International Research Journal of Engineering and Technology (IRJET)
e-ISSN: 2395-0056
Volume: 11 Issue: 05 | May 2024
p-ISSN: 2395-0072
www.irjet.net
Fraud Detection and Prevention in Ethereum Transactions S, Venkatesh prasath1, Dr.B. Prabhu Kavin2 1M. Tech Data Engineering, SRM Institute of Science & Technology, Kattankulathur, Chennai, India.
2Assistant Professor, Dept of Data science and Buisness Systems, SRM Institute of Science & Technology,
Kattankulathur, Chennai, India. ---------------------------------------------------------------------***---------------------------------------------------------------------
Abstract - Blockchain technology has introduced revolutionary changes in the world of finance, offering decentralized and secure transactions. However, the anonymity and irreversibility of transactions in blockchain systems, such as Ethereum, have also attracted malicious actors seeking to exploit vulnerabilities for fraudulent activities. Detecting fraud in Ethereum transactions is crucial to maintaining trust and security in the blockchain ecosystem.
This paper proposes an ensemble approach for fraud detection in Ethereum transactions using data science techniques. The proposed model combines the strengths of XGBoost and Isolation Forest algorithms, stacking them together and then applying logistic regression over the final vector. The model achieves an impressive accuracy of 99.18\%, demonstrating its effectiveness in detecting fraudulent transactions. The key contribution of this research lies in its practical application of machine learning to enhance security in blockchain transactions. The proposed ensemble model offers a reliable and efficient way to detect fraud in Ethereum transactions, thereby safeguarding the integrity of the blockchain network. This paper provides valuable insights for researchers and practitioners in the field of blockchain security, highlighting the importance of using advanced data science techniques for fraud detection in cryptocurrency transactions. Key Words: Ethereum Fraud, XGBoost, Isolation Forest(IF), Ensemble, Logistic regression(LR)
1.INTRODUCTION
Ethereum's impact on financial transactions is profound, revolutionizing the way we conceive and execute various financial activities. Ethereum's blockchain technology,
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One of the key aspects of Ethereum's financial ecosystem is its ability to create and manage digital assets through tokens. ERC-20 tokens, for example, have become a standard for creating new tokens on the Ethereum network, allowing for the creation of various digital assets representing anything from cryptocurrencies to real-world assets like stocks and commodities. Smart contracts on Ethereum allow for the automation of financial agreements, eliminating the need for intermediaries and reducing the risk of fraud or manipulation. For example, decentralized exchanges (DEXs) built on Ethereum enable users to trade tokens directly with each other without the need for a central authority. Ethereum's impact on finance goes beyond just tokenization and decentralized exchanges. It has also enabled the creation of new financial instruments and services, such as decentralized lending and borrowing platforms, automated market makers, and yield farming protocols. These innovations have opened up new opportunities for financial inclusion and democratized access to financial services. Overall, Ethereum's impact on financial transactions is significant, providing a foundation for a new decentralized financial system that is more transparent, accessible, and efficient than traditional finance.
1.1 Challenges in Ethereum Transactions
The advent of blockchain technology, most notably exemplified by cryptocurrencies like Bitcoin and Ethereum, has revolutionized traditional financial systems by introducing decentralized and secure transaction mechanisms. Ethereum, with its programmable smart contracts, has extended the blockchain's utility beyond simple transactions to enable complex decentralized applications (dApps) and decentralized finance (DeFi) ecosystems. However, the inherent nature of blockchain transactions, characterized by anonymity, transparency, and irreversibility, has also attracted fraudulent activities.
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coupled with its smart contract functionality, has enabled the creation of decentralized financial applications (DeFi) that operate without traditional intermediaries like banks.
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Anonymity and Pseudonymity: Ethereum transactions can be made pseudonymously, making it challenging to trace transactions back to their originators. This anonymity can be exploited by fraudsters to conduct illicit activities without fear of being identified. Complexity of Smart Contracts: Smart contracts on Ethereum can be complex, with multiple conditions and interactions. This complexity can make it difficult to identify fraudulent transactions or behavior within smart contracts. Variability of Transaction Patterns: Ethereum transactions can vary widely in terms of their patterns and characteristics. Fraud detection models need to be able to
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