Today's Web2, or the majority of the internet, is owned by businesses. They have complete control over most websites, data, and revenue.
However, a lot of experts think that the blockchain is fueling a revolution toward Web3, a decentralized internet that is owned by people and user communities and in which they will have complete control over their data, content, privacy, and financial gains. For their operations, many of the larger organizations are seeking a Web3 Development Company.
While this may seem like a nirvana for grassroots investors and content producers, it also gives criminals and terrorists a chance to take advantage of a decentralized, uncontrolled environment.
The majority of experts concur that blockchain technology and cryptocurrencies are here to stay and that mainstream acceptance will continue to grow despite the recent volatility in the cryptocurrency market, which has seen the value of many cryptocurrencies drop drastically. To protect the public, law enforcement and security agencies need to be aware of the following.
Cryptocurrencies: Facilitating crime
Bitcoin, Bitcoin Cash, and Ethereum were the first digital currencies to be built on the blockchain. In order to build a money that is decentralized, quick, worldwide, and pseudo-anonymous, these financial alternatives took advantage of the blockchain's key qualities.
Crypto is currently used by criminals in a variety of ways, including as a vehicle to fund terrorism, money laundering, ransomware campaigns, and the sale and trade of illegal items in underground markets. These are merely the most well-known illegal cryptocurrency-based activities.
A new instrument for money laundering is NFTs
A baseball card with a special serial number and value that cannot be replaced is an example of a non-fungible item. This is not the same as a fungible or interchangeable item, like a euro coin, which can be swapped out for another euro coin without any distinction in any aspect, like value or appearance.
The ownership of a digital asset is represented by an NFT, which is a unique token that is confirmed using blockchain technology.
An NFT is comparable to a property deed, whereas cryptocurrency may be likened to fiat money. An NFT is a digital asset registered on the decentralized blockchain, as opposed to a house registered with a municipality's title office.
NFTs are frequently employed in money laundering, as in the case of wash trading, where one party or a group of parties working together buy and sell an asset to influence the market or launder money.
One can use numerous wallets to make a transaction appear to be between multiple persons due to the blockchain's pseudo-anonymous properties.
Since the same person or business can manufacture an NFT and sell it to himself while claiming the funds to be legal, this strategy is well-liked in money laundering.
The next step: Web3
The great bulk of data and servers on the internet nowadays are controlled by well-known IT corporations. Blockchain technology is used by Web3, a decentralized version of the internet, to enable applications, platforms, data, and more.
The natural integration of cryptocurrencies and NFTs into every platform and application, such as Decentralized Applications (Dapps), Decentralized Autonomous Organizations (DAOs), and Metaverses, will enable a decentralized internet that is practically "owned" by the users themselves.
The blockchain: what is it?
The blockchain, a distributed public ledger that stores data such as bitcoin transactions, non-fungible tokens (NFTs), and smart contracts, is the core technology of Web 3. A network of decentralized nodes is used to maintain information, and in order to add new records, a consensus is needed.
Every blockchain transaction and the related metadata are visible to everyone and recorded on the public ledger, but the identities of the transaction creators are hidden. The blockchain and the uses of underlying technologies are anonymous and unregulated, which invites a variety of illegal conduct. Ethereum is a groundbreaking programmable blockchain that several Blockchain Consulting Firms even support.
Illegal activity automation through decentralized autonomous organizations
On top of the blockchain, a set of rules are used to create a DAO. It has no hierarchy or centralized leadership and is member-owned. Smart contracts and token-based voting are used in the organization to make automated decisions.
Like the venture fund Metacartel, which uses automated procedures to pool resources, vote on investments, and distribute profits to members, DAOs can be respectable enterprises. DAOs can also be used for illegal pursuits like unlicensed gambling.
In this scenario, a DAO may have built-in rules that allow for anonymous users to purchase tokens and make wagers, and the DAO could automatically distribute profits and associated fees. These operations can be carried out on users' smartphones in a worldwide setting without being observed by regulatory bodies.
Conclusion
Law enforcement authorities and security companies must take proactive measures to prevent criminals from abusing blockchain technology's applications as they become more widely used.
If law enforcement agencies are equipped with cutting-edge blockchain analytics technologies that enable them to monitor the blockchain, detect illegal activity, and deanonymize bad actors, they can use the blockchain's open ledger and public data to follow the money trail and expose suspicious transactions while bad actors can profit from these technologies' anonymity and decentralization.