Cryptoforensic Investigators Knowledge Base

Anti-Money Laundering

(AML) the laws, regulations and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income

Bech32 address

a bitcoin payment address format which starts with “bc1” and contains up to 90 characters (more often about 42); also known as the “Native SegWit” address because it interacts directly with the segregated witness protocol

Bitcoin

the name of the network (capitalized), the currency unit (the coin; lowercase), and the software; ticker symbol: BTC

BitcoinTalk

an Internet forum dedicated to the discussion of bitcoin, blockchain technology and cryptocurrency

Block explorer

a website for viewing public blockchains and transaction information such as status and confirmation time

Blockchain

A sequence of data blocks, each linking to its predecessor all the way to the genesis block (the very first block which initializes the blockchain). A blockchain is A distributed ledger that transaction data is stored on. Transactions are recorded on this ledger, and thus, balances of the asset(s) on the applicable Blockchain, such as ‘Bitcoin’ or Ethereum, can be ascertained accordingly

Blockchain analysis

the process of inspecting, identifying, clustering, modeling and visually representing data on a blockchain

CDA

a not-for-profit initiative consisting of exchanges, blockchain projects and cybersecurity organizations dedicated to stopping fraud, theft and liquidation of stolen digital assets

Centralized

being maintained and controlled by an entity

Chainalysis Reactor

blockchain analysis software that visualizes blockchain transactions and has a database of useful information

Change address

an address (usually automatically) generated by the sender’s wallet to receive the "change" in a bitcoin transaction when the input amount is larger than the amount to be sent to the receiver

CISC

training and certificate for mastering advanced investigative workflows and risk assessments in Chainalysis Reactor

Cluster

a collection of addresses that are determined by a blockchain analysis provider and/or blockchain investigator to be controlled by one entity based on certain heuristics

Co-spending

multiple addresses being used as a source of funds to a single transaction in which case they are identified as being controlled by the same entity

Consensus

when several nodes, usually most nodes on the network, all have the same blocks in their locally-validated best blockchain

Counterparty

in Reactor - a cluster that sends and/or receives funds directly to or from a selected cluster in trading - the opposite party in a transaction (buyer or seller)

Crypto custody

storing digital asset holdings on behalf of clients by holding the private key(s) on behalf of the asset holder, ensuring that it cannot be accessed by any other party; effective control over the assets under protection; (personal wallets) personal ownership and control over cryptocurrency

Cryptocurrency

any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions

Cryptocurrency Address

a unique identifier that is publicly sharable and visible on an applicable public blockchain and which acts as ‘location’ that the applicable cryptocurrency can be sent to or sent from

Cryptocurrency Exchange

a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies

Cryptocurrency Wallet

An auxiliary device or medium that holds or stores private key(s) needed to access or spend cryptocurrency balances that have been allocated to address(es) that are part of the wallet. This auxiliary device or medium could include a physical Ledger hardware wallet device, or could include a software client on a computer or phone, or could simply be a piece of paper. A cryptocurrency wallet is inherently ‘Self-custodial’ meaning that there is no institution holding cryptocurrency on behalf of the user, nor does the user need to seed any permission to have nor hold funds in such a wallet. Only the person who created the wallet has ability to access the wallet (unless the credentials to the wallet were to be breached).

Decentralized

maintained by members of a distributed network where each member has the exact same copy of the data and governance is achieved through consensus

Delegated Proof of Stake

DPOS; a consensus algorithm that enables the users of the network to vote and elect delegates to validate the next block; used in Tezos

Deposit address

an address that an organization or service manages on behalf of their user, where users receive funds into their account at the service (most often, deposited by a user of that exchange from their personal, self-custodial wallets); for all major cryptocurrency exchanges it is always associated with exactly one user; a user can have multiple deposit addresses

Distributed

spread across multiple data centers & geographies with data recorded in multiple places simultaneously

Dormant address

an address containing a certain balance of funds without recent activity and which is being monitored for movement of funds

Encryption

conversion of data into a code or cipher so that only people with access to a secret key (formally called a decryption key) or password can decrypt and read it

Escrow

a contractual arrangement in which an intermediary receives and disburses funds or assets on behalf of the primary transacting parties based on predetermined conditions agreed to by the transacting parties

Fungibility

The ability of an asset to be interchangeable with other assets of the same type. For example, one U.S. twenty-dollar bill is just as good and is interchangeable with any other U.S. twenty-dollar bill or for four U.S. five-dollar bills.

Gate

Gate.io; a centralized global cryptocurrency exchange based in the Cayman Islands https://www.gate.io/

Hash

a digital fingerprint of some binary input produced by a hash function

Hops

single transactions in a transaction chain; a quantity of hops is parlance for how many intermediary wallets between two given wallets

Kraken

a centralized global cryptocurrency exchange based in the USA https://www.kraken.com/

Liquidity

the degree to which an asset can be exchanged for cash without sharply affecting the price of that asset

Money Services Business

MSB; any person doing business, whether or not on a regular basis or as an organized business concern, in various capacities including monetary transmission

Nested Service

A cryptocurrency exchanging service that often offers to seamlessly swap one cryptocurrency for another. The nested service seeks liquidity from a major exchange (Binance being the most common exchange that nested services utilize). The nested service (many of which often have questionable compliance policies) effectively acts as an intermediary to facilitate the transaction.

Node

a computer with specific software (e.g. Bitcoin Core for the Bitcoin blockchain) connected to other computers which follow the same rules and share information

OSINT

Open Source Intelligence; the practice of collecting information from published or otherwise publicly available sources

OTC

Over-the-Counter; a term used to denote a currency exchange arrangement between two parties directly or via a dealer network, often outside a regulated exchange

P2P

peer-to-peer;: in the context of computer networks, "peers" are computer systems which are connected to each other via the Internet; files can be shared directly between systems on the network without the need of a central server

P2PKH

Pay To PubKey Hash address; a bitcoin payment address format which starts with “1” and is typically 26-35 characters long; also known as the “legacy” address type because this was the standard address for the bitcoin network proposed by Satoshi Nakamoto

P2SH

Pay-to-Script-Hash address; a bitcoin payment address format which starts with a "3" and is typically 26-35 characters long; also known as the “SegWit” or “Nested SegWit” address because it supports segregated witness transactions

Paxful

a global P2P cryptocurrency exchange https://paxful.com/

Private key

A private key can be thought of as being equivalent to a ‘password’ for a given cryptocurrency address. Only the entity that controls that address has the private key giving them the sole ability to send cryptocurrency from that address and execute transactions (unless it is exposed or breached, giving additional individual(s) access). If one doesn’t hold the private key(s) to cryptocurrency address(es) the cryptocurrency isn’t really theirs. The cryptocurrency is controlled exclusively by the entity with the control of the corresponding private keys (however, that entity may or may not have a corresponding liability to another party for cryptocurrency under their control).

Proof of Stake

POS; a method by which a cryptocurrency blockchain network aims to achieve distributed consensus; it requires the users to prove ownership of a certain amount of currency (their "stake" in the currency)

Proof of Work

PoW; a method by which a cryptocurrency blockchain network aims to achieve distributed consensus by requesting a piece of data that requires significant computation to find (e.g. in bitcoin, miners must find a numeric solution to the SHA256 algorithm that meets a network-wide target, the difficulty target.

Public key

an alphanumeric string derived from the private key that is used to derive addresses in a wallet; it is paired to a private key and used to lock funds by the sender which can only be unlocked by the receiver’s corresponding private key from the key pair

Seed phrase

(also seed recovery phrase, mnemonic seed and backup seed phrase) Also known as a backup seed phrase, mnemonic phrase, or recovery phrase, this is a series of words, most often 12 or 24 words in length (in a specific order), that acts as a backup of private keys associated with one or more wallets belonging to a user. The seed phrase grants a user access to the underlying private key(s) associated with wallet(s) of theirs, which could be in turn used to send transactions from (public) addresses that are associated with wallet(s) belonging to the user

Segregated Witness

SegWit; an upgrade to the Bitcoin protocol in which signature ("witness") data is separated from sender/receiver data to further optimize the structure of transactions

Smart Contract

Self-executing programs that are deployed to specific blockchains (such as Ethereum) which operate in accordance with how they have been programmed. This includes code that specifies various predetermined conditions that, when met, executes in accordance with the code.

Stablecoins

cryptocurrencies that attempt to minimize price volatility by pegging the coin to a cryptocurrency, fiat money, or to exchange-traded commodities

Stake bonding

(in Tezos) participation in a bond pool

Staking

locking/holding a certain amount of cryptocurrency native to a blockchain with a Proof-of-Stake consensus on a designated address as a stake in order to get the right/chance to validate transactions and create new blocks; usually for a predetermined staking period with a predetermined payment schedule and without transferring ownership of the funds

Staking as a Service

when a firm (i.e., a crypto asset custodian) posts the ‘stake’ or ‘bond’ required to validate transactions and receive the requisite return via a PoS-based protocol network on behalf of their clients

Trading pair

a function whereby you have two different currencies that can be traded between one another e.g. BTC/GBP and LTC/BTC

Wallet address

a digital destination used to send and receive cryptocurrency funds which consists of a string of letters and numbers

xPub

(extended public key); an alphanumeric string derived from the master public key of a “deterministic” or “Hierarchical Deterministic” wallet for each new account created, all addresses belonging to a single wallet are generated from it; can be used to generate watch-only wallets in third-party services

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