Abstract:
Blockchains, DeFi, and Web3, innovations for greater financial inclusion and democratization, currently fall short of the advocated benefits and present new risks and challenges. For example, while cryptocurrencies and digital assets hold promise for offering cheap, quick, and secure transfer of value, they also create payment channels for cybercrimes. The lack of disclosure and regulation also lead to vertical integration of centralized intermediaries that manipulate the market and commit frauds, as seen in the collapse of FTX. I discuss several projects assembling diverse sets of public, proprietary, and hand-collected data, and using large-scale computation and big data, both on-chain and off-chain, to investigate issues including wash trading, tax manipulation, ransomware, scams, mining concentration, network wealth inequality, and financial exclusion. Whereas blanket restrictions may prove ineffective and hinder innovations, blockchain forensics, statistical and behavioral principles, and appropriate tokenomics policies potentially enable the tracking, monitoring, and penalizing cybercriminals, market manipulators, and facilitate digital inclusion.