Blockchain Analysts Identify a Group of Bitcoin (BTC) Addresses Linked To QuadrigaCX Exchange

Blockchain analysts recently discovered some Bitcoin (BTC) addresses that are likely tied to the cold wallets of QuadrigaCX – a failed digital currency trading platform. The discovery is notable in light of the claim of QuadrigaCX that has been locked out of its cold wallets. The locked wallets holds a total of $190 million of customers’ funds.

The firm lost access to the wallets since the death of Gerald Cotton –the CEO of QuadrigaCX. In court filings, the firm stated that the CEO was the only one responsible for moving funds from the active or hot wallet of the trading platform to offline cold storage. But the firm never shared its cold wallet addresses. As such, a lot of researchers have been trying to trace transactions carried out by the firm to find out which wallets these were.

They are also trying to find out if the wallets truly contained the $136M in digital currencies, including about $92M worth of BTC, reported to be held offline. Fiat currency of customers of $53M has also been held up at payment processors. A clue came on Tuesday, from the court-appointed monitor of QuadrigaCX in the creditor protection case – Ernst and Young (EY).

Reports To the Court

In the first report to the court, EY said that the firm had mistakenly sent 103 Bitcoins, worth about $350,000, to the cold wallets that the firm is presently unable to access. They later discovered that a group of addresses received several small transfers on that date summing to 104.335 BTC, almost the same amount mentioned in the report. Before this transaction, these addresses had not seen any transaction since April.

Stepping back, it is crucial to be extremely careful when analyzing the blockchain of Bitcoin (BTC), or any other public ledger that depends on unspent transaction outputs (UTXOs). Unlike Ethereum that is based on accounts, what can be considered a wallet on Bitcoin blockchain is usually not one address but a group of them.

In the unspent transaction outputs model, addresses designate transaction outputs, not accounts. This means parts into which initial BTC amounts are split during transactions. These addresses are gathered automatically, thanks to a script processing a conservative version of an approach known as “merged inputs heuristic.” This was disclosed by Laurent when he was explaining how OXT draws connections between addresses.

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In its fundamental version, the “merged inputs heuristic” states that all the addresses linked to the inputs of a BTC transaction are under the control of the same entity and should be clustered. Nevertheless, Laurent warned that the blockchain analysis of Bitcoin (BTC), by its nature, can’t result in unambiguous, exhaustive conclusions.

For instance, he said that the Mt Gox trading platform, which failed woefully in 2014, had a feature that confused the analytics platforms. This resulted in the appearance of a huge cluster merging wallets that are controlled by independent entities. As such, many analytics platforms tagged these addresses as suspicious due to the fact that some transactions found on the cluster were associated with dark markets.

At the time of writing, Bitcoin is trading at $3,605 after a decrease of less than one percent over the past twenty-four hours. The current market cap of the digital currency is $63.23 billion and its trading volume over the past day is $4.5 billion.

Princess Ogono is a writer, lawyer and fitness enthusiast. She believes cryptocurrencies are the future. When she's not writing, she spends time with her adorable cat, Ginger and works out often.


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