Digital currencies such as Bitcoin challenge the existing financial system. Complexity science enables unprecedented transparency in global payment flows, including illicit ones, facilitating the identification of associated risks to society.
Payment is fundamental in everyday life and a basic economic function in any society. Digital currencies such as Bitcoin promise a fair, transparent, and democratic financial system, one that replaces reliance on central banks with decentralized trust ‒ but they’ve also become the primary means of payment in global cybercrime.
WHY IT'S COMPLEX
Using complexity science, it becomes possible, for the first time, to shed light on cryptoasset payment flows. To advance the goal of starving the dark web and the illicit activities it supports, transaction-flow networks and large-scale graphs containing billions of nodes (wallet addresses) and edges (transactions) are computed from publicly available blockchain data and subsequently processed and analyzed.
Explore the Research Topic ‘Digital Currency Ecosystems’ – with all publications, stories, projects and visualizations.
OUR APPROACH
Based on this new information, a model can be constructed that represents the cryptoasset ecosystem as closely as possible. This model, in turn, serves as the foundation for answering questions like: How democratic are the decision-making processes in decentralized networks really? How can a stablecoin collapse? How resilient is the system to cyberattacks? Which innovations in digital finance pose systemic risks that society might not yet fully understand?
The core premise of complexity science is this: by understanding how systems operate and how they depend on one another, the risks within those systems can, for the first time, be identified and quantified. In the Digital Currency Ecosystems research area, this translates into the ability to follow the money.
On a practical level, these methods have been successfully applied by global law enforcement to dismantle major criminal networks, by identifying connections between cases and thus enabling a far more efficient response to the flood of cybercrime incidents. On a deeper level, algorithms developed at CSH are applied to study the inner workings of this new financial world; a world that is rapidly growing in popularity, yet still barely understood at a fundamental level, even by many market participants.
THE IMPACT
Vast sums of money are already circulating in the new financial universe of digital currencies, and more are added every day. The stakes are high: when failures occur in this space, society ultimately bears the costs. Data-driven insights can identify risks at the individual level as well as the potential for systemic collapse, enabling the design of appropriate safeguards and interventions.
Looking ahead, the vision is to build a digital currency and payments ecosystem that simultaneously preserves genuine privacy for end users, renders the system unusable for criminal activity through robust mechanisms, and employs governance structures that ensure accountability and prevent concentrations of power.
