Chainalysis is a blockchain analysis firm that provides data and software to government agencies, exchanges, and financial institutions.
The role of blockchain analytics in financial security
As cryptocurrencies became more popular over the years following the launch of Bitcoin, the market value grew, and they became a target for cybercriminals. Since digital asset transactions leave a unique, on-chain trail, the rise in crime led to a demand for specialist tools and intelligence services for tracing stolen and illicit funds, creating a segment known as blockchain analytics.
Chainalysis is one of the earliest operators in this segment and has become a leading player, although now it competes with several others, including CipherTrace and Elliptic.
The history of Chainalysis
Founded by Michael Gronager, Jonathan Levin, and former CTO Jan Moller, Chainalysis was established after the infamous Mt. Gox hack. Gronager, then COO at Kraken, collaborated with Levin and Moller to create specialized software for detecting suspicious blockchain activity.
As of early 2024, Chainalysis raised over $530 million in funding from backers, including Paradigm and Barclays Bank, with the most recent estimates valuing the company at around $8.6 billion. Chainalysis employs around 900 people globally and is headquartered in New York City.
Milestones in Chainalysis history
Chainalysis quickly became a provider of choice for investigators of cryptocurrency-related crimes and is credited with assisting several high-profile cases:
- Silk Road seizure (2020): Assisted in recovering over $1 billion in stolen assets.
- Welcome to Video takedown (2019): Helped dismantle a child exploitation darknet platform by tracking cryptocurrency transactions to its operator and users.
- Lazarus Group Attribution (2020): Linked multiple cryptocurrency exchange hacks, including the 2019 UpBit hack, to North Korea's Lazarus Group, which had stolen over $1.75 billion.
- Colonial Pipeline Ransomware attack (2021): Supported the FBI in tracing and recovering Bitcoin ransom paid during the ransomware attack on Colonial Pipeline.
- Harmony Protocol theft (2022): Traced $100 million stolen from the Harmony blockchain bridge to North Korean hackers, aiding efforts to disrupt illicit fund transfers.
Chainalysis services and tools
Chainalysis offers a proprietary set of tools for on-chain analytics tailored for various clients, including law enforcement agencies, regulators, financial institutions, corporations, and other entities. However, to protect its business and clients, the firm doesn’t disclose extensive details of how its tools operate.
Chainalysis Investigations
Chainalysis Investigations focuses on crypto-related crime and compliance breaches. Key use cases include:
Law enforcement support: Tracks stolen fund movement across wallets, blockchains and exchanges and uncover on-chain evidence to provide evidence that a crime or breach occurred.
Tax agencies: Assist in identifying tax evasion through blockchain transactions.
Private sector clients**: **Carry out due diligence and risk checks on prospective business associates.
Chainalysis Intelligence
Chainalysis Intelligence is a database that maps over 65,000 real-world entities to over a billion blockchain addresses and accounts. It uses machine learning and forensic techniques to cluster activity, which helps facilitate investigations.
The company claims that its tools have helped recover over $11 billion in stolen assets.
Web3 growth insight
Chainalysis can also support the growth of Web3 projects by offering insights into blockchain activity, including:
- User behavior analysis (e.g., which blockchain platforms attract the most users, identifying when those users are most active, understanding which wallets and services they rely on, and analyzing which competitor dApps they use.).
- Strategic data for ecosystem growth and market entry.
Crypto Compliance Services
Chainalysis supports firms with their compliance-related needs for interacting with digital assets and digital asset users. Some of their services include:
- Address screening: Flags wallets associated with illegal activities or sanctions.
- Transaction monitoring: Tracks fund flows to identify suspicious transactions.
- Cybersecurity measures: Develops policies to mitigate digital asset-related threats.
With increasing anti-money laundering (AML) regulations, these services are essential for exchanges and financial institutions.
Chainalysis Insights: Industry-leading research
Chainalysis has also become renowned for delivering regular, reliable surveys and reports based on the data and intelligence it gathers using its tools.
For example, it issues an annual report on the state of crypto-related crime, which has helped cement its status in the industry as a leading authority on the subject matter.
In these reports, the company previously provided insights into the outcomes of its investigations into specific incidents, such as the 2019 phishing attack on Singaporean exchange DragonEx which was attributed to a renowned crime ring.
Insights also publishes a “Geography of Cryptocurrency” report that details the popularity of cryptocurrencies by country, using a proprietary ranking methodology.
Chainalysis Essentials
- Chainalysis provides tools to trace stolen funds, support law enforcement, and ensure AML compliance, recovering $11B+ in assets.
- Chainalysis played key roles in high-profile cases like the Silk Road seizure, Lazarus Group hacks, and Colonial Pipeline ransomware recovery.
- Chainalysis offers blockchain analytics, compliance tools, Web3 insights, and industry-leading research.