Researchers Find Added Layer of Protection Against Fraudsters in Blockchain Congestion
A recent study conducted by researchers from Florida Atlantic University and the University of Mississippi has found that blockchains with "full" blocks and transaction queues actually deter nefarious actors, money launderers, and fraudsters. The study delves into the Mt.Gox crash and other instances of cryptocurrency theft from exchanges to examine the relationship between block size, custodial security, and price.
Perpetrators of Illicit Activity Prefer Quick Laundering Transactions
The premise of the study is based on the idea that those involved in illicit activity want to complete their laundering transactions as quickly as possible. The researchers propose that when block sizes are closer to their limit and there is congestion in the network, it becomes more likely that the next transaction will be published on a later block instead of the most current one. This delay in transaction confirmation can deter cybercriminals who aim to launder stolen bitcoin.
Testing the Hypothesis with Historical Data
To test their hypothesis, the researchers analyzed historical Bitcoin blockchain data and a scam report from a crypto exchange. They used data from 2010 to 2021 and created a "fullness" score for blocks to evaluate the information. The team then examined two specific metrics: the impact of block fullness on the price of bitcoin and its effectiveness as a deterrent for bad actors.
Confirmation of Hypothesis: Full Blocks Act as Deterrent and Affect Price
The results of the evaluation confirmed the researchers' hypothesis. They found that full Bitcoin blocks serve as a deterrent to hackers and scammers because they indicate network congestion. Additionally, the study concluded that full blocks also signal a rise in network security, which is reflected in the price of bitcoin. The researchers discovered that block fullness is 20% lower on the average day that experiences a cryptocurrency breach or fraud.
This study sheds light on the potential benefits of blockchain congestion and transaction queues in deterring illicit activities and enhancing network security. It provides valuable insights for the cryptocurrency industry in combating fraud and protecting user assets.
