Crypto surveillance economics has transformed blockchain transparency into a global financial intelligence industry. This article explores how analytics firms use heuristics and on-chain data to track illicit funds, enforce AML compliance, and bridge the gap between pseudonymous transactions and regulatory oversight. Crypto surveillance economics specifically refers to the study of how the emergence of blockchain analytics eventually became a financial intelligence sector based on the processes involved in monitoring, analyzing, and assessing cryptocurrency-related activities. Although public blockchains are open by definition, with all transactions being permanent records that can be viewed by everyone, the transparency of blockchain doesn’t automatically translate to easily understandable information, because blockchain transactions are pseudonymous, technologically complex, and often involve multiple blockchain systems.
This was the birth of blockchain analytics, an industry that seeks to use heuristics, behavioral, and risk approaches in an attempt to convert blockchain information into useful financial information. Crypto surveillance plays a central role in AML compliance, crypto regulation, and risk management. On-chain analysis refers to the systematic analysis of publicly disclosed data on a particular blockchain to recognize various patterns, behaviors, and relationships specific to particular transactions performed on the blockchain or particular addresses. A typical analytics platform trying to make blockchain data interpretable at scale follows this workflow: A transaction is broadcast and confirmed upon the blockchain itself.
The transaction is indexed and stored in analytics databases. Past behavior of involved addresses is assessed. Heuristics are used to infer relationships or control patterns. Transaction flows can be forwarded and backward to addresses.
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