Identifying scam funds, Ethereum blockchain explorer Etherscan launches fund detection system

The Ethereum blockchain explorer Etherscan has announced the launch of a new tool called "ETHProtect," which can identify the source of funds and determine if an address is associated with hackers, scams, or illicit funds.

• Etherscan users will now be able to identify if funds are illicit
• Information includes the source of illicit funds, intermediary accounts, and current addresses

ETHProtect

ETHProtect is a detection system provided to Etherscan users to identify if addresses associated with their transactions have been involved in suspicious activities. It is claimed to trace stolen funds back to their source. Activities that would be flagged by ETHProtect include:

• Suspicious fraudulent activities
• Exploitation of program vulnerabilities
• Phishing schemes
• Hackers
• Scams

Etherscan receives user reports of suspicious activities daily. This data is then reviewed and verified by their security analysts. Once an address is identified as suspicious, it gets added to Etherscan's database, and suspicious funds are flagged based on each case. An example is shown in the image below, where a flashing "red shield" marks a suspicious address linked to Upbit hack:

Clicking on the "red shield" in the above image provides a detailed view of the suspicious fund flow, as shown below:

• The "Start" at the bottom shows the initial address of the suspicious funds and the transaction hash (TxHash).
• The "Depth" in the middle shows all addresses the suspicious funds passed through before reaching the current address.
• The "Trail End" at the top represents the current address of the suspicious funds, including block number, timestamp, transaction hash, and transfer amount.

Aside from Vitalik's Support, Other Opinions Exist

Etherscan stated in their announcement that with the increasing volume of fraud and hacker activities, their goal is to identify potential suspicious addresses. While not a new invention, such services are usually only available to large institutions and exchanges, and the costs are typically not cheap.

Etherscan mentioned:

Information is power. Our goal is to empower our users with more data insights so they can understand the mechanics behind interacting with a blockchain explorer and make informed decisions.

Ethereum founder Vitalik Buterin also expressed support on Twitter, stating that non-blockchain experts among regular users need assistance in identifying fraudulent activities and the like.

I think this is reasonable. People who aren't experts need epistemic aids to warn about scams; we don't want an unmediated information environment, we want a *competitively mediated* information environment.

— 豚林 vitalik.eth (@VitalikButerin) April 14, 2020

Furthermore, independent cryptocurrency researcher Hasu believes that this product only scratches the surface, marking specific suspicious blockchain addresses, without aiding in exposing suspicious funds moving from fiat to blockchain and beyond. He even suspects this function was created to cater to products from data companies like ChainAnalysis.

Buying into the fiction of taint is how you make it real. This sets a terrible precedent. We need all addresses to be tainted, not for users to start avoiding tainted addresses. https://t.co/eWuICXSBFB

— Hasu⚡️🤖 (@hasufl) April 14, 2020