- Blockchain analytics firm Elliptic collaborates with MIT-IBM Watson AI Lab to use artificial intelligence in detecting Bitcoin money laundering.
- The deep learning model successfully identified illicit proceeds, new laundering transaction patterns, and previously unknown illegal wallets.
- The findings are currently being used to enhance Elliptic’s products.
Elliptic and MIT-IBM Watson AI Lab leverage AI to detect Bitcoin money laundering, revealing new patterns and illegal wallets. The research findings are now improving Elliptic’s products.
Unveiling Hidden Money Laundering Patterns
Elliptic has made the underlying data, consisting of over 200 million transactions, public. This dataset will enable the community to develop new AI methods for identifying illegal cryptocurrency activities. Instead of focusing on transactions made by criminals, a machine learning model is trained to recognize “subgraphs” – chains of transactions indicative of Bitcoin laundering. This approach allows Elliptic to focus on the broader “multi-hop” laundering process rather than the specific on-chain actions of individual criminals.
Testing the Model’s Performance
Elliptic used an undisclosed cryptocurrency exchange to test the model’s ability to detect money laundering attempts. Out of 52 predicted “money laundering” subgraphs ending with deposits to this exchange, 14 were confirmed by the exchange to be linked to flagged users. Given that less than one in 10,000 accounts are flagged, this indicates the model’s strong performance. The firm believes that there is much more potential in this domain, and that further collaboration and data-sharing will be key to advancing these techniques.
AI’s Increasing Influence in the Blockchain Sector
AI tools are gradually demonstrating their exceptional ability to analyze large data sets and identify patterns beyond human perception, such as illegal money movements within the Bitcoin economy. This is reflected in the fact that VC investment in Web3 and AI startups exceeded $637 million in 2023. AI agents are expected to dominate the blockchain sector in 2024, establishing a more secure and efficient ecosystem, according to a report by Nansen.
Conclusion
The integration of AI in the blockchain sector is proving to be a game-changer, especially in detecting illegal activities such as money laundering. As AI tools continue to evolve, they are likely to play an even more significant role in ensuring the security and efficiency of the blockchain sector. The collaboration between Elliptic and MIT-IBM Watson AI Lab is a prime example of the potential of AI in combating financial crime in crypto assets.
