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How Do Blockchain Analysis Tools Help Prevent Crypto Frauds?

Slowly and gradually people have developed interest in blockchain technology as its benefits started appearing on the surface. At present, almost everyone is familiar with the word bitcoin even if they had no further idea about it.

Blockchain technology is the root base of cryptocurrency concept. Today this technology has several implementations in the crypto world providing multiple advantages to the users. However, with the increased shift of people towards cryptocurrency, the hackers and cyber criminals have also got advanced in technology and scamming people smartly.

Here’s how they trap the users and how it can be avoided through blockchain analysis and crypto monitoring.


In order to keep a check over the company transactions and to regulate and control any unlawful funds transfer, the crypto ventures must devise some tracking tools to keep an eye over any illegal activity such as money laundering activities etc.

To work up to their maximum capacity, the crypto companies require to keep an eye on every activity going on to ensure transparency. Blockchain analysis assists with the inquiry, organization and in keeping a track of every single address and the transaction occurring so that the analyst could explain the functions of the multiple blockchain participants.

The transactions in the crypto domain are carried out through blockchain technology due to which they are more exposed to scams and frauds. The blockchain chain analysis helps in the detection of the fraudulent acts and cybercrimes. One can easily detect any changes in the blockchain activities by analyzing the blockchain. The blockchain analysis enables one to take an immediate action if anything appears suspicious. Thus, blockchain analysis adds to the transparency of the transactions assuring the safe transfer of funds from one authority to the other.

For example, when two FBI agents deceived back in 2015 and stole the bitcoins while looking over the Silk Road darknet market, the blockchain analysis called Chainalysis came into limelight. Chainalysis is actually a platform that helps the governing authorities and the industrial sectors to perceive and inhibit any illegal transfer of any cryptocurrency.


Blockchain analysis assists the crypto industry and the business industry to look after the risks involved in crypto currencies and in between the two resource parties. It is a mandatory instrument to protect the users, the enterprise and the repute of the firm dealing with crypto transactions from any illegal venture on the blockchain. The blockchain analysis is crucial to keep an eye on any financial illicit activity in order to take the investor and the client in confidence and build the reputation of the cryptocurrency market.

These advanced technology solutions are more efficient in detecting any illegal activity in real time and provide the finest data quality to its customers. This inhibits payments to be transferred into previously corrupt wallets, keeping the users safe from any risky transactions.

Although the crypto payments are anonymous, through blockchain analysis one can track the transaction credentials of the users that makes the crypto blockchains partially anonymous. This makes it difficult to carry out any illegal activity such as money laundering or illegal funding for any suspicious act.

The businesses that provide the blockchain analysis encounter the records of the transactions and collect the information regarding these payment transfers hence constructing connections between some crypto wallets. This helps them in easily identifying any mishappening, risk or any illicit behavior on the blockchain. As a result, they flag those suspicious wallets.


One of the most common functions of blockchain analysis tools is their capability to connect the blockchain addresses to the real existing specifications. These tools multiple methods to find out the real-world credentials on the blockchain. Web scraping and clustering algorithms are the commonly used blockchain analysis techniques.

Among the analysis tools, clustering is the most frequent method used to find out the identification details such as transactions, payment processors and wallets. In the same way, web scraping is used for the analysis of cryptocurrency market. It keeps the record of the fluctuations in prices and saves them for future purposes. This helps one to produce an immediate response when the prices hike to a specific threshold.

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Address classification, provision of investigation tools, looking after the transactions and analyzing the risk factor are the primary functions of the blockchain analysis tools.

In addition to this, to investigate the crypto threats and to identify the blockchain details using the transaction graphs, the blockchain analysis tools also provide visualization tools. Moreover, the track of every transaction and money transfer is kept by the crypto compliance solution in order to keep the record of the two resource parties.

Blockchain risk analysis functions by constructing the risk models and operating them in such a way that they assign a risk score factor to each blockchain transaction. To create risk models, many other characteristics such as source of payments, payment amount and transaction history are used.


The scammers attack the blockchain in four ways

  • Phishing Attacks

These are the scams that are used to get access to the user’s personal details. The fraudsters send the user an email link that looks similar as coming from a trusted resource. The email asks about the personal credentials using fake links. Having their hands on the user’s wallet details they can immediately clear the wallet in no time.

  • Routing Attacks

Blockchains are dependent on real world large data transfers. When the data is transferring to the internet service providers, the cybercriminals can obstruct the process. The participants can normally visualize no suspicious activity and everything seems normal. The hackers behind the curtains have their hands on to the user’s credentials and wallet.

  • Sybil Attacks

Sybil refers to a fiction character who had a multiple identity disorder. In sybil attacks, the hackers create a situation via using false information and network identities that blocks the user’s system that results in losing the personal information.

  • 51% Attacks

There is a lot of computing power required for mining especially for the public blockchains at a large scale. But if a miner or a pool of miners own enough resources, they could have the access to more than 50% of the blockchain’s mining power. This means that one has control over the main chain and can easily manipulate it.


The anti-scam crypto monitoring tools scan the publicly available transaction credentials to track the illicit and criminal activities. When any online crypto wallet transaction occurs, the details are stored in the blockchain and cannot be changed or archived. The blockchain analysis functions by working diligently to gather and analyze the details present on the blockchain.

These all operations are handled by Cryptocurrency Intelligence Analysts (CIAs) who keep a constant check on the transactions and wallet activities to figure out any suspicious activity that may lead to a clue that a cybercrime is being held.

CIAs collaborate with a group of data scientists wo carry out research upon the findings to confirm that a suspicious activity is being held by using tools such as pattern recognition and machine learning process.

When any external interference is being detected, the suspected wallet is assigned a risk score and examined over the assigned risk score. This collection of data and payment identification is a continuous process. Blockchain analysis is mandatory in criminal investigation process.


To monitor the crypto funds transfer and to comply with the AML rules and regulations, both the Coinbase and Binance use the Chainalysis software. The Chainalysis helps the Coinbase in enforcing the Anti-Money Laundering (AML) regulations. Due to its multiple benefits, such as easy to use, putting up focus, strict security and regulatory compliance, it has become as cryptocurrency leading authority for the traders.

Binance has integrated with Chainalysis to lay the foundation of a strong security program in order to move forward into the next phase of blockchain transaction monitoring system. Binance can easily regulate with the AML guidelines via the Chainalysis software. As a result, such firms like Binance then find no difficulty in opening the bank accounts as they support cryptocurrency.

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Many techniques hiding the real credentials of a person pose a threat to the blockchain analysis. The professional cybercriminals use a number of techniques and strategies to choke the blockchain analysis. These are the techniques used by the experienced scammers to outsmart the regulatory authorities and restrict the crypto monitoring tools

  • Use of Mixers

A mixer also known as tumbler is usually used to integrate the multiple inputs of all the possible crypto assets that could be detected easily. The scammers usually use the mixers in order to deceive the authorities. They do so by piling up all the users’ details while hiding their original addresses. All the addresses could not be traced as they are coming from a single address. In this way they can hide the details of the original sender. This technique is used to increase the anonymity of the funds transfer so that the crypto transactions become more complicated to be tracked.

  • Multiple Wallets

This is also a strategy used by the scammers to deceive the authorities. In the multiple wallet technique, the cybercriminals create multiple wallets during multiple transaction so that the law enforcing agencies could not easily investigate to find out the real culprit.

  • Non- compliant Exchanges

When the scammers use non-compliant exchanges in order to avoid the KYC requirements, this practice help them to be neglected by the blockchain analysis and can not be easily detected by the law enforcing bodies.


The cryptocurrency money laundering is same as the other cybercrimes posing new AML threats, making the transaction monitoring more complex. The challenges faced in crypto transaction monitoring are as follows.

  • User’s Anonymity

As the cryptocurrency transfers are held keeping the user’s credentials anonymous, this can be a greater risk factor allowing the cybercriminals to interfere into the legal monitoring process to transfer illicit funds.

  • Speed of Transaction

The cryptocurrency funds can be transferred in just a few seconds from one wallet to other. This aids the money launderers to transfer huge volumes of money from one account to other in the blink of an eye.

  • Structuring Transactions

Many scammers feasibly structure the payment transfers in a way that the illegal funds transfer is not reported, or it does not activate any AML monitoring tool.

  • Using Money Mules

The cybercriminals can engage the third-party individuals to act as money mules that handle all the funds transfers and transactions on their behalf in a way keeping the criminals safe from the attention of safety monitoring measures.


Crypto enterprises train their staff to follow the regulatory guidelines suggested by higher authorities such as Financial Action Task Force (FATF) in the United Kingdom (UK).

Viewing the far-reaching consequences of cryptocurrency regulation and security, the crypto domain has agreed to work with the authorities in order to construct a more efficient regulatory system to keep an eye over every activity going on.

The companies that are in need for the security measures and rule abidance embrace the cryptocurrency investigation software and train and educate their staff accordingly about the necessity of the regulations and the rules and guidelines that FATF has issued to be followed related to funds monitoring, reporting any illegal activity and immediately responding to any suspicious activity.

To understand and abide by the local regulations and security measures, the decentralized exchanges and decentralized finance organizations could gain assistance through the cryptocurrency compliant software. Even the most complicated and robust anti-scam programs could be handled by the compliance teams with the assistance of blockchain analysts.


In the mid of 2018 and 2019, a new set of guidelines was issued on cryptocurrency service employees after revising the FATF recommendations to bring them in the shelter of existing AML compliance regulations. Under the new regulations imposed, the companies are asked to install the threat-based cryptocurrency monitoring measures that could easily get hold of any money laundering activity. The compliance measures imposed by the regulatory authority include the following.

  • Customer due Diligence (CDD)
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The risk profile and the crypto wallet transactions monitoring measures should be constructed by the crypto service providers on accurate CDD. Practically, it means that they should acquire the authentic verifiable credentials from the customers that may include their official documents such as passport, driving license or may be biometric identification techniques such as face recognition or fingerprints.

  • Monitoring and Screening

A variety of crucial risk data including the client’s PEP status, being involved in unfortunate media stories, or any international sanctions being imposed or been entered in the watch list etc. should be brought into consideration by the crypto service providers. They should let the transaction monitoring process know by screening and monitoring.

  • Smart Technology

Monitoring the transactions in the crypto domain involves a huge amount of data that could be difficult to process manually. So, to handle this matter, the firms link together a bigger range of automated smart AML instruments to expedite the crypto funds transfer process, increase the accuracy limit and make sure that any illicit activity should be detected immediately and then reported to the higher authorities as soon as possible.


The primary way out to protect oneself from crypto scams is to make the decisions smartly and not try to be over smart. One should keep an eye on all the updated tools and strategies to protect oneself from scam and also keep an eye on the possibilities of scams that could trap one easily.

The enterprises in the crypto world should use the blockchain analysis and monitoring tools in order to prevent any kind of mishappening and to win the user’s trust. Moreover, one should keep calm and control oneself to accept any uninvited offers especially the ones popping up by themselves on the mobile screens, as the lust of more could make one lost the present too.

Beware that a reputable and trustworthy bank would never make you haste in making investments. They allow you to take you time and be satisfied. In case you are made to pay immediately or as soon as possible be skeptical before transferring your funds as it could result in regrets later on.


Cryptocurrency market is continuously expanding with time. More and more investors are finding it fruitful and building their futures through crypto domain. The growing interest of the public towards crypto world has also activated the cybercriminals and they have found their way out in making money by ditching people through multiple means.

To address the increasing rate of financial crimes and the anonymity linked with the digital currencies, the blockchain analysis and the crypto monitoring solutions are mandatory. They can easily get hold over any suspicious activity and bring it to the surface so that the regulatory authorities could take immediate action against the culprits. produces top quality content exposure for cryptocurrency and blockchain companies and startups. We have provided brand exposure for thousands of companies to date and you can be one of them too! All of our clients appreciate our value / pricing ratio. Contact us if you have any questions: Cryptocurrencies and Digital tokens are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by our authors (namely Crypto Cable , Sponsored Articles and Press Release content) and the views expressed in these types of posts do not reflect the views of this website. Tokenhell is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Read full terms and conditions / disclaimer.

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Mubashar Nawaz (United Arab Emirates)

Mubashar Nawaz is an experienced crypto writer working for Tokenhell. Having passion for writing, he covers news articles from blockchain to cryptocurrency.

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