, I’d then punch the important thing that claims, hey, I need B2, after which it dispenses B2, and that’s just about how a wise contract works.

As soon as the circumstances are met, you set within the acceptable foreign money, or the suitable enter, no matter that could be, the sensible contract triggers and it does no matter directions that sensible contract is meant to do, and that may be signing an actual property contract, it may be establishing a course of to ship a car to any individual, it may be numerous various things, and it may be very advanced with a number of steps. However ultimately, it’s actually only a merchandising machine. It’s a course of when the circumstances are met, the method triggers, goes by way of no matter steps it has, and there could also be checkpoints or new actions that should happen. So much like the merchandising machine, you begin the sensible contract by placing the cash in, then it’s ready for enter. You need to choose the letter first, after which the sensible contract’s like, okay, I now have a letter, so now I’m going to ask for a quantity, after which you choose a quantity, after which it provides you the actual merchandise associated to that. There’s numerous steps concerned in that, although it appears quite simple. You’ve gotten the foreign money getting into, you may have validating, did I get the suitable quantity of foreign money? Sure. Okay, now I can ask for the enter to say what I wish to be allotted out of the machine, and increase, okay, I’ve obtained A and I’ve obtained 2. Okay, now I’ve obtained my correct inputs. Now I’ve to spin the coil. Spit out the only merchandise. Did the only merchandise fall by way of the trapdoor? Sure, it did. Did the trapdoor get opened? Sure, it did. Did the merchandise get pulled out of the trapdoor? Sure, it did. Now the contract is fulfilled, it’s accomplished. In order that’s actually the primary gist.

So what varieties of digital belongings are we speaking about? Once more, we’ve gone by way of most of this however you may have digital currencies, cryptocurrencies, and NFTs. NFTs are artworks which can be tied right into a Blockchain so you possibly can present sole possession, who owns that individual merchandise, a lot of dialogue round NFTs, and we’ll get just a little extra into that in a bit. Stablecoins. Stablecoins are pegged to one thing or backed by one thing. So you may have USDT, the US greenback tether, you may have a bunch of various tethers of that nature, and that’s actually attention-grabbing territory as a result of there have been some challenges in that not too long ago, and we’ll speak extra about that shortly as properly.

Then you may have Blockchains, your digital belongings which can be strictly digital coupons and vouchers, like Burger King will ship out to clients that submit for a sure factor or do sure issues, they’ll give them digital vouchers or coupons which can be tracked on the Blockchain, to allow them to monitor the redemption, who redeemed it, the place they redeemed it, how they redeemed it, and all kinds of different data. So it’s a really helpful advertising and marketing instrument.

After which you may have the sensible contracts, and sensible contracts, once more, can do many alternative issues. They require that you’ve got that acceptable enter, they require that acceptable actions are taken, and the conclusion.

One final remark about sensible contracts that’s actually essential is as soon as the triggering circumstances are met, the sensible contract will execute. It’s constructed into the Blockchain that method. So you must be – a complete space that’s going to should be checked out is basically going to be… how properly the sensible contract itself was written, as a result of once more, as soon as circumstances are met, the sensible contract triggers, so you probably have a programming error and that sensible contract triggers due to that programming error, it’s going to execute, it’s going to do what it’s speculated to do and comply with by way of with that course of.

So who makes use of digital belongings? What are the makes use of of digital belongings? Actually, most individuals have heard in regards to the felony or dangerous exercise, ransomware, darkish market, darkish net, the place persons are transacting and paying for issues in cryptocurrency, however there are 1,000,000 reliable causes. Lots of industries are utilizing it. It’s used to resolve geographic points. So that you’re in a market area, the place possibly the standard foreign money in that market, in that geographic space will not be very secure or dependable or accessible, and digital belongings can definitely present some benefits there.

If you begin speaking in regards to the industries that become involved in cryptocurrencies, there are numerous companies now accepting cryptocurrencies. There are numerous monetary establishments utilizing it to, once more, run non-public ledgers that switch currencies forwards and backwards throughout their organizations. Many, many alternative industries that partake and have some very legitimate makes use of for it. It’s now not strictly seen as a felony exercise the place initially a a lot bigger proportion of the exercise on the cryptocurrencies was felony. At present, there’s numerous legitimate exercise, numerous makes use of, numerous investing and buying and selling, day buying and selling, like hedge funds which can be being backed by cryptocurrencies. There’s numerous exercise across the cryptocurrency utilization and positively adoption throughout the monetary market.

It’s nonetheless extremely unregulated, it’s nonetheless very younger. The EU is simply now beginning to do some regulation round cryptocurrencies and that can proceed to mature, after which the Blockchain, digital belongings will proceed to evolve and mature as {the marketplace} evolves and matures round it.

So what are a few of these legitimate makes use of? Why would a enterprise become involved in it? So, there are numerous monetary makes use of, the place organizations are using the cryptocurrencies to promote items, obtain items; some organizations are utilizing cryptocurrencies as a hedge in opposition to the volatility within the conventional currencies. You’ve gotten very important purposes within the micropayments world the place it’s a lot more durable to cope with micropayments, pennies and cents. Lots of currencies are beginning to remove a few of that, or numerous locations are beginning to not carry the change, however cryptocurrencies can go all the way down to decimal factors of cents. A single little bit of Bitcoin is down into the hundredth of cents and may be divided in a lot smaller chunks, and it’s additionally numerous exercise round lowering or minimizing the prices per transaction.

So, the fee per transaction in some cryptocurrencies may be a lot decrease than, say, a regular bank card alternate fee. So when a enterprise takes a bank card, they pay a proportion price of that transaction with a view to obtain these funds, and for companies, these cryptocurrencies can scale back what these charges are, and make it in order that the precise group promoting the products can seize extra of the worth that they’re getting paid, and whether or not that’s handed on as price financial savings to the buyer or handed on as higher profitability for the group, there numerous potentialities there, however that diminished price construction’s definitely making important positive aspects within the commerce marketplaces. You possibly can see there’s numerous

shopper exercise round this, round the usage of cryptocurrencies. It’s simpler. They will keep one pockets with a number of currencies in it. It has password management or entry controls, so it’s a lot more durable to be stolen usually phrases, however folks don’t at all times handle their passwords correctly, and so that may additionally grow to be an issue. Lots of attention-grabbing issues there.

So this can be a actually attention-grabbing one as a result of this slide was executed a month in the past as we have been getting ready to do that presentation, and so Bitcoin, once we did this, was value 43,207. Properly, the entire cryptocurrency market truly has considerably dropped. So at the moment’s value this morning, a Bitcoin is value about 28,953, so you possibly can see it’s a 25% drop, virtually 30% drop over the course of the final 30 days. Ethereum once we did this was value $3,341, and at the moment it’s value $1,952. Once more, a big drop. Tether is an attention-grabbing one and we’re going to speak extra about this in a couple of moments, however Tether is a stablecoin, it’s pegged to the US greenback, and it’s speculated to at all times be value $1. At present’s market, it’s value 99 cents as a result of there’s been excessive volatility and they also’re having bother sustaining that peg. Very attention-grabbing stuff. Very difficult. BNB, one other one made a big loss. 498 was the worth once we did this, it’s now value 290. So, as you possibly can see, the crypto market cap was over 2 trillion once we introduced this slide. At present’s market worth, cryptocurrencies, the entire quantity is barely value 1.24 trillion. In order you possibly can see, a really important drop within the market.

Now we’re going to start out getting in direction of firms which can be utilizing or adopting cryptocurrency so we will begin stepping into the precise investigation facet. Why do we have to perceive investigations? All of this was foundational data, however now you possibly can see, you’ve obtained Starbucks, Subway, Microsoft, professional sports activities groups, Tesla, all of them buying and selling, accepting cryptocurrencies in a single form or one other – Complete Meals, Burger King. Burger King’s one of many large ones that makes use of these digital coupons. Very attention-grabbing stuff. Complete Meals Market, so staple gadgets, your grocery retailer, taking cryptocurrencies. Very intriguing stuff, or hedging with cryptocurrencies.

Okay, so now we’re going to speak about non-fungible tokens. Clearly, it’s been a scorching subject, everyone has been speaking about NFTs, and so what’s an NFT? Why is it essential to know what’s occurring there? So, NFTs are actually digital gadgets, music, artwork, movies, no matter, digitally. There are tweets which can be captured as photographs that may be bought on the Blockchain and be sure that there’s a sole proprietor that has full rights to it that owns it. After which that particular person can switch it. So it’s like artwork possession, is a method of it, however with a a lot simpler to entry market. It may be simply transferred, and once more, it’s an immutable ledger and the possession may be confirmed very simply and shortly by going by way of the ledger and seeing who has the final rights to it, who transferred the final rights to it.

So, once more, there’s been numerous attention-grabbing issues. You’ve gotten “Beeple” who had by no means bought something over $100. In March 2020, his first work, his first NFT, The First 5,000 Days, bought for an astounding $69 million. Lots of curiosity there and within the market itself. It undoubtedly drove some worth for him. The worldwide marketplace for NFTs is at present about 22 billion, however it’s quickly rising. There are new NFT marketplaces being launched virtually day by day. You’ve obtained celebrities and types which can be all becoming a member of in now. One of many newest NFTs that’s being talked about is you may have Gucci and different manufacturers which can be promoting digital variations of a handbag, as an illustration, to be used throughout the metaverse, within the digital world, so you should purchase a Gucci bag, and a few of these Gucci baggage are promoting for greater than the bodily counterparts in the true world, which is totally insane. So that you personal a replica of the digital model of it, and it’s being bought for greater than precise bodily units.

Stablecoins, we talked about {that a} good bit. Why do you must perceive them? So that they’re digital currencies backed by some form of asset, and that’s usually a bodily asset like gold or silver, or fiat foreign money, the US greenback, or the euro, or the pound, the sterling. They’re a stablecoin, they’re backed, they usually’re pegged to these currencies. In order that’s the place issues begin to get attention-grabbing. We are able to discuss Terra that was executed within the… it was a US dollar-based stablecoin. The market collapsed within the sell-off final week on Might 9, and so a Terra that was supposedly pegged to a greenback, so its worth ought to at all times be $1, is now value roughly 10 cents, and it has been de-pegged from the US greenback since Might 9, for the reason that market tanked that day, and it has but to recuperate and is more likely to by no means recuperate, however actually essential to know how that occurs and the place that comes from. So mainly, you may have a cryptocurrency that’s backed by some form of asset, they usually have a promise to pay or keep sufficient belongings to maintain the worth of that foreign money. And may be very attention-grabbing stuff.

Good contracts, we went by way of this a superb bit already. Ethereum is among the platforms that numerous sensible contracts are executed on. Lots of the sensible contracts are being utilized by varied firms. Starbucks is utilizing sensible contracts to have interaction and transact with their espresso growers and be sure that they’re utilizing acceptable practices, assembly the phrases of their contracts and their agreements, in order that the these sensible contracts are being executed to buy, management the value, and transact the espresso purchases, as an illustration.

So, why do we have to get into investigations? Why are we right here at the moment? So, as we stated, there was numerous felony exercise early on in cryptocurrencies. That has considerably diminished, however there’s nonetheless numerous felony exercise there, however past that, you may have numerous legitimate enterprise causes now. So you may have organizations which can be using these cryptocurrencies for reliable functions, and so when reliable functions come, lawsuits begin getting tied in, incidents happen the place an organization’s being acquired or an insolvency, and the way do you perceive what crypto belongings that entity owns? How do you perceive the place they’re, what’s occurred to them? The listing goes on and on, however there’s an enormous want to actually perceive what transaction issues happen. Insurance coverage claims, “Hey, my paper wallets obtained stolen”, cyber losses; ransomware occasions the place organizations pay ransomware in cryptocurrencies; the valuations of damages, if somebody stole cryptocurrencies from you, how do you determine what that cryptocurrency’s value? Is it value what it was the day it was stolen?

Once more, as you possibly can see, once we talked about it, cryptocurrencies are extremely unstable. They go up and down generally giant percentages in a day, and so, how do you consider these damages? Is it the damages based mostly on at the moment’s worth, the damages based mostly on the day that these currencies have been stolen? Can any of it’s recovered? How do you work that out? Fraud and corruption exercise? One of many case research that I discuss steadily concerned a merger and acquisition situation the place the corporate had acquired cryptocurrency – that the corporate that was acquired had acquired cryptocurrencies as a hedge or as safety for the eventuality of a ransomware occasion, and they also had this nest egg of cryptocurrencies sitting on the books, so to talk, within the occasion an occasion occurred, then they obtained acquired, so the brand new firm acquired them. The brand new firm didn’t perceive that they’d these cryptocurrencies and actually had no consciousness of it, and as that transaction occurred, shortly after the acquisition, the brand new firm, the fuller entity, did get ransomwared. So then they’re sitting in a board assembly and, “Hey, I believe Firm X had acquired some cryptocurrency as a hedge to have the ability to pay for the ransom”, the board had determined they wanted to pay the ransom as a result of they couldn’t afford the downtime and varied different points, and determined to go determine the place that cryptocurrency was, they usually couldn’t discover it. No person had any information of it. They couldn’t discover the place it was. We needed to do an investigation and we have been in a position to decide that the previous CFO of the group determined that no person knew about that cryptocurrency so he would simply transfer it to a few of his personal wallets, and we have been in a position to hint that, monitor that, unwind that, and efficiently recuperate the massive majority of that cryptocurrency for the group.

There are business instruments. There are additionally public, free instruments. You’ve gotten the business instruments CipherTrace and Chainalysis and Maltego that do numerous this. They’ve numerous nice options that assist you unwind or perceive in all probability probably the most crucial issues in relation to a cryptocurrency investigation, which is attribution, who owns that individual hash key, that individual pockets, who’s the proprietor or consumer of that pockets, and so these softwares do keep some attribution as entities get realized, in addition to have instruments to assist you to construct your individual entities as you perceive what entities personal sure cash, and begin constructing an attribution database, which may be actually essential on your investigations.

They do a bunch of different issues as properly, like present threat rankings, how a lot exercise has a selected pockets had at the hours of darkness market, or how a lot exercise of pushing foreign money by way of spinners or mixers, and that are instruments to obfuscate or launder the cash and forestall folks from having the ability to determine the place the foreign money went or how a lot foreign money there was et cetera.

So, these instruments may be extraordinarily helpful and helpful in that regard. However it may be executed with Blockchain.com Explorer that does Bitcoin. You possibly can go and search for transactions immediately on these platforms. You are able to do the analysis. You possibly can determine – you possibly can comply with the path of a transaction, but it surely’s guide whereas you may have some extra automation within the business instruments.

So, what kinds of issues do you should perceive in the event you’re going to get into investigating cryptocurrencies? You should perceive pockets varieties, a chilly pockets, a scorching pockets, software program, {hardware} wallets, paper wallets, getting a sound understanding of what the wallets are, what you are able to do with a pockets. The addresses, the general public handle versus the non-public keys. So, usually for the proprietor of a pockets, you may have your public handle, that’s the handle the place folks can ship foreign money to, or you possibly can spend your foreign money. And you must authenticate along with your non-public key. Your secret is what unlocks it. It says, “Hey, I personal this”. And cryptocurrency may be very very like fiat foreign money in that method. When you’ve got it in your hand and also you management it, you possibly can spend it. And so, within the cryptocurrency world, which means if I’ve the general public handle and the non-public key, I can spend that foreign money, I can do no matter I need with that foreign money, I can switch it. And that’s the place numerous threat comes into play.

Now, you must begin stepping into an alternate. Trade transactions, attention-grabbing issues there. Within the exchanges, in the event that they’re US-based, they comply with the KYC banking guidelines. And so, they should know your buyer, they’ve obtained to have that attribution constructed out for that individual handle that will get created on an alternate.

Then you may have the funding platforms the place you don’t truly personal the asset. So, in the event you exit on Robinhood at the moment, and you purchase Bitcoin you don’t truly personal the Bitcoin, you personal an asset registered with Robinhood that’s tied to that Bitcoin.

Now, Robinhood, specifically, is launching its personal wallets, they usually’re going to start out providing you with the flexibility to personal your precise cryptocurrency and be capable of transact in it and switch it. They’re launching their very own pockets. However in at the moment’s market with Robinhood, in the event you have been to go have a look at the general public ledger whenever you made a purchase order of Bitcoin, you received’t see your transaction there as a result of Robinhood owns a big portfolio of cryptocurrency they usually simply transfer round project as to who owns it and purchase further foreign money in the event that they want. Nevertheless it’s executed with a shadow ledger that claims, “OK, so we’re going to assign X {dollars} of X factors of Bitcoin to this consumer”. And so, that ledger simply tracks what your portion of possession of that individual asset is.

Then you can begin speaking about privateness cash. Privateness cash, like DOGE and monero the place they’re a lot more durable to unwind, they’re a lot nearer to an nameless foreign money as a result of they do issues to obfuscate the possession, they do issues to create new addresses for every transaction. When the transactions get put into the blocks, they seed it with different transactions. They do issues to assist actually obfuscate and maintain the flexibility of monitoring down that cryptocurrency – to make it tougher basically.

After which the very last thing, simply extra of an consciousness and understanding is mining. What’s mining? Why is mining a time period associated to cryptocurrencies? So, mining is the method of validating a block throughout the Blockchain and creating the brand new foreign money. So, Bitcoin, each time you mine a block, there’s a fee of cryptocurrency to the profitable miner of that block. Now, the profitable mining is the method of operating the mathematical equations and doing the hashing to find out what the hashes that solves – what’s the hash for a selected block. So, as you undergo on a brand new block, you get all the data – they get all of the details about the transactions contained in that block which have been verified and are in that block. After which you must remedy for the hash of that block. And that’s a mathematical components that will get scaled. Usually, it simply will get more durable and more durable as {hardware} developments happen and as software program developments happen, but it surely may truly simplify it as properly as a result of it’s sustaining the method to make sure that it takes 10 minutes to mine a block within the Bitcoin world. So, that course of is basically making an attempt to make sure that it takes 10 minutes to mine every block. And that creates the brand new section of Bitcoin that will get put into {the marketplace} with every block that’s mined. And that will get halved at common intervals till there will likely be no extra Bitcoin to be added to the block, and there’ll be 21 million Bitcoin on the block. After which at that time, it’ll simply be motion of the Bitcoin, after which the transactional charges associated to that Bitcoin. That may be the one fee.

So, actually essential to know in an investigation context, you’ve obtained to exit and also you’ve obtained to do forensics. You’ve obtained to go have a look at the computer systems. You’ve obtained to find out, “Hey, are there cryptocurrencies concerned on this explicit asset?” As I stated, generally, you’re going to be doing an investigation and know that there’s cryptocurrencies concerned there. It’s possible you’ll even know some pockets addresses. You could have already gone to Blockchain.com Explorer and traced a few of these transactions, after which discovered some new pockets addresses possibly. And you should go discover them on the units that you simply’ve accessed. That’s the place these regexes come into play. And these are the fundamental regexes that can assist you discover any Bitcoin, Ethereum, monero, or sprint. And there’s a complete library of those. You possibly can construct – the hashes do have a selected sample, usually. So, you possibly can construct and develop these for almost any cryptocurrency that you really want. Actually, a really useful instrument.

However you do have to know, doing that forensic investigation remains to be one of the best and most tried and true method of starting an investigation as a result of chances are you’ll or might not know that cryptocurrencies are concerned in a selected group or a selected matter as you’re beginning to do the investigation. It’s an incredible apply in at the moment’s day and age to start out on the lookout for these cryptocurrency signatures, making an attempt to find out are there wallets put in? Have they got a {hardware} pockets or software program pockets that has been accessed? Or an online pockets that’s been accessed by a selected endpoint, whether or not it’s a cellular gadget or a pc. Understanding the presence of these cryptocurrency instruments is definitely a sign that you could be wish to begin investigating it and figuring it out.

That is the place issues begin to get much more difficult as a result of, once more, you do should exit and begin monitoring these transactions. One of many investigations we did, we needed to monitor the transactions, over 700 transactions deep. If you happen to’re utilizing these free instruments, that may be fairly time-consuming, going single transaction by single transaction and dealing down a tree versus utilizing a number of the business instruments. However the business instruments are very, very expensive. And the whole lot that they do may be executed by the free instruments. It’s only a extra guide course of, except the business instruments do present rankings. Once more, they’ve like a rating. Virtually consider it like a – you possibly can consider it like a credit score rating. And so, a selected pockets could have a credit score rating that claims, “Hey, that is increased threat, it’s been concerned in numerous darkish net transactions, or it’s been concerned with different wallets of identified nefarious actors” as a result of they’ve that attribution constructed out. And so, subsequently, it has a better threat rating that claims, “Hey this can be a rather more dangerous factor”.

From there, I’m going to start out tackling a number of the questions which have are available at the moment. Once more, your greatest method for any cryptocurrency investigation is basically delving into the forensics first. After which you probably have a big quantity of transactions or a big quantity of IDs and stuff, I actually suggest having an expert that’s obtained important expertise coping with cryptocurrency investigations, as a result of they are often difficult. They are often fairly difficult, particularly as you begin having cross-Blockchain transactions the place persons are going by way of an alternate. So, they’ve Bitcoin, they usually’re going by way of an alternate they usually’re shopping for Ethereum or they’re shopping for monero or different cryptocurrencies that may make issues extraordinarily extra difficult to comply with and monitor.

So, we’ve our first query that was requested is, “Utilizing Blockchains to trace real-world belongings like eggs, does this logistically work? How do I cease one egg being swapped for an additional egg? Do you want some type of tattoo or product like a QR code linking to the NFT or is there one other method?”

So, they do have barcodes like on the packaging, and generally even throughout the precise gadgets the place the logistics chains are utilizing it. It’s extraordinarily attention-grabbing, the place they’ll truly comply with an egg from the hen home all the best way to the grocery retailer till the purpose of checkout when any individual truly purchases that individual package deal of eggs.

And so, then that particular person goes house they usually get salmonella from these explicit eggs, they’ll simply backtrack on to what vans it was on. A few of them are getting much more subtle the place that Blockchain, that logistics Blockchain is definitely monitoring the temperature of the truck. It’s getting recorded inputs from the temperature of the truck to know if there was a temperature variation throughout the truck that was transport them from the producer location to the distributor location, or from the distributor location to the precise retailer.

So, there are numerous attention-grabbing controls round there. There are numerous issues being executed with RFID chips linking into these logistics Blockchains. So, they’re getting automated inputs from these RFID chips. There’s numerous actually attention-grabbing actions and issues occurring round it. However sure – to allow them to truly do this monitoring. It’s executed by way of barcode/QR code sort data on these units that enables them to try this monitoring.

So, the following query is said to any individual simply stating they didn’t know that they didn’t truly personal the Bitcoin in Robinhood.

And so, that’s right. So, within the Bitcoin public ledger, Robinhood truly owns these Bitcoins at present. Once more, that’s altering with Bitcoin, and a number of the different platforms. However in Robinhood, they’ve an inside ledger that claims, “Hey, we personal 500 Bitcoin, as an illustration, and that 500 Bitcoin is distributed throughout these folks, that every particular person owns a little bit of it”. And so, they’ve their very own inside ledger that tracks that possession versus being out on the precise public ledger.

That public ledger solely says, “Hey, Robinhood has all of those cash”. So, then whenever you’re speaking about doing investigations, you do have to really exit and subpoena Robinhood and say, “Hey…” if the corporate owned a Bitcoin by way of Robinhood, you would need to truly subpoena the data from Robinhood versus wanting on the Blockchain itself. And that’s only a easy finite instance, however there’s numerous various things that should occur round that and it may be very attention-grabbing.

So, then we’ve – the following query is, “Is possession of Bitcoin at all times public? Is it potential to understand how a lot Bitcoin is in chilly storage at any time?”

Attention-grabbing query. Sophisticated reply. So, the possession of the Bitcoin is public. It’s a public ledger. Each motion – each creation of Bitcoin, after which each motion of that Bitcoin from that creation is tracked in that public ledger. Once more, it’s tracked by these public addresses, by your pockets handle. And so, these addresses are public they usually’re there.

Now, can I inform what’s in chilly storage? You possibly can’t as a result of it – all you recognize is that that pockets exists, that handle, that public handle exists. What sort of handle it’s, is it a chilly storage pockets the place they’re simply printing it out, placing it on paper? There’s no technique to monitor or know that.

Typically, they are saying that at the least 25% of Bitcoin is useless foreign money, foreign money that folks now not have entry to. That foreign money can now not be accessed, as a result of the folks don’t have the non-public keys to entry it, or they transferred it to an invalid handle, and in order that invalid handle has no – there is no such thing as a proprietor of it. So, there’s some attention-grabbing issues that happen round that.

Now, in the event you begin speaking about monero and privateness cash, once more, nonetheless a public ledger that may be absolutely traced, to the extent that that individual handle has entry to the coin. The challenges are actually that numerous these privateness cash, they’re taking your $10 transaction, as an illustration, breaking it up into 5 $2 transactions, or extra usually, a $1, a $3, a $2, and a $1.50, and a $1.50. And all these transactions are being mixed to make your transaction. And so, they’re breaking it up into these a number of transactions by way of automation. And it turns into very exhausting to comply with and hint that foreign money due to the best way they perform. However numerous exercise round that, however it’s nonetheless a public ledger. And you’ll nonetheless have a look at that public ledger, and we’re nonetheless in a position to construct some stage of attribution on these ledgers.

So, subsequent query. “Simply to be clear, can the forensic investigation uncover who the precise particular person is within the management of the pockets i.e., to problem authorized proceedings in opposition to a particular particular person?”

Nice query. It’s potential. It’s not essentially constructed into the Blockchains themselves. However once more, by way of the event of attribution, by way of the event of the forensics investigation, you seize an individual’s laptop, you discover the precise wallets they’ve, after you have these addresses, possibly you establish they got here by way of an alternate like Coinbase right here within the US, and so then you possibly can then flip round and subpoena Coinbase. You possibly can problem orders to have that foreign money frozen. There are numerous potentialities.

How that every one will get interpreted within the authorized system remains to be type of younger. There’s not numerous case precedent. However there’s numerous exercise there. There are numerous issues that you are able to do by way of… when any individual owns that foreign money by way of an alternate the place they do have KYC necessities, you may get numerous that data, and you may proceed with that in a authorized courtroom.

Now, is that going to say that you simply’re going to achieve success with that on a regular basis or each time? Completely not. It’s a matter of determining, are they utilizing an alternate? Is their pockets based mostly by way of an alternate? Or are they simply utilizing a {hardware} pockets the place they’ve direct management and entry to their foreign money? Or in different circumstances, you may have the Robinhood the place you don’t truly personal the foreign money. A lot more durable to perpetrate fraud with the foreign money concerned within the platforms like Robinhood. That’s coming as a result of they’re launching their very own {hardware} wallets, their very own software program pockets the place folks could have entry to their foreign money and be capable of truly transact with the foreign money that they’ve invested in by way of that platform. So, numerous potentialities there that may be taken benefit of.

However the parting thought right here is it’s subtle, it’s difficult. They aren’t easy investigations. Usually, although there’s a public ledger, there’s numerous work to be executed to unwind them, examine them, monitor it again, construct attribution to who’re the people concerned in these explicit transactions and gadgets.

Your greatest technique of unwinding most cryptocurrency issues begins with a superb forensic course of. Amassing the gadget. Amassing the mobile phone. If you happen to’re particularly doing a crypto investigation and have malfeasance with the cryptocurrency, getting that gadget, that cellular gadget in an unlocked state the place you may get entry to the pockets and be capable of decide the precise pockets addresses and stuff may be extraordinarily helpful.

Once more, a few of that data may be gained by way of the forensic course of, doing the forensic photographs of it, after which looking for the addresses and figuring out the cryptocurrency addresses. However your mileage might range relying on the sophistication of the consumer, the actual varieties of transaction and actions that they’re doing.

All that being stated, I believe we’re nearly on the high of the hour. I’ll ask if there are any final questions earlier than we transfer on.

Seems to be like we’re good. So, I wish to thank all of you who took the day out of their schedules to take part in at the moment’s webcast. We all know how worthwhile your time is and recognize you sharing it with us. We additionally hope you may have the chance to attend our subsequent month-to-month webcast at present scheduled for June 22^nd, 2022. Necessary subject for this upcoming webcast will likely be Knowledge Safety and Privateness with Cross-Border Transfers. You will discover data on this forthcoming webcast in addition to on-demand variations of previous webcasts on HaystackID.com.

Thanks for attending, and we hope you may have an incredible day.

If anybody does have any questions, please be happy to achieve out. We’re glad to reply the questions or interact with you, present no matter data we will. This can be a subject that’s close to and pricey to my coronary heart and I’d like to dig in and discuss it. So, please be happy to achieve out.

This concludes at the moment’s webcast. I hope you may have an exquisite day.