In a recently published document on the use of Bitcoin for illegal activities, researchers from the University of Sydney, the University of Technology in Sydney and the Stockholm School of Economics in Riga indicate that a quarter of all Bitcoin users are associated with illegal activities

Source

The use of Bitcoin for illicit purposes has long been the most controversial aspect of the cryptoactive, although it has been relegated to speculation about the price of Bitcoin in recent years.

In addition to estimating the scale of illegal activity involving Bitcoin, the research paper also states that this type of activity represents an important part of the underlying intrinsic value of Bitcoin.

Methodology

In the document, which was co-authored by Sean Foley, Jonathan R. Karlsen and Tālis J. Putniņš, publicly available information is used as a basis to identify an initial sample of users involved in illegal activities in the Bitcoin block chain.

The seizures of Bitcoin by the authorities, the attractive wallets and Bitcoin addresses in the darknet forums are used here, in addition to the commercial user networks that were identified in this data set.

The formula for detecting delinquents in the blockchain involves a wide variety of parameters such as transaction counting, transaction size, frequency of transactions, number of counterparts, the number of darknet markets active at the time, the extent to which the user hides your activity and the degree of interest in Bitcoin in terms of Google searches at that time.

"Bitcoin users who are involved in illegal activities differ from other users in various features," the document says. "Transmission users use predominantly (or only) Bitcoin as a payment system to facilitate the trade of illegal goods / services, and tend to make more transactions, but in smaller amounts. They are also more likely to make repeated transactions with a given counterpart. "

The scale of the problem

As with any investigation into the activities of criminals on the Internet, it is important to take the conclusions of this study with a grain of salt. Remember, this is a study about the activities of those who do not want their activities to be discovered in the first place.

Having said that, these are the findings about illegal activity in the Bitcoin network, according to the study:

24 million illicit users, which is 25 percent of all users.
36 million illicit transactions per year, which is 44 percent of all transactions.
US $ 72 billion in illicit transactions per year, which is 20 percent of the dollar value of all transactions.
US $ 8 billion in illicit Bitcoin holdings at the time of the study.
51 percent of all Bitcoin holdings throughout history have been illegal in nature
The study compares Bitcoin's black market with illegal drug markets in the United States and Europe. In the United States, this market is worth $ 100 billion per year. In Europe, the market is 24 billion euros per year.

Other data

Although the amount of illegal activity that takes place in the Bitcoin network seems to be relatively large, the document indicates that the prevalence of this type of activity has been decreasing since 2015 as more conventional users have entered the market due to interest in Bitcoin as a refuge of value or speculative asset.

The study also indicates that privacy-focused altcoins, such as Monero and Zcash, may be reducing Bitcoin's role as the black market currency online.

"By providing an anonymous and digital payment method, Bitcoin did for the darknet markets what PayPal did for eBay: provide a reliable, scalable and convenient payment mechanism," the document added.