SoK: The Next Phase of Identifying Illicit Activity in Bitcoin

Abstract

Identifying illicit behavior in the Bitcoin network is a well explored topic. The methods proposed over time have generated great insights into the deanonymization of the Bitcoin user base through the clustering of inputs and outputs. With advanced techniques being deployed by Bitcoin users, these heuristics are now being challenged in their ability to aid in the detection of illicit activity. In this SoK, we provide a comprehensive list of methods deployed by malicious actors on the network and illicit transaction mining methods. We highlight the issues associated with conducting law enforcement investigations and propose recommendations for the research community to address these issues. Our recommendations include the release of public data by exchanges to allow researchers and law enforcement to further protect the network from malicious users. We recommend the enhancement of current heuristics through machine learning methods and discuss how researchers can take the fight head-on against expert cyber criminals.