Fraud Prevention in the World of Bitcoins

  • Internet Fraud

In a recent study, conducted by the University of California San Diego and George Mason University, it was concluded that there is a certain amount of privacy Bitcoins offer as long as you dont cash out or spend them. This really comes in to play when you have fraudsters trying to illegally spend and launder money. The researchers found that its harder to convert Bitcoins to cash and stay anonymous due to Bitcoins blockchain.

In relation to tracking who is spending which coins, there is a public ledger that records Bitcoin transactions. Bitcoin blockchain is the public ledger that shows how coins move from one person to another. They are represented by 34 character alphanumeric addresses. While these are numbers without names, it still allows for some sort of tracking of users and transactions.

Now, more and more companies and individuals want to know whom they are dealing with when it comes to buying or selling virtual currency. Using sophisticated fraud prevention tools and systems is one good way to regulate transactions.

By using special algorithms, it is now possible to associate large numbers of seemly anonymous Bitcoin addresses with certain major services such as exchanges and payment processors. Through legal orders, deposits and movement of the virtual currency can be traced back to the user allowing investigators to reveal the people behind them. Fraud prevention tools can assist in monitoring transactions, which make it possible to diminish the anonymity of Bitcoin users.

[Contributed by EVS Marketing]