Could participating in Telegram’s many crypto trading bots contaminate your wallet address?
More importantly, are you unwittingly part of the “bad actor ecosystem”?
Blockchain has always been lauded for its privacy – in fact, one of its hallmarks is its anonymity.
Permissionless in nature, blockchain has typically been held in contrast against traditional transactions online.
The latter is typically traceable, leaving a “paper trail” that binds one to any illicit activities they might be involved in.
But is blockchain genuinely anonymous?
Bitrace, in a recent report, highlighted how participating in seemingly innocuous online gaming or gambling could put your wallet address under undue risk and scrutiny.
For one, a large portion of transactions involving cryptocurrency for virtual goods or services occurs in highly anonymous environments like Telegram groups, overseas payment platforms, and anonymous forums.
These transactions often lack Know-Your-Customer (KYC) protocols, making them susceptible to misuse.
This then becomes the fertile soil for malicious actors – which in turn contaminate addresses that they interact with.
The report highlighted an example of how companies who specialise in providing customised wallets addresses are vulnerable to such contamination risk, since such services can often be used as tools for phishing scams.
Through such services, scammers customise the first and last few characters of the wallet address while sending dust transactions to the target that they intend to scam.
Naturally, such service providers may or may not be aware of what the customised addresses might be used for.
Binance owner Changpeng Zhao previously tweeted on the X in August regarding this particular form of scam:
Other service providers within the “bad actor” ecosystem are not spared as well.
Another example of service providers being unduly affected by this risk are the providers of cryptocurrency bots on Telegram.
Such bots are typically very versatile, which has generally allowed them to be used for different purposes, such as price feeds or spot exchanges.
This ease of use, however, soon becomes their undoing as many bad actors use such services to manage their ill-gotten gains.
Users, whether as end-users or intermediaries, are not immediately aware of such bad actors – having their wallets addresses associated with said bad actors while using such services.
Bitrace’s research brought up one example Tron address that was associated with an anonymous technology service team.
The service provider itself offers customised Tron addresses and Telegram bots.
Based on DeTrust’s financial risk data platform, the specific address became active on September this year.
It received transactions from 93 counterparts, with close to 90% of these funds coming from activities such as gambling and money laundering.
Because this address received payments from various sources, the wallets that it interacts further with invariably become wallets of interest to regulated platforms.
The service provider also transferred such risk-associated USDT to five exchange addresses, including two centralized exchange accounts – potentially triggering restrictions on these accounts due to their involvement with illicit activities.
If you already find KYC on regulated exchanges problematic, you do not want your wallet to be tagged as suspicious.
Being associated with such bad actors (even unknowingly) will permanently link your address with high-risk financial addresses, potentially damaging your reputation on the blockchain.
It’s easy to scoff at this – since you can quite easily create a new wallet, but perhaps the inconvenience from investigations due to law enforcement might give you pause.
This is the real-life equivalent of tearing out the Ring of Gyges.
Privacy may soon be dead in the blockchain, but perhaps its demise may mean the rise of more accountability within cryptocurrency.