How Do Hackers Use Bitcoin?

In this blog, we take a deeper look at how cybercriminals operate. Because Tozetta employs hackers ourselves, we know better than anyone what working methods cybercriminals use. It's well known that every (cyber)criminal faces a major challenge: the illegally earned money needs to be spent, preferably without it being noticed by a bank or law enforcement agency. Making illegally earned money (appear) legal is called money laundering. In this blog, we tell you more about cryptocurrencies, how cybercriminals deploy cryptocurrencies, and also why cybercriminals use cryptocurrencies.

What Is Bitcoin?

Bitcoin is a cryptocurrency — nothing more than a digital currency you can own as an individual. Compare it to your digital savings account: you don't physically hold the money, but the bank guarantees you own a certain amount. With Bitcoin and other cryptocurrencies, you also have a digital savings account (crypto wallet) in which you hold a certain number of cryptocurrencies. The value of cryptocurrencies is usually converted into euros or dollars. For now, it's important to know that most cryptocurrencies are extremely volatile, which attracts many traders — but also scammers, more on that shortly.

The Blockchain

The biggest difference from regular currency is that cryptocurrencies don't have a central authority that controls and manages them, the way a bank does. This means Bitcoins can't simply be "printed" the way currencies like the euro or dollar can. Cryptocurrencies and all the transactions that take place are controlled by a decentralized network. This involves a network of computers that ensures all transactions are checked and validated. This decentralized network is called a blockchain.

How Do Criminals Use Cryptocurrencies?

You've just had a brief introduction to what Bitcoin is and what cryptocurrencies exactly are. Now that we've covered the basics, we can explain in more detail how cryptocurrencies are deployed by cybercriminals. We do want to stress upfront that cryptocurrencies aren't used solely for criminal purposes — there are also plenty of benefits and positive applications of cryptocurrencies.

Online Marketplaces

Countless online marketplaces can be found on the lesser-known parts of the internet. On these marketplaces, you can buy drugs, weapons and other illegal services and products, among other things. In another blog, we've written in detail about the dark web and exactly how it works. We won't go further into that in this blog.

Say you want to sell drugs as a criminal. You could take to the streets, but you could also list your products on an online dark web marketplace. The chance of a sale goes up, and the chance of getting caught goes down — ideal, and exactly the reason why we're seeing a shift from offline crime to online crime. If you're selling drugs online, your customers can hardly transfer money to your personal bank account. Opening a new (business) bank account also unfortunately isn't an option for most criminals. After a number of suspicious transactions, your bank will start investigating the transactions and the origin of the wealth you're building up.

This works completely differently with a crypto wallet. If you create a crypto wallet and cryptocurrency such as Bitcoin is sent to that address, there's no authority checking all these transactions. An ideal solution for criminals to receive funds for their illegal services or products. It only gets tricky once you want to convert that money into euros or dollars.

Crime on Telegram

Many people think the dark web is extremely difficult to access. Nothing could be further from the truth — with just a few clicks, you're already on a dark web network. Yet the dark web retains this image, and we also see more and more crime shifting from online (dark web) marketplaces to anonymous chat services such as Telegram. What's convenient about a chat service like Telegram is that the app can simply be downloaded from the app store.

Telegram is, after all, nothing more than a chat service, just like WhatsApp. Except Telegram takes very good care of its users' privacy. For example, Telegram often doesn't cooperate with law enforcement agencies, allowing criminals to communicate freely on this platform.

A lot of illegal trade also takes place on this platform, where cryptocurrency is likewise used as a means of payment. If you want to know more about crime on Telegram, read our blog!

Cybercriminals

Cybercrime is currently one of the biggest threats to business. It's not only businesses but also individuals who fall victim to cybercrime. Businesses are frequently victims of ransomware. Ransomware is malicious software that encrypts computers or files on computers. So it's entirely possible you arrive at the office on Monday to find your most important files encrypted and no longer accessible.

The cybercriminals hold the files hostage and demand a ransom to release them. Now you can guess how the payment needs to be made... Of course, in cryptocurrencies!

Why Are Cryptocurrencies Interesting for Cybercriminals?

Why is this digital currency so appealing to criminals? Because the bank monitors you, illegal transactions through your own bank account stand out enormously. Applying for a bank account under fraudulent personal details is, if things work properly, also no longer that easy. We owe this to the Wwft (the Dutch Money Laundering and Terrorist Financing Prevention Act).

Criminals look for other ways to carry out transactions relatively anonymously. Because there's no central authority monitoring and checking all transactions (this is done by the network of computers via the blockchain mentioned earlier), cryptocurrency turns out to be an extremely interesting escape route.

Are Cryptocurrencies Really That Anonymous?

The short answer is no. The transactions that take place on the blockchain can be viewed by anyone and everyone. The blockchain is open and decentralized — anyone can see which wallets (accounts on the blockchain) are exchanging cryptocurrencies with each other. So you can literally see: Wallet X sends 0.01 Bitcoin to Wallet Y — you just don't know who owns the wallet.

Still, in many cases this can be traced by government agencies. Most people who own cryptocurrencies use a "broker." Think of it as a bank that opens a bank account for you and gives you access to all kinds of currencies around the world. Through that broker, you buy various cryptocurrencies and can then store them, or, as criminals do, receive and send illegal funds.

Verification Processes at Crypto Brokers

Verification processes at crypto brokers are becoming increasingly strict. It's comparable to the application process at a bank. Crypto brokers know which crypto wallet belongs to which person. So, in case of suspected criminal activity, government agencies can request the data from the crypto broker and uncover the criminal's identity.

How Do Criminals Use Cryptocurrencies?

Of course, it's not always as straightforward as we've explained above. Yet we see that many criminals simply don't know exactly what they're doing, or make a small mistake somewhere along the way. Due to ignorance or a tiny slip-up, their identity can be uncovered.

Cryptocurrencies will remain interesting for cybercriminals in the coming years. As long as there are too few investigators to solve these kinds of cases, criminals who make mistakes or are uninformed will keep going with their criminal activities undiminished.

Do you have ambitions to support us in the fight against cybercrime? Our partner CryptoCrimeTraining offers training in the field of crypto and crime. This teaches you how to recognize and investigate suspicious transactions, as well as the various working methods of cybercrime related to cryptocurrencies.