How Will Better Blockchain Monitoring Make Crypto Safer?

The use of blockchain and cryptocurrency has already brought many changes, and yet many more are expected. Both of these things are interlinked, and hence it becomes necessary to know how each of them affects the other one. The use of blockchain is gradually spreading in different areas, and the same is the case with the virtual currency or cryptocurrency also. In such a scenario, the use of blockchain can help the use of cryptocurrency in many ways. It can keep track of the currency in every form and fraction.

Blockchain Monitoring Make Crypto Safer

One of the fundamental properties of cryptocurrencies is that it allows to monitor public blockchains, and the transactions can be verified in this manner. Not only that, you can even query public blockchains and analyze the nature of transactions. In this way, when a transaction is verified publicly, it can be proved that value has been transferred from one wallet to another in the market.

Even in the case of privacy coins, such mechanisms do exist, and it will be possible to prove that the transaction has happened for sure. The value will move from one address to another during the transaction, and this will be verified publicly through the blockchain technology.

When the technology first emerged, it was only able to monitor the new transactions added to the blockchain. Apart from that, various other aspects are needed during this time as better transparency will attract more users to the industry. Apart from that, it is important to reduce market manipulation in the long run to safeguard investor wealth. All these monitoring systems need to be upgraded so that the crypto industry becomes safer in the long run. In this regard, let us analyze how this can be done through the latest technology.

Tracing stolen funds

In the early days of cryptocurrency, many hackers were able to get away with stealing cryptocurrencies. As the transactions were done in an anonymous way, it was not possible to find out where the money went, and it would often be split into multiple accounts to avoid detection. However, many hacks have come in recent years to trace such stolen funds. The cryptocurrency transactions by nature are not completely anonymous but only pseudonymous.

In this regard, once the transaction is identified, it becomes easy to trace stolen funds, and this is also possible when the funds are sent to different addresses. When the connection between the sender and any address is established, all the transactions made between them will be visible on the blockchain.

This will be helpful in tracing stolen funds, and such funds can be frozen at the earliest so that they are not converted to fiat currency. A paper trail is automatically created that can be linked to an individual. As every account now comes with proper KYC norms, it is easily possible to trace the person involved in the transaction.

There is a separate segment of blockchain forensics that is active in the market to analyze such transactions. Many private institutions and law enforcement agencies take the help of such forensics experts to trace movements of suspicious funds in the market.

Need for democratizing information in the long run

The major disadvantage associated with the cryptocurrency market is that it is not regulated like the traditional financial markets. In this regard, markets are manipulated in some cases, and this does a lot of damage to investor confidence.

One of the most common practices of market manipulation includes spoofing where a large order is placed to create a hype about a certain trend. However, this often gets cancelled before the trade is filled at that level. In simple terms, scammers place orders at certain levels to attract buyers or sellers towards that level. In this way, when a large order is placed at a certain level, it can create optimism or pessimism depending on the level at which such orders are placed. However, the scammers have no intention of executing the orders, and they cancel the order as the price comes towards that level. In this way, they will be able to manipulate the direction of the price according to their plan.

Yet another common method of market manipulation is through insider trading strategy. In the case of cryptocurrencies, the scammers may have knowledge about a particular big trade that is going to happen at a later date. They take advantage of that and position their trades so as to make a profit from that information. Such things are better regulated in the financial markets, and the exchanges can even ban the individuals and institutions involved in such trading.

Apart from that, some exchanges also do what is called wash trading that simply uses automated bots to trade the entities among themselves. This is often done in order to drive up volumes in the exchange, and it can have a significant impact on the popularity of that entity in the market.

As the average trading volumes in the cryptocurrency market is generally lower, it is easier to manipulate the market using such methods. However, when it comes to the traditional financial markets, it is very difficult to manipulate them as the trading volumes are very high.

However, using advanced technology, such moves can be tracked in the blockchains as every information is stored in a public ledger. The technology still needs to improve in order to find such threats in real-time and block them so that investors are protected from such manipulation in the future. As of now, there is a lack of sophisticated tools to identify such manipulation in real-time, and things will be known only after some damage has happened.

In the near future, better monitoring of the blockchains will definitely improve the situation and help investors to get a level playing field in the market. In this way, cryptocurrencies will gain widespread adoption from a large number of investors in the future. This can reduce manipulation and other problems associated with the crypto industry.

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