Blockchain Manual – How to trace assets on a Blockchain

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Blockchain Manual

A public Blockchain is responsible for keeping track of the balances of all network participants within a public ledger. If you are reading this, chances are that you have heard of Bitcoin and Cryptocurrency and may have already bought your first virtual currencies.

But did you know that everyone can look up and trace Bitcoins, check the balance of an address and even see the biggest token holders with a few easy clicks?

What is a Blockchain?

Before we jump into the tracing of assets on a Blockchain, let us establish how a Blockchain works: A Blockchain is a public ledger, kept by all active network participants. Active Network participants are miners, nodes and some but not all wallets. When running a full Bitcoin node, the first thing you will notice is that your PC or Laptop will download a whole lot of data. This data is the entire history of transactions on the Bitcoin Blockchain. The current size of the Bitcoin Blockchain is 263.20 Gigabyte, as of Block 581,583 (Source: Bitinfocharts)

When sending Bitcoin from one Adress to another, you request the miners to add your transaction to the Bitcoin Blockchain in the next Block. The miners are compensated for adding your transaction, along with thousands of other transactions, to the Blockchain with the Block reward of 12.5 BTC as well as your transaction fees.

Once the miners have mined a Block, they ask the nodes to verify that the Block is valid.
If the Block is valid, your transaction gets added to the Blockchain, the miner gets compensated and the circle begins again.

So how can i trace Bitcoins?

Now that we have established how a transaction works on the Bitcoin Blockchain, let’s take a look at a couple of ways to trace your transaction:

First, we need to familiarize ourselves with a so-called Block-Explorer. One of the most famous Block-Explorers and the one we will be using as an example is Blockchain.com.

This is what the Blockchain.com Explorer looks like. (Source: Blockchain.com)

Now, we are going to search for the very first Block, the so-called Genesis Block. This Block was mined by Satoshi Nakamoto himself (or herself) on the 3rd of January, 2009. We can see that there is no previous block as the hash for the previous block is all zero’s.

The Genesis Block as seen on the Blockchain.com explorer. (Source: Blockchain.com)

We can also see that there is one transaction in the block. That transaction is the block reward of 50 BTC, being paid out to Satoshi. The size of the Genesis Block is 0.285 KB.

A Trail of Breadcrumbs

The very first Bitcoin Transaction. (Source: Blockchain.com)

Now, we can follow those Bitcoins. We know that they were created in the Genesis Block, we know which Adress they were sent to and now, all we have to do is check what happened to the Bitcoins after they arrived at Satoshis Adress.

Satoshis first Adress with a total of $621.183,39 sitting there, waiting for its creator to return.
(Source: Blockchain.com)

As we can see, the Adress currently has 67.1041795 BTC ($621.183,39), with 0 sent transactions and 1646 incoming transactions. The first 50 Bitcoins that were mined on the 3rd of January are still safely stored and have not moved since their generation.

Other Blockchains

Now that we have learned how to trace assets on the Bitcoin Blockchain, we are going to take a look at the Ethereum Blockchain. More specifically, we are going to take a look at the Blockchain of an ERC-20 Token, the token standard used by most ICOs.

The ERC-20 Token we will be looking at is called Basic Attention Token (BAT). Be sure to follow our A Closer Look Series where we take a deep-dive into the Basic Attention Token and the technology behind it.

The Blockchain Explorer we will be using to look at BAT is called etherscan.io. The first thing we see when looking at the results for BAT on etherescan.io is the total supply, the total number of addresses holding BAT and the total number of transactions called transfers.

An overview of the BAT ERC-20 Token Smart Contract as seen on etherscan.io. (Source: Etherscan.io)

Everything we learned previously that applies to the Bitcoin Blockchain works for Ethereum too. We can follow transactions and trace BAT on the Blockchain.

There are however a few functionalities that differentiate Ethereum and ERC-20 Tokens from Bitcoin. First of all, ERC-20 Tokens have no miners and don’t generate new coins. All coins are created when the Smart Contract is deployed.

The Top 15 BAT Token Adresses, as seen on etherscan.io. (Source: Etherscan.io)

Second, we can see the Top Holders of BAT in a neatly organized List and see how many coins these addresses hold. Some Addresses have additional information attached, for example, the Binance and Bittrex Exchange Addresses or the BAT Reserve.

Final Thoughts

Now we have learned the basics of how to trace assets on a Blockchain and the next time we transfer our Bitcoins from Coinbase or our Hardware Wallet to an exchange, we can follow them along the Blockchain and know exactly what they are up to.

Blockchain Manual is an ongoing series with the goal to educate our readers about Blockchains and Cryptocurrencies. Have a suggestion for our next manual?
Let us know at: stories@thereformer.net

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