Dusting
Another tagging technique, which does not rely on open source, is dusting. Dust is simply a trace
amount of cryptocurrency left over in a crypto wallet, also known as Unspent Transaction Outputs
(UTXO), that has negligible monetary value. Dusting involves continuously sending small amounts of
cryptocurrency to dynamic addresses created by services of interest and tracing the money using
blockchain analytics tools or block explorers. In this way, dusting allows a user to tag addresses
associated with different services. This technique, combined with clustering, often allows a user to
fully attribute all the addresses of a service.
Tagging maps the blockchain ecosystem, to quickly reveal a variety of entities. The benefits of tagging include:
Follow the money to exchanges or Virtual Asset Service Providers (VASPs): Identifying and tagging
exchanges or VASPs can serve investigators who pursue the money trail to these services, which
are bound by strict Anti-Money Laundering (AML) regulations, including Know Your Customer (KYC).
KYC requires VASPs to verify the identity of their customers and their customers' transaction counterparts.
Tagging exchanges and VASPs enables financial investigators to easily understand which exchange or VASP
they should approach to ask for the illicit transaction maker identity.
Indicate illicit behaviors: Identifying and tagging services intended to obscure transactions may reveal
money laundering attempts. Mixers (also known as tumblers, shufflers, or blenders) pool, group and
scramble one user’s cryptocurrency with another’s, thus obscuring the money trail. These services
are popular among criminals and terrorists.
Limitations with this methodology
The main problem with tagging occurs when bad actors exploit privacy-enhancing services, like
mixers and shapeshifters, since they prevent authorities from following the money trail to an
exchange or VASP (Virtual Asset Service Provider). In these instances, tagging a privacy-enhancing
service does not typically aid in de-ammonization of the suspect.
Open-source analytics enable law enforcement and security organizations to rapidly identify and tag diverse
services on the blockchain: online exchanges, distributed exchanges and shapeshifters, anonymizing services
such as mixers, payment services, gambling sites, donation addresses and additional platforms and entities on
the blockchain.
Tagging of services within the ecosystem
Open-source Methodologies