How to Prove Bitcoin Evidence

Evidence is fundamental to the use and regulation of cryptocurrencies like Bitcoin. This blog post demonstrates one way to collect and preserve evidence about cryptocurrency transactions, technology and businesses.

Bitcoin evidence might be used as follows:

  • in a court of law to enforce a contract for sale of a product purchased with Bitcoin
  • by a tax authority to calculate tax (The IRS says Bitcoin is property on which capital gains taxes must be paid.)
  • by an accountant to audit the financial condition of a company that owns Bitcoin
  • by a regulator to monitor a Bitcoin exchange (The New York Department of Financial Services proposes to license and regulate virtual currency businesses under a program popularly known as BitLicense.)
  • by a compliance officer at a licensed Bitcoin business to show she checked the function of Bitcoin software at a specified time


Example Evidence in Failed Transaction


Cryptocoinsnews recently reported how evidence was captured and shared regarding a failed purchase purchase of goods paid with Bitcoin. The author says he tried, unsuccessfully, to make a purchase at Tiger Direct, which uses Bitpay to accept
Bitcoin payments. In connection with the author’s research of the failed transaction, “BitPay has sent [the author] the screenshot showing the proper amount paid . . .” In other words Bitpay proffered the screenshot that it made as probative evidence of Bitpay's proper performance in the transaction.



A Screencast Video Is Sometimes Better than a Screenshot.


A screenshot is a common form of evidence for online data and transactions. Screenshots are commonly relied upon in court and in financial audits. They are commonly retained as archives of online events, including contracts or statements of account.

But a problem with a screenshot is that it misses the interactivity of software or an online event. It misses audio feedback. If an investigator wants evidence that after he clicks X then Y happens, he can try to make multiple screenshots and explain them in a written report. But compiling multiple screenshots into a detailed written report is awkward and time-consuming.

A screencast video (including audio), on the other hand, can be worth 10,000 words. Here is a screencast video of a hypothetical review by a compliance officer of a web-based Bitcoin wallet. Notice the audio beeps and the brief notices that blink in the upper right-hand corner and then go away; these would be hard to represent with screenshots stitched into a written report.
 
(I use the demo wallet at Blockchain.info, which is described as “Free. Open Source.”)

Video Freezes Evidence at a Point in Time.


Software and other technology change constantly. This video documents precisely what the investigator sees at a particular time. It also records the audio “beeps” he hears, and it shows precisely when he heard them.

Could the investigator forge or manipulate this video record? Yes, just as investigators can forge other evidence like screenshots or old-fashioned paper documents.

The value of the screencast video evidence depends on the reputation of the investigator.

I have previously analyzed video evidence like this.

The credibility of the video could be enhanced if it were created and signed by more than one investigator.

The statement of date and time by the investigator via webcam makes it more difficult for anyone to manipulate the video, especially if date and time are corroborated by an outside source, such as email to which the video is attached or a cloud service to which the video is uploaded.

For instance, the Youtube (i.e., cloud computing) page for the video above shows the video was uploaded July 17, 2014. I (the Youtube subscriber who controls the page) am not able to manipulate that date. Thus, if six months from now I wanted to create a fake video and claim the date was July 17, 2014, I could not use Youtube to corroborate the date for the fake video.

Legal Signature Supports Authenticity.


A crucial aspect of the video is the webcam signature of the investigator at the end. The webcam-recorded words “I Ben Wright hereby sign and affirm this video as my official work,” make clear the investigator is putting his professional reputation on the line. He is going so far as to record his face and moving lips as he speaks the words. He is making a form of legal affidavit.

The signature potentially opens him to legal and professional punishment if he is lying or cheating. (If he is licensed like a certified public accountant, he could lose his license. He could jeopardize his ability to ever get professional employment again in the future.)

This signed video record could even be valuable years later when the investigator is no longer available or willing to vouch for it. His employer (in the hypothetical video the employer is Acme Virtual Currency Brokerage) may need his evidence long after he leaves employment.

Deeper Evidence Might Be Available.

The video above of course records the function of a wallet at the level of user interface. This record may be adequate for many audits and regulatory reviews. But sometimes deeper evidence may be necessary. Records of logs, ledgers, journals, meta-data, audit trails, and the like may be necessary . . . assuming the investigator has access to them, as well as the time and expertise to make use of them.

In any case, the application of a legal signature by the investigator who collects and authenticates such evidence can contribute to the long-term credibility of the evidence. Often a webcam signature (stating date and time) would be practical, reliable and persuasive to legal authorities like juries.

What do you think?

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Related: How to verify online forensic evidence.