Part 2: Protect your crypto privacy on Twitter (Python, Financial Data Science)
In October 2022 someone created a database containing 100k+ Twitter accounts associated with crypto addresses. These addresses were made available in a public Google Drive database. In this medium, we will examine the financial insights that can be gleaned from this extensive dataset.
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I. Evaluating ENS’ net-worth
Evaluating the net worth of an Ethereum address can provide valuable insights for a variety of purposes, including:
- Analyzing market trends: By tracking the net worth of high net worth individuals or organizations, it may be possible to identify trends and patterns in the cryptocurrency market. This information can be useful for investors and analysts who are looking to make informed decisions about where to allocate their funds.
- Making investment decisions: By understanding how money flows within different crypto funds or wallets, it may be possible to identify opportunities for investment. For example, if an individual or organization has a significantly high net worth at a particular Ethereum address, it could be an indication that they are holding a large amount of a particular asset or are actively trading in the market.
- Tracking the financial performance of an individual or organization: Evaluating the net worth of an Ethereum address can also be useful for tracking the financial performance of an individual or organization over time. This information can be useful for financial planners, analysts, and others who are interested in understanding the financial health of a particular entity.
- Understanding the overall cryptocurrency market and the distribution of wealth within it: By analyzing the net worth of a large number of Ethereum addresses, it may be possible to gain a better understanding of the overall cryptocurrency market and the distribution of wealth within it. This information can be useful for researchers, policymakers, and others who are interested in understanding the dynamics of the cryptocurrency market.
- Relevant for the Internal Revenue Service (IRS) when it comes to detecting tax evasion or money laundering. For example, if an individual or organization has a significantly high net worth at an Ethereum address but does not report this income on their tax returns, it could be an indication of tax evasion. Similarly, if an individual or organization is found to have a high net worth at an Ethereum address and is suspected of engaging in money laundering activities, this information could be used as evidence in an investigation.
II. Python: Loading the net-worth list
To value an Ethereum address, you will need to determine the total value of all the assets that the address holds. This will typically include the balance of Ether (ETH) and any other tokens that the address holds.
To determine the value of an address, you can follow these steps:
- 1) Determine the balance of Ether (ETH) that the address holds. You can do this by using a tool like web3.py or a blockchain explorer to query the balance of the address. The balance is typically expressed in wei, and you can convert it to ETH by dividing it by 10¹⁸.
You can use Infura in python to connect to an Ethereum node using web3.py to get the ETH balance as follows:
- 2) Determine the value of any other tokens that the address holds. This will typically involve finding the contract address for each token and using a tool like web3.py to query the balance of the address for that token.
- 3) Add up the value of all the assets that the address holds to get the total value of the address.
One way to easily track the total value of your cryptocurrency portfolio on the Ethereum blockchain is by using the Zapper.fi API. To use this tool, you will need to have a developer account and obtain an API key. The following code will can help you retrieve your net worth using the Zapper.fi API interface:
It’s worth noting that the value of an Ethereum address can fluctuate over time based on the market price of the assets it holds. Therefore, it’s important to regularly update the value of the address to ensure that it reflects the current market prices.
III. Sorting & Ranking the list
A few days after the file was released, I calculated the net-worths of the first 20,000 accounts, and ranked them by net-worth.
To protect individuals’ privacy, I will not be sharing a comprehensive file with all of the net-worths. If you wish to see the complete details, you can run the code I provided above. Nonetheless, I will still offer some specific examples to demonstrate the privacy concerns that exist. But before we do that, let’s examine if there is any existing correlation between net-worth and the number of followers an influencer has.
IV. The relationship between the reach of influencers and the funds displayed
One might expect that crypto influencer with a large Twitter following may be able to use their social media presence to promote their investment strategies and expertise, which could attract more investors and increase the assets under their public address. They may also be able to use their social media following to gain access to valuable information and insights from other industry experts and influencers, which could help them make more informed investment decisions.
To test the hypothesis that there may be a correlation, I calculated the correlation coefficient between the number of followers and their networth on public ENS.
import numpy
print(numpy.corrcoef(followers,networth))
[[1. 0.00312019]
[0.00312019 1. ]]0.00312019 indicates there is no inherent connection. It is not surprising … Many influencers use their Ethereum addresses as donation addresses, but they often receive few or no donations from their followers, suggesting that these influencers are not providing valuable financial guidance to their followers.
V. Suspected Financial Irregularities
I will now analyze three case studies that caught my attention.
a) Person A:
As of October 2022
0. Address: '0xca86d57519dbfe34axxxxxxxxxxxxb71'
1. ENS: 'ixxxxxxxm.eth'
2. Twitter handle: ixxxxxxxxth
3. Nb followers: 3396
4. Net-worth: $10,008,420.67I found this particular case to be particularly interesting because, since the release of the database, Person A has deleted their Twitter account which previously had 3,396 followers. The account now has only 6 followers, and many of the posts are scams.
The combination of a significant drop in followers, the high balance of $10 million (now $4mio), and the change in behavior on social media caught my attention and prompted me to investigate the allocation of those funds.
Upon further examination, I found that most of the funds were lent through small decentralized exchanges. On one of them, SudoSwap, Person A’s deposits represent more than 15% of the total value locked on the exchange.
Out of the tweets I examined, I found that the majority of them were promoting giveaways of NFTs that depict gory or violent images. These tweets seemed to be of a dubious nature and raised concerns for me.
It is not uncommon for individuals to engage in unethical or illegal activities in order to obtain the funds used to purchase non-fungible tokens (NFTs). This may include creating and promoting fake projects, artificially inflating their value, and selling them at a high price, or stealing liquidity. NFTs can also be used to facilitate money laundering, which is the process of concealing the proceeds of illicit activities as legitimate funds.
Money launderers may use NFTs to transfer illicit funds. By purchasing NFTs with dirty money, they can convert the funds into a seemingly legitimate asset that can be easily traded or sold. They may also use NFTs to make multiple transactions, thereby making it more difficult for authorities to trace the flow of funds.
b) Person B:
As of October 2022
0. Address: '0xd7d72811d5f4adc498XXXXXXXXXXXXXX'
1. ENS: 'rXXXXXXXXXXXXXX.eth'
2. Twitter handle: RoXXXXXXXXXXXXXX
3. Nb followers: 8'275
4. Net-worth: $9,025,089.54It seems that Person B has taken steps to protect their privacy by removing their ENS address from their Twitter profile. This may be because they have become aware that the database containing their address has been released, and they want to avoid attracting unwanted attention to their financial activities.
A review of the transactions associated with their ENS address shows that they have been actively moving large sums of money, in the millions of dollars, between FTX/Binance and their ENS address on both the Ethereum and Binance Smart Chain networks.
Given the significant amount of money being moved and the fact that these transactions may not have been declared to financial authorities, it is possible that Person B is trying to avoid scrutiny from authorities. It is understandable that they would want to keep their financial activities private, especially if they are not in compliance with tax and other financial reporting requirements.
However, it is worth noting that it is not necessarily illegal to move large sums of money or to keep financial transactions private. It is only when these activities are connected to illegal or fraudulent activities that they become a concern. Without more information, it is difficult to determine the exact motivations behind Person B’s actions.
c) Person C:
As of October 2022
0. Address: '0xbb46be602xxxxxxxxxxxxxxxxf339'
1. ENS: 'cxxxxxxxx.eth'
2. Twitter handle: mxxxxxxxx
3. Nb followers: 14'742
4. Net-worth: $7,367,686.85Person C has also taken steps to protect their privacy by removing their ENS address from their Twitter profile. Most of the tweets he shares are retweets of upcoming projects, airdrops, and the latest news in the cryptocurrency space.
One interesting aspect of this case is that the amount of ETH held in this address has remained relatively stable since May 2020, when around 6,000 ETH were transferred to it. When you investigate the origin of these 6,000 ETH, you will find that the funds came from numerous ENS addresses acquired in May 2017. It is difficult to trace the provenance of the funds before they were locked in these ENS.
In 2017 when the bidding happened, the old ENS registrar used a first-come, first-served registration process, which meant that users could register any available name as long as they were the first to do so.
How name auctions worked
New names were allocated using an auction process based on a “Vickery auction”. Auctions proceeded in three stages:
- First, someone opens an auction for a name they wish to buy, and places a bid. This starts a 3 day timer for other people to place bids on the name. During this period, the details of bids are obscured: nobody can tell how much you bid, or even what name you are bidding on.
- After the three day auction finishes, a two day “reveal” period begins. During this period, everyone who bid must reveal the details of their bid — if they don’t, they lose their entire bid. If your bid is not the highest, you are refunded your bid, less a 0.5% fee, which is burned.
- At the end of the two day reveal period, the winner is the person who revealed the highest bid, but they only have to pay the amount of the second-highest bidder. This amount is locked up in a contract for as long as the winning bidder retains control of the name. The winner must send a “finalize” transaction to receive a refund of any extra funds, and to be assigned control of the name in ENS.
One aspect of this case that raises suspicion is that Person C attempted to bid all 6,000 ETH on a single ENS domain (see below). However, this was not possible, so they had to distribute their bids over multiple domains. It is unusual for someone who is interested in acquiring multiple domains to bid all of their funds on a single ENS bid.
It is possible that Person C could have potentially used the ENS auction process to launder money by bidding on a domain name and then transferring the registered name to a third party, such as another of their own addresses. This would make it difficult for investigators to trace the origin of the funds and could potentially be used to obscure the source of the funds and make it appear as if they came from a legitimate source.
However, it is important to note that the ENS auction process is not designed specifically for money laundering and it is not necessarily an effective way to do so.
III. Conclusion
The widespread use of social media has revolutionized the way we communicate and share information, but it has also introduced significant risks to personal privacy. When we use social media platforms like Twitter, we are constantly generating vast amounts of personal data that can be easily accessed and analyzed by others. This data can include our thoughts, opinions, and personal finances, as well as our physical locations, connections to other users, and even our online behavior.
When this data is collected and combined, it can provide a detailed picture of who we are and what we do. This can be valuable for advertisers and other companies that want to target us with personalized content and offers. It can also be valuable for financial agencies, such as the Internal Revenue Service (IRS), as they may be able to use this information to track and monitor financial transactions for tax compliance and other regulatory purposes.
Through my analysis of financial activity on blockchain addresses, I hope to have demonstrated that it is possible to detect financial anomalies such as potential scams, money laundering, and tax evasion. My intention in conducting this analysis was not to expose any particular person, but rather to illustrate the ease with which the origins of funds can be investigated. By examining the flow of funds on the blockchain, it is possible to identify suspicious activity and potentially uncover illegal financial practices. It is important for individuals and organizations to be aware of these issues and to take steps to ensure that their financial activities are transparent and compliant with relevant laws and regulations.
I hope this analysis has been helpful and informative. I would love to hear your thoughts on this topic in the comments. Please feel free to share your perspective and any insights you may have.
Thank you for reading. Happy holidays!
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