Bitcoin has always been pseudonymous at best. By design, the transparent nature of blockchain enables anyone to access transaction details using block explorers. However, tracking the entire transaction history of any Bitcoin token is a cumbersome task at the moment.
A tool currently under development at the Sandia National Laboratories may make it easier to track Bitcoin transactions. Once completed, the tool is expected to help law enforcement agencies track illegal Bitcoin transactions. “Illegal Bitcoin” may imply multiple things. It can be the digital currency stolen from wallets and exchanges or even the digital currency used to buy illegal substances over the dark net.
However, the rise of blockchain analysis and tracking tools poses a huge risk to the Bitcoin network itself. In the current scenario, the absence of well-defined Bitcoin regulations may hurt the mainstream prospects of the digital currency.
According to Sandia National Laboratories, the tool is being developed for the US Department of Homeland Security’s Science and Technology directorate. They believe that the tool will eventually be used by other federal, state and local law enforcement agencies as well. The project leader, Andrew Cox explains the need for such a tool by saying,