Bitcoin and blockchain security and reliability is that very stumbling point that has always been used by detractors to explain their distrust of the cryptocurrency and its underlying technology. However, now this problem will be taken seriously.
Elliptic, a bitcoin surveillance startup based in the United Kingdom, aims at preventing illegal bitcoin deals. The company has just raised US$5 million from prominent venture capital firms and angel investors including private equity group Paladin Capital, the Spanish banking giant Santander and venture capitalists Octopus Ventures. Elliptic is going to use the investment to track down unlawful activity on the Bitcoin blockchain and to develop a set of measures to combat it.
Paladin capital’s managing director Kenneth Minihan, by the way a former director of the US National Security Agency, comments: “Elliptic is a game-changer for blockchain and is already trusted by some of the smartest minds in law enforcement and compliance. The firm’s monitoring capability will be an essential component of any blockchain in the future and we will help Elliptic to expand in the US, via our contacts and knowledge of US law enforcement and government agencies.”
In 2014 Elliptic raised US$2 million from Octopus Investments for its Bitcoin vault services. With the recent funding round, the capital of the startup reaches US$7 million. The company is planning to devote several next months to the development and distribution of its bitcoin transaction identification software.
James Smith, one of the co-founders of Elliptic, underlines that fighting criminal and illegal activity on the bitcoin blockchain is the primary aim of the company. The software, they develop, uses artificial intelligence to check the Bitcoin network for patterns of suspicious behavior and trace it back to the source. The Elliptic platform can be used by online exchanges and law enforcement agencies and has already processed around $2bn in Bitcoin transactions.
“People realise that if Bitcoin and blockchain is going to be taken seriously you have to start acting like the rest of the world,” says Smith.
It is hard to argue that one of the main characteristics of bitcoin is anonymity. No wonder that many criminals use bitcoin for illegal activities – mostly for international money transfers. When provided sophisticated surveillance tools, government and law enforcement agencies will be able to track transaction on the blockchain back to its origin.
The attempts of Elliptic are focused on making the blockchain more controllable. The development of proper software will lead, in its turn, to public image perfection of bitcoin. The elimination of fraudulent transactions and money laundering action on the blockchain will definitely result in Bitcoin network becoming a more reliable and secure payment network.