Blockchain
How do blockchain forensics and asset tracking work?
Discover the workings of blockchain forensics and asset tracking with real-world examples — e.g., enhance transparency, reduce fraud and improve security.
Asset tracking on the blockchain is a process that involves recording and monitoring the movement of assets on the blockchain in order to improve transparency and accountability.
The following steps explain how asset tracking works on the blockchain, using Bitcoin (BTC) as an example.
Creation and registration of Bitcoin
When new Bitcoin is created, it is assigned a unique identifier known as a transaction ID (TxID), which is recorded on the blockchain. The BTC can be followed as it travels across the blockchain network using this identity.
Bitcoin transfer
The blockchain keeps track of all Bitcoin transfers that take place among users. As a result, a permanent record of the ownership and transaction history of BTC is created. For example, if User A sends 1 BTC to User B, the transfer is recorded on the blockchain and assigned a new TxID.
Validation and verification
The legitimacy and ownership of a Bitcoin may be confirmed at every point of its path by looking at the blockchain record. By doing this, fraud is reduced, and double-spending and counterfeiting of BTC are prevented. For instance, when User B receives the Bitcoin, they can check the blockchain transaction to make sure the BTC they received is genuine and hasn’t already been spent.
Reporting and analytics
Moreover, reports and analytics on the movement of BTC, such as the quantity of Bitcoin transferred or the overall number of BTC transactions, can be generated using the blockchain record. This can assist companies in recognizing patterns and enhancing their financial procedures.
In addition, the blockchain record can be used to settle a dispute regarding the ownership or movement of a Bitcoin. This is so that the ownership and movement of Bitcoin can be clearly and independently verified thanks to the immutable blockchain record. For instance, the blockchain record can be used to ascertain what user has the rightful claim if there is a disagreement about who is the rightful owner of a specific Bitcoin.
