Thread by @Cryptadamist

🧵1/Ω
Just read #Chainalysis "2024 Crypto Crime Mid-Year Report". Obvs they have a habit of minimizing crypto crime stats but reading closely I realized this is kinda nuts. So nuts I that we need new rhyme akin to "pump & dump" vein. I give you:

"Minimize & Legitimize"

Ω👇Ω

🧵2/Ω
The report has two parts. I focused on the 2nd half because it makes a big deal about CSAM. Surprisingly to me it seemed like Chainalysis was for once maybe not downplaying something really bad...

But then I started checking the numbers.

(Report: )chainalysis.com/blog/2024-cryp…

🧵3/Ω
Below is the tweet I dashed off as did a quick scan. CSAM is bad. If CSAM number go up = really bad. Looked like Chainalysis was admitting bad number go up!

Which, speaking as someone who's checked their work on terrorism financing, was surprising.

🧵4/Ω
But there was a really important caveat: Chainalysis excluded Monero ("XMR"), Zcash ("ZEC") and other "privacy coins". These tokens have impresive privacy features!

If you send $XMR to someone no one can see:
1. who sent it
2. who received it
3. how much was sent

🧵5/Ω
(Yes, I am aware that the NSA or whoever have made some cryptographic progress using probabilty theory etc to be able to see very vague outlines of activity for big $XMR movers. We're not having that discussion now bc for all intents & purposes it's still private).

🧵6/Ω
Privacy is nice for avg ppl but it's Very Important to people selling cocaine by the kilo on the internet's darknet mkts ("DNMs"), x100 if their DNM store has 387 5⭐️ reviews ("quick delivery!", "friendly seller!")

(yes there's a review system. it's basically amazon tbh)

🧵7/Ω
As a result no one selling drugs on a darknet mkt has accepted anything but privacy coins in like, years at this point. In fact last I looked at the data *all* the consumer level DNMs were $XMR *only* (or $ZEC, whatever - privacy coins).

🧵8/Ω
So when I saw Chainalysis's crime stats that the govt & the public were supposed to use to guide policy don't include any crimes committed using $XMR as payment i was... surprised.

(ok fine i wasn't surprised. they suck).

🧵9/Ω
Chainalysis has always fudged numbers and always minimized & legitimized to an egregious extent. But still this felt kinda new. Like seriously measuring drug sales on the darknet w/out including monero is like measuring the intl oil market without USD...

or Euros.

🧵10/Ω
(Possibly important caveat: it may well be the case that when the 14k Triad buys 30 metric tonnes of cocaine from the Sinaloa cartel at wholesale prices they just use bitcoin; I dunno. But tbh i doubt it. Cartel guys don't like prison food any more than the rest of us.)

🧵11/Ω
While I don't have any direct knowledge I tend to think the only mkt more likely to use XMR than the cocaine mkt is the CSAM mkt¹ bc the consequences of being caught are Really Bad

¹ after 🧵 my goal is to never think about the fact that there's a CSAM "market" ever again

🧵12/Ω
Also not to stereotype but I've seen some #LouisTheroux documentaries 👇 & tbh the CSAM guys seem like they are probably way, way better at computers than your average member of MS-13.

If nothing else as a cohort they are way above avg at Warcraft.

🧵13/Ω
Back to the 🫵: remember Chainalysis's report made a big deal about CSAM being on the rise, especially in... China (ooh!). I have a few issues with this data.

1st of all when you look closer you see almost the only CSAM # of any kind is "20.000 days"... which means bubkis

🧵14/Ω
If I sell a start a biz selling parmesan cheese subscriptions and i offer a 55 year lifetime subscription for $5,000 then ok i guess, cool. But kinda seems more important to know if anyone actually bought the lifetime sub and if so, how many people bought it right?

🧵15/Ω
Chainalysis provides us with nothing even resembling a number like that.

Instead we get this, which means absolutely nothing:

🧵16/Ω
And this 📊 which I think we can safely ascribe to Chainalysis's inability to catch Chinese people buying CSAM pre-2023 and not, as the report implies, to the incidence of pedophilia in china rising 1,000% in 1 yr

That's not real & it's dishonest to not give that caveat.

🧵17/Ω
This is also not how data scientists communicate. I've worked w/data scientists ("DS") & anyone who has ever asked a bona fide rider of the python pandas a seemingly basic yes/no question knows...

🧵18/Ω
...that in the language of data science a y/n question translates to "plz spend 20m explaining all possible caveats, weather patterns, & moon phases that may influence the result before saying 'It's hard to say. Yes-ish at 9am, no-ish after 5pm but only if you like bacon."

🧵18/Ω
What's kind of particularly weird about Chainalysis though is even their own data scientists talk like this! they are obviously data scientists. Some of them even seem to be pretty smart.

And yet the published work product is always just "minimize and legitimize".

🧵19/Ω
This leads to situations where the Chainalysis PR ppl say "Hamas never uses Tether. We checked. No need to think about this ever again! Come folks move along here." and then the data team goes on @laurashin and gives a completely different answer:

🧵20/Ω
A much more reasonable answer of the sort a data scientist should give, meaning they say "we literally can never know that number. In fact the range of plausible amounts of Tether hamas used to buy missiles is massive, from low 6 figures to basically sky's the limit."

🧵21/Ω
Back, unfortunately to CSAM numbers... and also importantly back to Chainalysis's favorite kind of chart: a circle made of circles with lines between them with an almost unreadably tiny font and 0 visual indicators of WTF any of it means.

🧵22/Ω
What's going on here is that the circles are wallets and the lines are tokens.

"Cool" you might think. "Would be kinda nice if a billion dollar txn was like, a thicker line than a $5 txn. Also maybe the font could be legible? Maybe in/outbound txns could be diff colors?"

🧵23/Ω
Chainalysis: "Fuck your feelings asshole."

🧵24/Ω
You can actually kind of get a feel for what the data scientists tried to write before the PR guys took the ball at the 40 yard line if you squint...

So squint, and as you do look at the $ amounts.

("Hard to quantify" is data scientist speak for "Good job bro.")

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Lost a few posts to browser fail. If you get to the end now wait and hour and come back for the rest bc the rest is good.
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🧵25/Ω
You may have to squint really hard but if you do you'll notice that some of these txns are like... not big. Maybe even small, maybe.

Which I mean, OK. CSAM transactions = Strong Bad. Max Bad. But there's two other crime situations in this report.

🧵26/Ω
Topic 2 is pig butchering scams. Also pretty bad! But let's skip that 4 now.

The 3rd situation in there is something called "Huione Guarantee" (HG). HG seems to be what a DNM would be if that DNM were owned by the king and could do & sell anything.
elliptic.co/blog/cyber-sca…

🧵27/Ω
The $ amount that Chainalysis puts on the amount of contraband moving through Huoine Guarantee is... well I mean let's just say it's a little bit big. Maybe even kinda biggish.

Call it's $50. $50... billion.

Roughly the cost of the US Airforce's F-16 fighter jet fleet.

🧵28/Ω
Imagine you are the writer of the Chainalysis half year crypto crime report. You are trying to present yr data in a useful way to your audience (AKA "the FBI and friends").

On the one hand you've got some circles you drew with lines and numbers that add up to ~$1,000 CSAM

🧵29/Ω
CSAM is bad! But...on the other hand you have the equivalent of a substantial % of the military might of the most powerful army in the history of the world ending up in the hands of the Chinese mafia and/or Vladimir Putin.

Does this seem like the right priority order?

🧵30/Ω
I mean let's face it this is good PR. CSAM gets people riled up (even FBI agents). But this is supposed to be an overview of the entire criminal ecosystem in crypto & they never even estimate the total size of CSAM mkt?

All we get is a stacked % chart and... circles.

🧵31/Ω
So they made a totally unquantified appeal to parental rage THE priority in the report. Everything else? Meh.

Which, I mean... Let's look at what those other things actually are.

Because CSAM is bad but tbh slavery is Also Very Bad.

🧵32/Ω
Everyone's got their own moral hierarchy but ppl tend to agree a decabillion dollar slave trade scamming grandmas the world over out of their savings that exists only bc crypto empowered grandma to instantly send her entire savings to Cambodia...

🧵32/Ω
Is bad.
aljazeera.com/news/longform/…

🧵33/Ω
But wait, there's more!

Near the end of the rept Chainalysis offers even more circles but this time the circles are supposed to help us understand all the Very Bad Things going on at Huione:

- Casinos!
- Weapons!
- Drugs!
- Putin!
- Iran!

and...

- CSAM! (again)

🧵34/Ω
Huione is a CSAM mkt! Evil! Yes!

But let's slow down and look at the numbers in the circles for a sec bc you know, emotion / reason kinda complementary.

Before we see the circles here's something more useful: a spreadsheet. With the numbers from the circles added up:

🧵35/Ω
No, yr not reading that wrong. Chainalysis offered one of its circle charts with a bunch of circles numbers that add up to almost $300 million... & CSAM is 0.00002% of the total.

A lonely $48.50 yellow circle.
But hey - same size AND color as Russia's circle!
And Iran's!

🧵36/Ω
Going to post that last chart again with and w/out my annotations bc:

1. #Chainalysis chart is one of the least informative things i've ever seen, period. GOATed.

2. Annotating was hard so make me happy and look.
In particular look on top right.
@GraphCrimes @jgharris7

🧵37/Ω
What do you see in the top right?

Something about - well gosh it looks like it's somehow one of Chainalysis's big customers! Wow, how did that ever get in there. Must be a mix up - customer called "Tether" facilitating a small U.S. Force worth of criming.

Huh. Weird.

🧵38/Ω
I mean it's not like... I mean I don't want to suggest anything.

But, is it possible, maybe...

That there's a small incentive to downplay it when someone who gives you enormous checks every month is doing something kinda... bad?

🧵39/Ω
Nah... That would be "minimize and legitimize" behavior!

#Chainalysis would never do something like that. Especially because they probably really, really need that Tether check to stay in business given a lot of bros stopped paying.

Right?

🧵40/Ω

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thoughts/RTs appreciated; this was a pain to put together.

Ω👆Ω
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