Follow the Money: Analyzing Darknet Activity Using Cryptocurrency and the Bitcoin Blockchain

• Author: Thomas E. Dearden,Samantha E. Tucker
• DOI: http://doi.org/10.1177/10439862231157521
• Published date: 01 May 2023
• Date: 01 May 2023
• Subject Matter: Articles

https://doi.org/10.1177/10439862231157521

Journal of Contemporary Criminal Justice

2023, Vol. 39(2) 257 –275

© The Author(s) 2023

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DOI: 10.1177/10439862231157521

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Article

Follow the Money:

Analyzing Darknet Activity

Using Cryptocurrency and

the Bitcoin Blockchain

Thomas E. Dearden1 and

Samantha E. Tucker2

Abstract

Transactions on the darknet are notoriously difficult to examine. Prior criminological

research has generally used web scraping and qualitative text analysis to examine

illegal darknet markets. One disadvantage of this process is that individuals can lie.

Fortunately for researchers, the currency used for transactions on the darknet,

cryptocurrency, is designed to be tracked. In this article, we examine transactions

from a former darknet marketplace, AlphaBay. Using the blockchain, we examine the

interconnectedness of both legal and illegal cryptocurrencies. In addition, we provide

a structured approach to quantitatively examine the Bitcoin blockchain ledger,

offering both the tools and our own experiences for other researchers interested

in such approaches. While cybersecurity, information technology, accounting, and

other disciplines can examine the financial data itself, we believe that criminologists

can provide additional benefits in pattern analysis and organizing the context and

theory around the transactions. Our results show that cryptocurrency transactions

are generally identifiable (90%) and involve likely illegal transactions, transactions

that attempt to obfuscate other transactions, and legal transactions. We end with a

discussion of newer cryptocurrencies and related technology and how they will likely

shape future work.

Keywords

dark web, darknet, cryptocurrency, cybercrime, Bitcoin

1Virginia Tech, Blacksburg, USA

2The University of Alabama, Tuscaloosa, USA

Corresponding Author:

Thomas E. Dearden, Department of Sociology, Virginia Tech, Blacksburg, VA 24061, USA.

Email: tdearden@vt.edu

1157521CCJXXX10.1177/10439862231157521Journal of Contemporary Criminal JusticeDearden and Tucker

research-article2023

258 Journal of Contemporary Criminal Justice 39(2)

The internet and other technologies have created an interdependent and interconnected

world. Online-only businesses, banks, and communities are now mainstream. The

increased adoption of technology has also contributed to the development of new

criminal opportunities. This has given rise to a new area of criminology, aptly called

computer-facilitated crimes (Gordan et al., 2022). Some computer-facilitated crimes

can be difficult for criminologists to examine due to technological complexity. At the

same time, criminologists’ insights into human behavior and sociological patterns are

invaluable in understanding and addressing the nature of crime. One example is the

use of cryptocurrency in criminal transactions. Although often technologically com-

plex, the nature of illegal transactions has been studied by criminologists for decades

(e.g., Donald Cressey’s Fraud Triangle).

In this article, we have several goals. First, we want to consider additional sources

of data on darknet markets, specifically cryptocurrency. Despite technical sophistica-

tion, the overall ideas and use of cryptocurrency is easy to understand. We hope read-

ers will become more comfortable viewing and understanding cryptocurrency

transactions. To this end, we provide a structured approach to quantitatively examine

the Bitcoin blockchain ledger, offering both the tools and our own experiences for

other researchers interested in such approaches. This leads to our first research

question:

Research Question 1 (RQ1): How identifiable are illegal blockchain transactions?

Second, we believe that cryptocurrency, like all technological innovations, is sim-

ply a tool. It must be understood in a larger context and not in isolation. In our article,

we consider the contexts where criminal transactions take place. Rather than focusing

only on building better security through a technical approach, developing an under-

standing of the situations where criminal transactions take place can help criminolo-

gists and others understand how cryptocurrency is utilized in a larger decentralized

network. These environments include both legal and illegal transactions. This leads to

our second research question:

Research Question (RQ2): What proportion of transactions on darknet market

associated wallets are tied to illegal activity?

We hope this article serves as a guide for researchers interested in cryptocurrency

and criminology. We offer numerous possibilities for future research. In addition, we

highlight the potential pitfalls, advantages, and limitations of cryptocurrency. Just as a

survey or experiment offers a way of analyzing data and understanding the world, we

believe that cryptocurrency analysis can offer additional insight.

Literature Review

Both the anonymity of the darknet (also commonly referred to as the dark web) and the

pseudonymity of Bitcoin provide a space conducive to criminality. Prior large darknet