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Chainalysis partners with the Smart Contract Security Alliance

Chainalysis has announced a partnership with the Smart Contract Security Alliance (SCSA) to help businesses understand the risks and opportunities in the cryptocurrency market.

Chainalysis is a New York-based organization that provides blockchain data and analysis to government agencies, law enforcement agencies, regulators, crypto exchanges, and financial institutions in more than 45 countries around the world.

Founded by Jan Moller, Jonathan Levin, and Michael Gronager in 2014, Chainalysis markets itself as the world’s most comprehensive cryptocurrency investigation and transaction monitoring solution. The company provides compliance and investigation tools, as well as education and support to help its clients understand what’s happening on blockchains.

Chainalysis recently announced a new partnership with the Smart Contract Security Alliance (SCSA) to help businesses further understand the risks and opportunities in the cryptocurrency market. The announcement was avilable to BNC Pro users when it was released.

Jason Bonds, the Chief Revenue Officer at Chainalysis said, “Chainalysis exists to build trust in blockchains, and one of our strategies to do that is to demonstrate their transparency by offering insights into cryptocurrency activity. We are excited to join the SCSA to further generate awareness of cryptocurrency’s use and misuse.”

San Francisco based blockchain security firm Quantstamp initiated the SCSA in 2019. Quantstamp CEO Richard Ma said, “We are trying to build the standards. Over time, more companies will join the SCSA and provide part of their codes and policies, to be open-sourced, and be considered best practice. The SCSA will make it easy for people to find and use these resources, helping new projects innovate further. Adding insights on cryptocurrency crime from the leading blockchain analysis company is a welcome addition to SCSA’s deep blockchain security expertise.”

The Smart Contract Security Alliance works with members of the cryptocurrency industry to develop accepted standards for creating and evaluating the security of smart contracts. Its broader mission is to support the healthy growth and adoption of blockchain applications. Members of the alliance include Fujitsu R&D Center, NRI Secure, MythX, Blockgeeks, Layer X, the National University of Singapore Crystal Centre School of Computing, and Quantstamp.

As a nascent field, the potential benefits, risks, and implications of smart contracts are still emerging. The fast-growing Defi ecosystem is an indication of the strong interest in this area. The value of funds locked in DeFi applications surged from US$276 million 18 months ago to over one billion dollars in February according to website DeFi Pulse. This has since dropped back to US$820 billion.

However, recent exploits of Defi protocols bZx and dForce, which leveraged weaknesses in the protocol’s respective smart contracts, demonstrate the need for higher standards. bZx, the seventh-largest DeFi protocol lost US$350,000 and US$645,000 worth of Ether in two separate exploits in February.

The Smart Contract Security Alliance has published its recommended standards to increase the level of professionalism in the field. The Alliance believes that the standardization of security evaluations will facilitate compatibility, accountability, interoperability, research, and credibility for all industry participants.

To provide its clients with the data they need, Chainalysis uses three distinct tools. Chainalysis KYT is the firm’s compliance tool. This tool is used by cryptocurrency businesses and financial institutions to monitor large volumes of cryptocurrency activity and identify any potential high-risk transactions. Chainalysis Reactor is the firm’s investigation tool. This tool is used by law enforcement agencies to investigate possible incidents of fraud, extortion, and money laundering on the blockchain. Finally, the Chainalysis Kryptos tool helps financial institutions vet potential clients and users based on Know Your Customer (KYC) details.

Last week Chainalysis announced a new series of “Crypto Crime Intelligence Briefs.” The company states, "Our goal for this series is to share our analysis of the most interesting blockchain entities and transactions that, while not under active investigation, should still be of interest to law enforcement, regulators, cybersecurity experts, and compliance professionals."

The first three Intelligence Briefs cover:

  1. A bullet-proof hosting service that received Bitcoin from a cryptocurrency address connected to North Korea-led cryptocurrency exchange hacks
  2. A Ponzi scheme with its own infrastructure of purpose-built shell companies to facilitate cryptocurrency payments to and from victims
  3. An Iranian cryptocurrency exchange with connections to both international exchanges and OFAC sanctioned addresses implicated in the SamSam ransomware investigation

While law enforcement agencies have come to rely on the services of firms such as Chainalysis, others have been critical.

In an interview last month, Andreas Antonopoulos said working for Chainalysis was the moral equivalent of working for a weapons manufacturer.

“Companies like Chainalysis and others are basically in an arms race against privacy," said Antonopoulos. "And what they’re doing is they’re providing the world’s worst dictators and regimes, either directly or indirectly, with information that violates the civil rights of millions of people.”

The public nature of the Bitcoin blockchain allows for pseudonymous transactions. However, these transactions are transparent and recorded in the public ledger. That means that firms such as Chainalysis can track and trace transactions.

Meanwhile, Bitcoin core developers are evaluating several privacy-preserving updates to the Bitcoin protocol. These include Schnoor signatures, taproots, and tapescript, each of which has the potential to make the work of companies such as Chainalysis more difficult.


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