Hackers and scammers are a scourge on the entire crypto sector. The latest figures from Chainalysis, one of Data Ownership Protocol’s collaborators, suggest they stole $1.7 billion in 2023.

 

Every attack causes untold devastation — not only for innocent victims who lose their hard-earned savings, but the exchanges and DeFi platforms who see their reputations torn to shreds after critical vulnerabilities in infrastructure are exploited by malicious actors.

 

But there’s a wider problem that needs to be discussed: even if you never interact with cybercriminals, or the crypto projects they target, you could still get caught up in the middle. Why? Because the digital assets you receive may have once belonged to a tainted wallet.

The tainted wallet problem

Regulators are constantly on the lookout for tainted funds linked to thefts, money laundering, the financing of terrorism or other illegal activity such as purchases on darknet marketplaces. Blockchain analytics is regularly used to track the flow of this crypto from one wallet to another.

 

Let’s imagine that $100 in crypto is withdrawn from an Iranian exchange by a user called Bob. Given how Iran is subject to extensive economic sanctions from the likes of the US and the EU, this would instantly throw up a red flag among law enforcement agencies.

 

Bob then transfers these funds in full to a friend, who in turn sends the crypto to yet another address. With every passing transaction, greater distance is established between the new recipient and the original person involved in illegal activity. 

 

But even if this problematic crypto ends up flowing through dozens of different addresses, facts are facts: the 80th, 90th, or 100th wallet that comes into contact with these funds will be tainted — and this can cause huge headaches for unsuspecting, law-abiding investors like you.

 

For one, crypto exchanges could end up freezing these funds — either temporarily or permanently — with their accounts banned. You may need to cooperate with lengthy investigations about the provenance of these digital assets, disclose information about where you received them from, and undergo enhanced Know Your Customer checks. Worse still, your financial matters could come under close scrutiny from law enforcement agencies.

 

Sometimes, such issues only emerge when you are attempting to make withdrawals — either to another wallet or to a fiat offramp. This may mean you will be blissfully unaware that you’ve received tainted crypto until it’s too late.

 

So… what’s the answer?

DOP: A safe haven for funds

The best course of action to take is to prevent your wallet from receiving compromised crypto in the first place.

 

DOP’s collaboration with Chainalysis makes it harder for criminals and fraudsters to interact with our protocol by flagging illicit activity as soon as it emerges. Funds flowing into DOP wallets are immediately assessed for risk and checked against known tainted sources. This ultimately means that the crypto flowing around our ecosystem has been carefully filtered, giving law-abiding users confidence that the crypto sent to them by others in the DOP community is clean.

 

We implement zero-knowledge Know Your Customer tools to help preserve your privacy — and what’s more, our approach to selective transparency means that you can encrypt assets including cryptocurrencies and NFTs, as well as shield past transactions without public view. 

 

Put together, these distinctive features double your protection against malicious actors.

 

Even if you’re lucky enough to have millions of dollars’ worth of crypto from legal and clean sources, all it takes is a single dollar from a suspicious source to contaminate your wallet.

 

Receiving and sending funds through DOP isn’t just sensible from a privacy standpoint, but from a safety perspective as well. And given we’re based on top of the Ethereum blockchain, our technology is fully compatible with the third-party wallets you already use.