44 Percent Of All Bitcoin Transactions Involve Illegal Activities


After conducting a study of historical bitcoin transaction data, an Australian research group concluded that about one in four cryptocurrency transaction involves in illegal activities.

"We find that illegal activity accounts for a substantial proportion of the users and trading activity in bitcoin. For example, approximately one-quarter of all users (25%) and close to one-half of bitcoin transactions (44%) are associated with illegal activity," said the researchers.

"Furthermore, approximately one-fifth (20%) of the total dollar value of transactions and approximately one-half of bitcoin holdings (51%) through time are associated with illegal activity. Our estimates suggest that in the most recent part of our sample (April 2017), there are an estimated 24 million bitcoin market participants that use bitcoin primarily for illegal purposes. These users annually conduct around 36 million transactions, with a value of around $72 billion, and collectively hold around $8 billion worth of bitcoin."

The research was conducted by Sean Foley of the University of Sydney, Jonathan R. Karlsen of the University of Technology Sydney, and Tālis J. Putniņš of the Stockholm School of Economics in Riga.

To come into that conclusion, the team used 'detection controlled estimation' and 'network clustering'. These strategies involve data analysis and algorithms.

"While cryptocurrencies have many potential benefits including faster and more efficient settlement, regulatory concerns center around their use in illegal trade (drugs, hacks and thefts, illegal pornography, even murder-for-hire), potential to fund terrorism, launder money, and avoid capital controls."

And according to the research, the team pointed out that the number does not indicate that cryptocurrency is fueling the growth of black market. Instead if may have been the payment method for usual crimes.

"A crucial piece of this puzzle is understanding the extent to which the online illegal trade simply reflects migration of activity that would have otherwise occurred on the street, versus the alternative that by making illegal goods more accessible, convenient to buy, and less risky due to anonymity, the move online could lead to growth in the aggregate black market. Our estimates of the amount of illegal trade facilitated with bitcoin through time contribute to understanding this issue, but further research is required to relate these estimates to trends in the offline black market."