Anonymity Analysis of Bitcoin Transactions Using Unsupervised Machine Learning

International Journal of Research and Scientific Innovation (IJRSI) | Volume V, Issue VII, July 2018 | ISSN 2321–2705

Anonymity Analysis of Bitcoin Transactions Using Unsupervised Machine Learning

 Bivin S. Nair, Regi Kumar V.

Financial Engineering, Department of Mechanical Engineering, College of Engineering, Trivandrum, Kerala, India

Abstract- Bitcoins are digital currencies that works on technology called blockchain, which is a public electronic ledger that is openly shared among the nodes in the network and creates an unchangeable record of the transactions. In financial networks, thieves and their illegal activities are called as anomalies. Members of a network want to detect anomalies as soon as possible to prevent them from creating problems in the network’s community and integrity. This study focuses on anomaly detection of the bitcoin transactions using unsupervised machine learning method. An anomaly detection model is developed with the help of isolation forest algorithm. The developed model initially extracts all bitcoin transaction data and various features of the same. The incorporated isolation forest algorithm isolates observations by arbitrarily choosing a feature and afterward split the value amongst most extreme and least ones of the selected features. The anomalies are detected by running developed the isolation forest model and the most suspicious transactions are determined for corrective action.

Keywords: Bitcoin, Anomaly, Financial Transaction, Clustering, Isolation Forest


Bitcoin is a collection of concepts and technologies that form the basis of a digital money ecosystem. Units of currency called bitcoins are used to store and transmit value among participants in the bitcoin network. Bitcoin users communicate with each other using the bitcoin protocol primarily via the Internet, although other transport networks can also be used. The bitcoin protocol stack, available as open source software, can be run on a wide range of computing devices, including laptops and smartphones, making the technology easily accessible.
Bitcoin is the name of the protocol, a peer-to-peer network, and a distributed computing innovation. Bitcoin represents the culmination of decades of research in cryptography and distributed systems and includes four key innovations brought together in a unique and powerful combination