What is a blockchain?

A blockchain is a record of transactions that is shared by many computers instead of being kept by one company. Everyone taking part has a copy, and new entries are only added when the network agrees on them.

A notebook everyone can check

Imagine a notebook in which every payment is written down. Instead of one bank keeping it in a vault, thousands of computers around the world keep identical copies. When someone wants to add a line, the others check it against their own copy first.

Why that matters

• No single owner. No one company can quietly change the record or switch it off.
• Open to check. Anyone can look up a transaction and see that it happened.
• Hard to change. Once an entry is settled, rewriting it would mean convincing most of the network at once.

Where blockchains are used

The best-known use is money that moves over the internet without a bank in the middle — coins such as bitcoin, and stablecoins such as USDT. Blockchains are also used to create tokens and to run small programs called smart contracts.

Blocks, hashes and the chain

Transactions aren’t added one by one. They’re collected into blocks, and each block is locked to the one before it. That link is what makes the record so hard to tamper with.

What’s in a block

A block holds a batch of recent transactions, the time it was made, and a short code that points to the block before it.

Fingerprints called hashes

A hash is a short fingerprint calculated from data. Change even one character of the data and the fingerprint changes completely. Each block stores the hash of the block before it, so the blocks form a chain.

Why the past can’t be changed quietly

If someone edited a transaction in an old block, that block’s hash would change. The next block would no longer match it, and neither would any block after that. The rest of the network would see the broken link and reject the edited copy.

Confirmations

Each new block added after yours is called a confirmation. The more confirmations a transaction has, the more settled it is. Services usually wait for a set number before they treat a deposit as final.

Who keeps a blockchain running?

There’s no central server. A blockchain runs on computers called nodes, and a set of rules — the consensus mechanism — decides who adds the next block.

Nodes

A node is a computer that keeps a copy of the blockchain, checks new transactions against the rules and passes them on to other nodes. On many networks, anyone with the right software can run one.

Agreeing without a boss

Because nobody is in charge, the network needs a fair way to choose who writes the next block — and to make cheating expensive. Two common approaches are proof of work and proof of stake.

Why many independent nodes matter

The more independent nodes and validators a network has, the harder it is for one party to block transactions or change the rules on its own.

Wallets, keys and addresses

A crypto wallet doesn’t hold coins the way a leather wallet holds cash. The coins live on the blockchain; the wallet holds the keys that let you move them.

Private key and public address

Every account has a pair of keys. The private key is a secret number that signs your transactions — whoever has it controls the funds. From it comes a public address that you can share so that others can send you crypto.

The recovery phrase

Most wallets show the private key as a recovery phrase of 12 or 24 ordinary words. Anyone who knows these words can take everything in the wallet, so write them down offline and never type them into a website or share them with anyone.

Custodial and self-custody wallets

With a self-custody wallet you keep the keys yourself. With a custodial service such as an exchange, the provider keeps the keys and you log in with an account and a password.

Custodial or self-custody? — the guide

Every network has its own addresses

Each blockchain has its own address format. A TRON address starts with T, many Bitcoin addresses start with bc1 or 1, and an Ethereum address starts with 0x. Sending to an address on the wrong network can mean losing the funds.

Sending a transaction

Here’s what happens between pressing Send and the money arriving.

1. Create and sign. Your wallet builds the transaction — amount, recipient and fee — and signs it with your private key.
2. Broadcast. The signed transaction is sent to nodes, which check the signature and that there are enough funds.
3. Wait in line. Valid transactions wait until a miner or validator puts them into a block.
4. Added to a block. Once it’s in a block, the transaction is part of the chain.
5. Confirmations. Every new block after it adds a confirmation, until the transaction is treated as final.

Network fees

Every transaction pays a small fee to the network for processing it. Fees depend on the network and on how busy it is. On TRON they’re paid with resources called bandwidth and energy, or in TRX.

Network fees on TRON — the guide

Final means final

A confirmed blockchain transaction can’t be reversed by the network. If you send to the wrong address, there’s usually no one who can send it back — so always check the address and the network first.

Coins, tokens and stablecoins

Not every crypto-asset is the same kind of thing. Knowing the difference helps you send the right asset on the right network.

Coins

A coin is a blockchain’s own currency: BTC on Bitcoin, ETH on Ethereum, TRX on TRON. It’s used to pay the network’s fees and to reward the people who keep it secure.

Tokens

A token is created by a smart contract that runs on an existing blockchain. USDT on TRON, for example, is a TRC-20 token. Tokens use the network they live on, so moving them still costs that network’s fees.

Stablecoins

Stablecoins are tokens designed to keep a steady value, usually one US dollar. They’re handy for moving money quickly, but they have their own risks, such as the issuer freezing tokens or the price slipping below its target.

Stablecoins and their risks — the guide

Same name, different network

The same token can exist on several blockchains — USDT, for example, is issued on TRON, Ethereum and others. These versions don’t mix, so always send on the network the recipient expects.

Smart contracts in plain words

A smart contract is a small program that lives on a blockchain and does exactly what it was written to do — every time, for everyone, without anyone pressing a button.

Like a vending machine

Put in the right coins, choose a drink, and the machine hands it over. Nobody behind the counter decides. A smart contract works the same way: when its conditions are met, it carries out its rules automatically, and everyone can see what happened.

What they are used for

• Tokens. Every TRC-20 token, such as USDT on TRON, is a smart contract that keeps track of who holds how much.
• Exchanges without a middleman. Some contracts swap one token for another at a price set by a formula.
• Apps on the blockchain. Apps whose logic runs on smart contracts are called dApps (decentralised apps).

What to keep in mind

A contract does what its code says — including its mistakes. A bug can lock or lose funds, and code that’s live is often hard to change. In a self-custody wallet, approving a contract lets it move your tokens, so only approve contracts you trust, and only for the amount you need.

Risks and good habits

Blockchains are powerful, but they don’t forgive mistakes. A few habits protect you from most problems — and knowing the risks helps you decide how much to use.

The main risks

• Prices move fast. Crypto-assets can rise or fall sharply, and you could lose some or all of their value.
• Transfers are final. A confirmed transfer can’t be reversed, even if it went to the wrong address.
• Scams target people, not code. Most losses start with someone being tricked into sending funds or sharing access.
• No deposit guarantee. Crypto balances aren’t bank deposits and aren’t covered by deposit guarantee schemes.

Habits that protect you

Use a strong, unique password and two-factor authentication. Check the network and every character of an address. Send a small test to new recipients. Never share your password, codes or recovery phrase. Be suspicious of urgency, guaranteed profits and messages you didn’t expect.

How much to use

Only put in what you can afford to lose, and don’t put all your money in one type of asset. Nothing in this course is investment advice — it explains how the technology works so you can make your own choices.

How the TRON network works

TRON is a public blockchain built for fast, inexpensive transfers. Its own coin is TRX, and a new block is added about every three seconds.

Who produces the blocks

TRON uses a form of proof of stake. TRX holders stake their coins and use the votes they get to elect 27 Super Representatives. These take turns producing blocks, and the votes are counted again every few hours, so a validator that does a poor job can be voted out.

Addresses and accounts

A TRON address starts with a capital T and has 34 characters. One address holds TRX and every TRON token at the same time. An address only exists on the network once it has received something.

Why stablecoins like TRON

Fast blocks and usually low fees made TRON one of the most used networks for moving stablecoins such as USDT. That popularity also attracts scammers — later lessons show how to move stablecoins safely.

Bandwidth and energy in practice

On TRON, fees are paid with two resources. Knowing how they work explains why some transfers cost more than others.

Two resources

Bandwidth pays for the size of a transaction in bytes. Energy pays for the work a smart contract does. A plain TRX transfer needs bandwidth only; a TRC-20 transfer such as USDT runs the token’s contract, so it needs energy as well.

Staking or burning

Accounts that stake TRX receive bandwidth and energy in return. Each account also gets a small amount of free bandwidth every day. When an account doesn’t have enough of a resource, the network burns TRX from that account to pay for it.

What changes the cost

• The kind of transaction. Contract calls such as token transfers use energy; simple TRX transfers don’t.
• The recipient. Sending USDT to an address that has never held USDT needs more energy than sending to one that has.
• Network settings. Resource prices are network parameters that TRON’s Super Representatives can change.

Many wallets and exchanges handle this for you: the network fee is shown on the review screen before you confirm.

TRC-20 tokens: spotting the real one

Anyone can create a token on TRON and give it any name. The only thing that identifies the real token is its contract address.

Names can be copied, contracts can’t

A token’s name, symbol and logo are just labels chosen by whoever created the contract. Scammers create tokens called “USDT” and send them to many wallets. The real USDT on TRON is the contract below; anything else with the same name is a different token.

Habits for tokens

• Check the contract. Compare the full contract address with an official source before you trust a token.
• Ignore surprise tokens. Tokens you never bought, especially with a website in their name, are a lure. Don’t visit the link and don’t interact with them.
• Mind the decimals. USDT on TRON has 6 decimals: 1 USDT is 1,000,000 of its smallest units. Wallets show the converted amount.
• Approve carefully. In a self-custody wallet, approving a contract lets it move that token from your wallet, up to the amount approved.

Same token, other networks

USDT also exists on Ethereum and other networks, each with its own contract. A TRC-20 token can only move between TRON addresses — never send it to a 0x… address.

Stablecoins in depth

A stablecoin aims to be worth a fixed amount, usually one US dollar. How well it does that depends on what backs it and on the company behind it.

Three designs

Reserve-backed coins depend on the issuer holding enough safe assets. Crypto-backed coins hold more crypto collateral than the coins they issue, to absorb price swings. Coins kept stable only by a formula have collapsed in the past when confidence ran out.

What can go wrong

• Losing the peg. If people doubt the backing, the price can fall below its target, briefly or for longer.
• Frozen tokens. Many issuers can freeze the tokens at an address, for example at the request of law enforcement. This applies to USDT on TRON.
• Issuer and reserve risk. You rely on the issuer’s reserves being real and sufficient, and on how openly it reports them.
• Changing rules. Stablecoin laws differ by country and are changing, which can affect where a coin may be offered.

Reading the signals

Issuers publish reserve reports or attestations describing what backs their coins. They help, but they are statements at a point in time, not a guarantee. Stablecoins aren’t bank deposits and aren’t covered by deposit guarantee schemes.

Moving stablecoins safely

Most losses with stablecoins happen in the few seconds before pressing Confirm. A fixed routine makes those seconds safe.

The routine

1. Agree on the network. Ask the recipient which network they expect — for example TRON (TRC-20) — and use exactly that.
2. Take the address from a trusted place. Use your saved address book entry, not your transaction history or a message.
3. Check every character. Look-alike addresses match at the start and the end and differ in the middle.
4. Send a small test. For a new recipient or a large amount, send a little first and wait for confirmation.
5. Read the review screen. Check the asset, amount, network fee and what the recipient gets, then confirm.

Striblo’s safeguards

On an exchange, turn on the withdrawal whitelist if it offers one, so it only sends to addresses you’ve approved, and save the addresses you trust in your wallet.

Reading a transaction on an explorer

A block explorer is a public website that shows everything on a blockchain. With a transaction hash, anyone can check whether a transfer happened and what it cost.

The fields that matter

• Hash. The transaction’s unique ID. Share it when someone asks for proof of a transfer.
• Status and confirmations. “Success” with confirmations means it’s settled and can’t be reversed.
• From and To. The sending and receiving addresses. Check that To is the address you meant.
• Token and amount. Which asset moved, and how much. For tokens, check the contract too.
• Resources. The bandwidth and energy used, and any TRX burned to pay for them.

What you won’t see

Trades inside an exchange settle in its internal ledger, so they don’t appear on an explorer. Deposits and withdrawals do, because they move on the blockchain.

The threats you face

Attackers rarely break blockchains. They go after people — because crypto transfers are fast and usually can’t be reversed.

How each one works

• Phishing. A message or website copies a brand you trust to get your password, codes or recovery phrase.
• Malware. Harmful software can record what you type or swap a copied address for the attacker’s (clipboard malware).
• Social engineering. Someone builds trust or creates panic so that you send money or share access yourself.
• SIM swap. An attacker convinces your mobile provider to move your number to their SIM, then receives your SMS codes.

Your best defence

Almost every attack needs you to act quickly. Slow down, and check anything unexpected through a channel you found yourself — the official website you type in, or the app you installed from the official store.

Recognising scams

Scams change their story, but not their pattern: an unexpected contact, a reason to hurry, and a request to send money or share access.

Common scams

• Fake support. Someone claiming to be from Striblo or another company asks for your password, a code or remote access.
• Investment scams. Guaranteed high returns, “risk-free” trading bots or secret opportunities. Real investments always carry risk.
• Giveaways. “Send 1, get 2 back” offers, often using a famous name. Nobody doubles your money.
• Romance and fake jobs. A new online friend or employer builds trust for weeks, then asks for crypto or a fee to release your earnings.

What to do

Don’t reply, click or call back. Reach the company through its official website, which you type in yourself. Striblo will never ask for your password, 2FA codes or recovery details — anyone who does is not Striblo.

Passwords and two-factor authentication

Your password and your second factor are the two locks on your account. Make both strong, and never hand either of them to anyone.

Strong, unique passwords

A strong password is long and used for one site only. When a website is breached, attackers try the leaked passwords everywhere else; a unique password stops that. A password manager creates and remembers a different password for every site, so you only need to remember one.

Two-factor authentication

With two-factor authentication (2FA), logging in needs a code as well as your password. Codes from an authenticator app or a hardware security key are safer than SMS, because SMS codes can be stolen with a SIM swap. Striblo uses an authenticator app.

Backup codes and recovery

Keep backup codes offline, somewhere safe — they get you back in if you lose your phone. Never store them in a screenshot, a chat or your email. And never share a password or code with anyone: Striblo will never ask for them.

Protecting your devices

Your phone and computer hold the keys to your accounts. A few settings make them much harder to attack.

Four habits

• Install updates. Updates close security holes that attackers already know about. Turn on automatic updates.
• Keep extensions few. A browser extension can read the pages you visit and change what you copy. Keep only the ones you trust and need.
• Lock the screen. Use a PIN, fingerprint or face unlock, so a lost phone doesn’t become a lost account.
• Use official apps only. Download apps from the official store or the provider’s own website. Fake apps copy real ones.

Two situations to avoid

On public Wi-Fi, avoid logging in to financial accounts, or use a connection you trust. And never install a remote-access app because someone asked you to “help” — it gives them control of your device, as if they were sitting in front of it.

A checklist for every transfer

A blockchain transfer can’t be called back. Thirty seconds of checking before you confirm is the best protection there is.

The checklist

1. Asset and amount. Is it the right token, and the amount you meant?
2. Network. Does it match what the recipient expects? The same token on another network can’t be received.
3. Fee. Is the network fee what you expect, and is the amount the recipient gets right?
4. The whole address. Compare every character with a trusted source, not just the start and the end.
5. Nobody rushing you. If someone is pressing you to send now, stop. That pressure is the warning.

Let Striblo help

Save trusted addresses in the address book, turn on the withdrawal whitelist so funds only go to addresses you’ve approved, and send a small test to new recipients first.

If something goes wrong

Acting quickly and in the right order limits the damage — and keeps you from falling for a second scam.

1. Stop. Don’t send anything else and stop talking to the person involved.
2. Secure your account. Change your password and set up two-factor authentication again. If you use the same password elsewhere, change it there too.
3. Contact Striblo support. Use the official website. Have the dates, amounts, addresses and transaction hashes ready — never your password or codes.
4. Report it. Report fraud to the police or the relevant authority in your country. A report creates a record and can help investigations.
5. Beware of recovery scams. People who promise to get your crypto back for an upfront fee are almost always scammers targeting victims a second time.

Be realistic

A confirmed blockchain transfer can’t be reversed by the network. Sometimes funds can be traced, and some issuers can freeze stolen stablecoins, but you shouldn’t count on getting them back. That’s why prevention matters so much.

Candlesticks and timeframes

Price action means reading what the price itself has done — its opens, highs, lows and closes — rather than relying mainly on indicators. Everything starts with the candlestick.

Anatomy of a candle

Each candle sums up the trading in one period: where the price opened, the highest and lowest prices reached, and where it closed. The thick part, the body, spans the open and the close. The thin lines above and below, the wicks, reach the high and the low.

What the shape tells you

• Large body, small wicks. One side was in control for most of the period.
• Long upper wick. Price went up but was pushed back down before the close: sellers were active higher up.
• Long lower wick. Price fell, but buyers pushed it back up before the close.
• Small body, long wicks. Neither side won the period: indecision.

Timeframes

The same market looks different on a 15-minute, 4-hour, daily or weekly chart. A higher timeframe shows the bigger picture, and its levels usually matter more. A lower timeframe shows detail — and much more noise. Many analysts start on a higher timeframe to find the trend and the key levels, then zoom in for detail.

Market structure: trends and ranges

Before you look for signals, decide what kind of market you’re in. Price moves in swings, and the pattern of those swings defines the trend.

Swing highs and swing lows

Price rarely moves in a straight line. It rises to a swing high, pulls back to a swing low and moves again. Comparing each swing high and swing low with the one before tells you the structure of the market.

• Uptrend. Higher highs and higher lows: buyers keep paying more.
• Downtrend. Lower highs and lower lows: sellers keep accepting less.
• Range. Price swings between a ceiling and a floor without making new highs or lows.

When the structure changes

A trend is treated as intact until its structure breaks. In an uptrend, a close below the last higher low is a first warning that buyers are losing control; a lower high after that confirms the change. One break is no guarantee — markets often fake a break and then carry on.

Why it matters

Many methods that work in a trend fail in a range, and the other way round. Buying pullbacks can make sense in an uptrend; in a range, prices near the ceiling are often sold. Deciding the structure first keeps you from using the wrong tool.

Support and resistance

Support and resistance are price zones where buying or selling has stopped a move again and again. They are where many traders make their decisions.

Zones, not exact lines

Support is a zone below the price where falls have stopped before, because buyers stepped in. Resistance is a zone above where rises have stalled, because sellers stepped in. Treat them as zones a little wider than a single price: markets often poke through a level by a small amount before they turn.

What makes a level stronger

• Several touches. A zone that has stopped the price several times is watched by more traders. But each test also uses up the orders waiting there, so a level can eventually give way.
• A higher timeframe. Levels on daily and weekly charts usually matter more than levels on 15-minute charts.
• Sharp reactions. A fast move away from a zone shows strong interest there.
• Round numbers. Prices such as 1.00, 0.10 or 100,000 often attract orders.

Role reversal

When price breaks clearly through resistance, that zone often acts as support on the way back down — and broken support often becomes resistance. Traders who missed the first move, or who want to get out at break-even, place their orders there.

Breakouts, false breakouts and retests

A breakout is price leaving a range or crossing a key level. Many breakouts fail, so the useful skill is telling a real one from a trap.

What a convincing breakout looks like

• A close beyond the level. A candle that closes clearly through the zone — not just a wick that pokes through it.
• Participation. Rising volume on the breakout candle shows that many traders took part.
• Follow-through. The next candles keep going instead of falling straight back inside.

False breakouts

A false breakout moves through a level and then quickly returns. It often happens where many stop orders sit just beyond an obvious level: once those orders are triggered, the move runs out of fuel. Traders caught on the wrong side then have to get out, which can push the price hard the other way.

The retest

After a breakout, price often comes back to the level it broke. If the old resistance now holds as support, many traders see that as confirmation. Waiting for a retest means fewer trades and missing some moves, but it filters out many traps.

Candle patterns in context

Single candles and short candle patterns can show a change in control — but only where they appear decides whether they mean anything.

Four patterns worth knowing

• Hammer. A small body near the top and a long lower wick: sellers pushed the price down, buyers pushed it back. Most meaningful at support after a fall.
• Shooting star. The mirror image: a long upper wick and a small body near the low. Most meaningful at resistance after a rise.
• Engulfing. A candle whose body completely covers the previous candle’s body in the other direction — a sharp change in control.
• Doji. The open and the close are almost equal: indecision. On its own it says little.

Context beats the pattern

The same hammer means little in the middle of a range and much more at a tested support zone on a daily chart, in line with the bigger trend. Ask three questions: is it at a key level, which way is the higher-timeframe trend, and does the next candle confirm it?

Even good setups fail often. At best, a pattern shifts the odds a little; it never tells you what will happen.

Volume and confirmation

Volume — how much was traded in a period — shows how many traders stood behind a move. Price tells you what happened; volume hints at how convincing it was.

Reading volume

• Rising price, rising volume. Broad participation: the move has support behind it.
• Rising price, falling volume. Fewer traders are pushing it; the move may be tiring.
• A volume spike at a level. A burst of trading at support or resistance often marks a strong reaction, or the end of a sharp move.
• A breakout on low volume. Less convincing, and more likely to fail.

Divergence

When price makes a new high but momentum or volume makes a lower high, the move is losing strength. That’s called a divergence. It’s a warning, not a timing signal: trends can keep going for a long time while they diverge.

Volume in crypto

• Volume is split across many exchanges. One exchange’s chart shows only part of the market.
• Reported volume can be inflated. Some venues have reported fake volume, so compare sources and focus on well-known markets.
• Thin markets move easily. Small tokens with little trading can jump on a single large order, and their patterns are less reliable.

Risk, position size and a trading plan

Reading charts is the smaller part of trading. Over time, results depend far more on how much you risk, where you accept you were wrong and whether you follow a plan.

Decide where you’re wrong first

Before you enter, decide the price at which your idea is clearly wrong — for example just beyond the support zone you’re relying on. That’s where the stop-loss goes. Placing it by the chart, not by how much you’d like to lose, keeps it meaningful.

Position size comes from risk

Then choose a size so that, if the stop is hit, you lose only a small, fixed share of your account. Many professionals risk around 1% per idea.

Risk and reward

Compare the distance to your stop with the distance to a realistic target, such as the next resistance zone. If you risk $5 to make $10, you need to be right on more than a third of such trades to break even before fees. That isn’t easy: distant targets are reached less often.

A simple trading plan

• Market and timeframe. What you trade, and on which charts.
• Setup. The exact conditions for an entry: structure, level, confirmation.
• Exits. Where the stop-loss and the target go, decided before you enter.
• Size. How much of the account you risk per idea.
• Review. A journal of every trade: why you entered, how it went and what you’d change.

On Striblo Intelligence

Striblo Intelligence is a data platform. It offers no trading of any kind, and nothing in this course is a recommendation to trade. You can follow prices, candles and volume on its Markets pages.

UTXO and account models

Blockchains keep track of who owns what in two main ways. Knowing which model a chain uses explains what you see on an explorer — and what you can conclude from it.

The UTXO model

Bitcoin uses unspent transaction outputs, or UTXOs. Coins sit in separate pieces, like notes in a wallet. A payment spends whole pieces as inputs and creates new outputs: one for the recipient and usually one that returns the change to the sender, often to a new address.

The account model

Ethereum and TRON use accounts. Each address has a balance that goes up and down, like a bank account. A transfer simply lowers one balance and raises another. Tokens are balances recorded inside each token’s smart contract.

What it means for analysis

• Change outputs. On UTXO chains, one payment can show several outputs; working out which one is the change is a key part of tracing.
• Address reuse. Account chains encourage using one address again and again, which makes activity easier to group — and privacy weaker.
• Fees. On UTXO chains the fee is whatever the inputs exceed the outputs by; on TRON it’s paid with bandwidth, energy or burned TRX.

Inside a transaction: calls, events and internal transfers

On account chains, one transaction can do much more than move coins. An explorer shows it in layers, and reading them correctly is the core skill of on-chain analysis.

The layers

• The transaction. Who signed it, which address or contract it called, the TRX value sent, the fee and the result.
• The contract call. The function that was called and its inputs — for example transfer(to, amount) on a token contract.
• Events. Records the contract writes while it runs. A token transfer writes a Transfer event with the sender, the recipient and the amount.
• Internal transactions. Value moved by contracts calling other contracts, which doesn’t appear as a separate signed transaction.

Why the “To” field misleads

When you send USDT, the transaction goes to the USDT contract, not to the recipient, and its TRX value is zero. The real recipient and amount are in the contract call and the Transfer event. Reading only the top line is the most common beginner’s mistake.

Failed transactions

A transaction can be included in a block and still fail — for example when a contract runs out of energy. It still costs fees, but no tokens move. Always check the result, not just that a transaction exists.

Approvals

An approve call lets a contract move a token from your address later, up to an allowance. Unlimited allowances to unknown contracts are a common way wallets are drained. Explorers and wallet tools can show these allowances and revoke them.

Following funds between wallets

Tracing means following value from address to address. Every step is public, but turning addresses into people or companies depends on assumptions that can be wrong.

Hops and paths

Each transfer is a hop. Funds are often split, merged and moved through many hops. Analysts follow the largest flows and the timing: amounts that leave one address shortly after arriving there are likely to be related.

Grouping addresses

• Common input. On UTXO chains, inputs spent together in one transaction usually belong to the same owner — but not in CoinJoin-style transactions.
• Change detection. Working out which output is the change helps link a wallet’s addresses.
• Deposit addresses. Exchanges often give each customer a deposit address that forwards funds to a central wallet; that pattern identifies exchange wallets.
• Behaviour. Timing, amounts and fee habits can link addresses — the weakest evidence on this list.

Where tracing stops

Custodial services such as exchanges pool customer funds in shared wallets and keep track of ownership in an internal ledger. On-chain, you can see funds enter or leave the service, but not which customer they belong to. Mixers, cross-chain bridges and privacy tools break or blur the trail too.

Exchange flows and large transfers

Large transfers and the flows in and out of exchanges are among the most watched on-chain signals. They can be informative — and they are easy to misread.

Inflows and outflows

• Inflows to exchanges. Coins moving onto exchanges are often read as possible selling, because selling usually happens there.
• Outflows from exchanges. Coins leaving exchanges are often read as moving into storage or self-custody.
• Stablecoin inflows. Stablecoins arriving at exchanges can mean buying power waiting to be used.

Why these signals mislead

• Internal moves. Exchanges move funds between their own hot and cold wallets; if the labels are incomplete, that looks like inflows or outflows.
• Not every transfer is a trade. Coins sent to an exchange may be used as collateral, lent out or simply stored.
• Label coverage. Analytics only count the exchange wallets they have identified; unknown wallets are missing from the totals.
• Hindsight. A big inflow before a fall is easy to spot afterwards; many similar inflows were followed by nothing.

Large transfers

Whale trackers show very large transfers. Many of them are exchanges, custodians or market makers moving their own funds, not one rich person. Read them as context, together with price structure and other data — never as a signal on their own. Striblo’s On-chain pages show large transfers and wallet activity, so you can practise reading them.

Network activity and stablecoin supply

Beyond single wallets, on-chain data describes a whole network: how many addresses are active, how much value moves and how the supply of stablecoins changes.

Common network metrics

• Active addresses. Addresses that sent or received in a period. One person can use many addresses, and one exchange address can stand for thousands of people.
• Transactions and fees. How busy the network is. Low-fee networks such as TRON can show high counts from tiny or automated transfers.
• Value transferred. The total moved on-chain. It includes exchanges moving their own funds, so it isn’t the same as economic activity.

Stablecoin supply

Issuers mint new tokens when customers deposit dollars and burn tokens when customers redeem them. A growing supply on a network suggests more demand for dollars on that chain; a shrinking one points to redemptions or moves to other chains. Mints and burns are visible on-chain as transfers from or to the issuer’s addresses.

Making metrics meaningful

• Compare like with like. Look at trends over weeks or months, not single days, and compare a network with itself.
• Watch for distortion. Spam, airdrops and address poisoning can inflate the counts.
• Combine sources. A metric that agrees with others is more trustworthy than one on its own.

Limits, labels and wrong conclusions

On-chain data is public and permanent, but it doesn’t explain itself. The most damaging mistakes come from trusting labels and stories too much.

Labels can be wrong

Labels such as “exchange”, “fund” or “scammer” come from analytics companies, explorers, public reports or the community. They can be out of date, incomplete or simply wrong. Treat an address without a label as unknown, not as a private person, and a label as a claim to check.

Common mistakes

• Correlation taken as cause. Two things happening together doesn’t mean that one caused the other.
• Cherry-picking. Choosing the examples that fit a story and ignoring the ones that don’t.
• Forgetting off-chain activity. Trades inside exchanges and custodial ledgers never appear on-chain.
• Look-alike addresses. Address poisoning plants addresses that share the first and last characters with real ones; compare full addresses.

Privacy and responsibility

Linking addresses to a real person can reveal their wealth and habits. Analyse responsibly: don’t publish personal conclusions, and leave investigations of crime to the authorities.

Futures and perpetual contracts

A derivative is a contract whose value comes from something else — here, the price of a crypto-asset. Most crypto derivatives trading happens in perpetual futures.

Futures

A futures contract is an agreement to buy or sell an asset at a set price on a set date. You don’t need to hold the asset: most crypto futures are settled in cash or stablecoins, paying out only the difference in price.

Perpetual futures

Perpetual futures, or perps, have no expiry date. To keep their price close to the spot price, they use a funding mechanism: regular payments between buyers and sellers, explained in lesson 4. Perps are the most traded crypto derivative.

Long, short and hedging

• Long. You profit if the price rises and lose if it falls.
• Short. You profit if the price falls and lose if it rises. Shorting lets traders bet on — or protect against — a falling price.
• Hedging. A holder can open a short to offset falls in what they hold, reducing risk rather than adding to it.

Options, briefly

Options give the right, but not the obligation, to buy (a call) or sell (a put) at a set price. Buyers can lose at most what they paid; sellers can face large losses. Options are complex and beyond this course.

Leverage and margin

Leverage lets you open a position larger than the money you put up. It multiplies gains and losses by the same factor — and losses can arrive much faster than most people expect.

Margin and leverage

The money you put up is the margin. With 10× leverage, $100 of margin controls a $1,000 position. A 1% move in the price changes the position’s value by $10 — that’s 10% of your margin.

Initial and maintenance margin

The initial margin is what you need to open a position. The maintenance margin is the minimum you must keep. If losses push your margin below it, the exchange closes the position: a liquidation, covered in the next lesson.

Isolated and cross margin

• Isolated margin. Only the margin assigned to that position is at risk.
• Cross margin. Your whole account balance backs all positions: one losing trade can eat into the funds meant for the others.

Liquidations

A liquidation is the exchange closing a leveraged position because its margin can no longer cover the losses. It happens automatically — often at the worst possible moment.

The liquidation price

Every leveraged position has a liquidation price. For a long, it lies below the entry; for a short, above it. The higher the leverage, the closer it is to the entry: at 10× it sits a little less than 10% away, at 50× less than 2%.

Why liquidations come in waves

When the price moves sharply, the first liquidations force the exchange to sell (for longs) or buy (for shorts) in the market. That pushes the price further and triggers the next layer of liquidations. These cascades cause many of the long wicks seen on crypto charts.

What happens to your money

• You lose the margin. Most or all of the margin in the position is gone, and many exchanges charge a liquidation fee on top.
• Insurance funds. Exchanges keep a fund to cover positions that close at a worse price than their liquidation price.
• Auto-deleveraging. If that fund runs out, some exchanges reduce profitable traders’ positions to cover the gap.

Reading liquidation data

Striblo’s Derivatives pages show recent liquidations and heatmaps of estimated liquidation levels. Clusters of estimated levels can attract the price, because large liquidations add fuel, but they are estimates based on assumed leverage and change all the time.

Funding rates

Perpetual futures never expire, so something has to keep their price near the spot price. That something is funding: regular payments between longs and shorts.

How funding works

At set intervals — commonly every 8 hours, on some exchanges more often — traders on one side pay those on the other. When the perpetual trades above spot, the rate is positive and longs pay shorts. When it trades below spot, the rate is negative and shorts pay longs. The payments go between traders, not to the exchange.

What funding tells you

• High positive funding. Many traders are paying to stay long. The market is crowded on one side, which can end in a squeeze of the longs.
• Negative funding. Shorts are paying: bearish positioning, which can fuel a short squeeze if the price rises.
• Near zero. Positioning is balanced.

Funding describes positioning, not direction. A crowded trade can stay crowded for weeks, and holding a position while paying funding is a cost that adds up.

Open interest and long/short ratios

Open interest and long/short ratios describe how much money is in the derivatives market and how it is positioned. Combined with price, they give context — not predictions.

Open interest

Open interest is the total value of derivatives positions that are still open. It rises when new positions are opened and falls when positions are closed or liquidated. Every open contract has a long and a short side, so open interest shows how much is at stake, not which side is winning.

Long/short ratios

Exchanges publish the share of accounts, or of their top traders, holding more longs than shorts. Because every contract has both sides, a ratio above 1 doesn’t mean more money is long — it means more accounts are. Smaller accounts are often crowded on one side, which some traders read as a contrarian signal.

Putting it together

Rising open interest with high funding and a high long/short ratio describes a crowded, leveraged market in which a sharp move can trigger a cascade. None of it tells you when. Striblo’s Derivatives pages show these figures side by side for exactly this kind of reading.

Why leverage loses money — and how to limit the risk

Leveraged trading suits professionals with strict risk control, and most retail traders who use it lose money. Knowing why is the best protection.

Why leveraged traders lose

• Small moves, big losses. Normal crypto price swings are enough to liquidate high-leverage positions within hours.
• Costs add up. Trading fees, funding and the spread are charged on the full position, not on your margin.
• Wicks and cascades. Brief spikes can liquidate a position even if the price later moves your way.
• Behaviour. Chasing losses with more leverage turns a bad day into a lost account.

If you use leverage anyway

• Use low leverage. Lower leverage keeps the liquidation price far away.
• Set a stop-loss before the liquidation price. Decide your exit in advance instead of letting the exchange decide it for you.
• Use isolated margin. Keep each position’s risk separate.
• Only risk money you can afford to lose. Assume any leveraged position could lose its whole margin.
• Check the rules. Many countries restrict leveraged crypto products for consumers; the UK, for example, doesn’t allow crypto derivatives to be sold to retail consumers.

Money laundering and the crypto risk landscape

Money laundering is the process of making the proceeds of crime look legitimate. The United Nations Office on Drugs and Crime has estimated that 2–5% of world GDP is laundered every year. Crypto didn’t invent the problem, but it changed the tools — for criminals and for the people who catch them.

Three stages: placement, layering, integration

Classic anti-money-laundering (AML) training describes laundering in three stages. They apply to crypto almost unchanged.

• Placement. Criminal money enters the financial system — for example cash used to buy crypto from an unregistered over-the-counter dealer, or a ransom paid directly in bitcoin.
• Layering. The trail is blurred with many transactions: moving funds through dozens of wallets, swapping between tokens, bridging between blockchains or using mixing services.
• Integration. The money comes back looking clean — sold for euros at an exchange, spent on property or cars, or passed through a business as fake revenue.

Why crypto attracts criminals — and why it helps catch them

Crypto moves value across borders in minutes, without a bank, and addresses don’t carry names. That makes it useful for ransomware gangs, fraud networks and sanctioned states. But public blockchains also keep a permanent, public record of every transfer. Investigators can follow funds years later, which is rarely possible with cash.

The main threats a crypto business sees

• Fraud and scams. Investment scams, “pig butchering” romance scams and fake support desks — often the largest source of illicit funds reaching exchanges.
• Ransomware. Victims pay in crypto; criminals then try to cash out.
• Hacks and thefts. Stolen funds from exchanges, bridges and DeFi protocols, a large share attributed to North Korean groups.
• Sanctions evasion. Sanctioned people, companies and countries trying to use crypto to move money.
• Darknet markets and terrorist financing. Smaller in value, but serious in harm.

The rulebook: FATF, the EU and national supervisors

Anti-money-laundering rules for crypto come in layers: a global standard, laws that turn it into obligations, and national supervisors that check the work. Knowing who sets which rule is the first skill of a compliance professional.

The global standard: FATF

The Financial Action Task Force (FATF) is an intergovernmental body that sets the global standard against money laundering and terrorist financing in its 40 Recommendations. In 2019 it extended them explicitly to crypto: virtual asset service providers (VASPs) — exchanges, custodians and similar businesses — must be licensed or registered, know their customers, monitor transactions, report suspicions and share sender and recipient information on transfers, the so-called Travel Rule. FATF doesn’t make law itself; countries are assessed on how well they implement its standard.

The European Union

• The Fifth Anti-Money Laundering Directive. Since January 2020 it has required crypto exchange services and custodian wallet providers in the EU to apply AML rules and register with a national authority.
• MiCA. The Markets in Crypto-Assets Regulation (EU) 2023/1114 has applied in full since 30 December 2024. Crypto-asset service providers need a licence, which can be “passported” to serve customers across the EU. Transitional periods for existing firms end by 1 July 2026 at the latest.
• The Transfer of Funds Regulation. Regulation (EU) 2023/1113 has applied the Travel Rule to crypto transfers since 30 December 2024 — with no minimum amount.
• The new AML package. The AML Regulation (EU) 2024/1624 will apply directly in every member state from July 2027, and a new EU authority, AMLA in Frankfurt, will supervise the riskiest firms directly.

National supervisors

In the Netherlands, crypto providers had to register with De Nederlandsche Bank under the Dutch AML act (Wwft) from 2020; under MiCA, the AFM grants licences. In the United Kingdom, crypto firms must register with the FCA under the Money Laundering Regulations. In the United States, crypto exchanges are generally money services businesses under the Bank Secrecy Act and must register with FinCEN, while OFAC enforces sanctions.

The risk-based approach and the compliance programme

No firm can check everything with the same intensity. The risk-based approach — the core principle of FATF and EU law — means understanding where your risks are highest and putting the strongest controls there.

The business-wide risk assessment

Every firm starts by assessing its own exposure along four dimensions, and documents the result:

• Customers. Private individuals or businesses, politically exposed persons, customers with complex ownership structures.
• Products and services. Privacy coins, transfers to self-hosted wallets, high limits and instant withdrawals carry more risk than small, slow ones.
• Channels. Online onboarding without meeting the customer, agents and partners.
• Geographies. Countries on FATF’s lists of high-risk jurisdictions — for example North Korea, Iran and Myanmar, which are subject to a call for action — and sanctioned regions.

The building blocks of a compliance programme

• Governance. A management body that owns the risk, and a compliance officer (often called the MLRO) with real authority and resources.
• Policies and procedures. Written rules for onboarding, monitoring, sanctions, reporting and record keeping.
• Controls. Customer due diligence, sanctions screening, transaction monitoring and the Travel Rule.
• Training. Staff who know the red flags and know how to escalate.
• Independent testing. Internal audit or an external review that checks whether the controls actually work.

Many firms organise this in three lines of defence: the business that owns and manages the risk, the compliance and risk functions that set rules and challenge, and internal audit that checks independently.

Know your customer: due diligence and beneficial owners

Customer due diligence (CDD) answers three questions: who is this customer, who is really behind them, and what activity should we expect? The answers become the baseline against which every later transaction is judged.

The four steps of CDD

1. Identify. Collect the customer’s details: full name, date of birth, address and nationality — or, for a company, its legal name, registration number and address.
2. Verify. Check them against reliable sources: an identity document with a liveness check, company registers, and independent data.
3. Understand the relationship. Record the purpose and expected activity: occupation, expected amounts, where the money comes from.
4. Monitor. Keep the information up to date and compare activity with the profile for as long as the customer stays.

Enhanced due diligence

Higher risk calls for enhanced due diligence (EDD): more evidence and senior approval. Common triggers are politically exposed persons (PEPs) and their close relatives, links to high-risk countries, complex ownership, unusually large amounts and activity that doesn’t fit the profile. EDD usually means documenting the source of funds — where this money comes from — and, for larger relationships, the source of wealth — how the customer built up their assets overall.

Business customers and beneficial owners

For a company, the real question is who owns or controls it. Under EU rules, anyone holding more than 25% of the shares or voting rights, or controlling the company in another way, is a beneficial owner and must be identified and verified. Shell companies, nominee directors and chains of holding companies in several countries are classic ways of hiding the people behind a business.

Sanctions screening on and off the chain

Sanctions forbid dealing with specific people, companies, countries — and, increasingly, crypto addresses. A firm must check both who its customers are and where their crypto comes from and goes to.

Who issues sanctions

The most important lists for crypto firms come from the United Nations, the European Union, the United Kingdom and the US Treasury’s Office of Foreign Assets Control (OFAC). OFAC has added crypto addresses to its list of Specially Designated Nationals since 2018. In the US, civil liability for sanctions violations is strict: a firm can be penalised even if it didn’t know.

Where to screen

Name screening uses fuzzy matching, because names are transliterated and misspelt; every possible match must be reviewed and the decision recorded. Wallet screening checks counterparties against listed addresses and, with blockchain analytics, against addresses that are only a few hops away from a sanctioned entity.

North Korea and hacked funds

The FBI attributed the theft of about $620 million from the Ronin bridge in March 2022, and of about $1.5 billion from the exchange Bybit in February 2025, to North Korean hackers. Funds from such hacks are moved quickly through exchanges, bridges and over-the-counter brokers. Screening deposits for exposure to these clusters — and acting fast — is one of the most important things an exchange can do.

Transaction monitoring and blockchain analytics

Onboarding tells you who a customer is. Monitoring tells you what they actually do. In crypto, it combines classic rules on account activity with analysis of the blockchain itself.

Rules and scenarios

Monitoring systems run scenarios that raise an alert when activity matches a known risk pattern:

• Pass-through. Funds are deposited and withdrawn again within minutes, using the account only as a stepping stone.
• Structuring. Many amounts just below a reporting or review threshold.
• Profile mismatch. Volumes far above what the customer said to expect.
• Many to one. Many unrelated senders paying one account — a sign of a money mule or a scam collection account.
• High-risk counterparties. Direct or indirect exposure to mixers, darknet markets, scam clusters or sanctioned entities.

FATF’s 2020 report on red flag indicators for virtual assets lists many more, from the use of several accounts with the same IP address to customers who can’t explain where large holdings came from.

Blockchain analytics

Analytics tools group addresses into clusters that probably belong to the same entity — for example because they are spent together as inputs of one Bitcoin transaction — and label clusters as exchanges, services or illicit actors. A risk score then measures exposure: direct, when the counterparty itself is risky, or indirect, when the funds passed through risky addresses a few hops earlier. Labels are estimates, not proof, so analysts must check them.

From alert to decision

Every alert is triaged, investigated if needed, and closed with a documented decision: no further action, ask the customer, restrict the account, or report. Supervisors look closely at quality: a backlog of unreviewed alerts, closures without reasons, or rules that are never tuned are among the most common findings in inspections.

The Travel Rule in practice

When a bank sends a wire transfer, information about the sender and the recipient travels with it. The Travel Rule requires the same for crypto transfers between service providers — even though the blockchain itself carries no names.

What has to travel

FATF Recommendation 16 requires the sending provider to collect and send information about the originator and the beneficiary, and the receiving provider to obtain and check it. FATF allows countries to apply simplified requirements below USD/EUR 1,000. The EU’s Transfer of Funds Regulation goes further: since 30 December 2024 it applies to every crypto transfer between providers, regardless of the amount. The data includes the originator’s name, account or wallet address and, for example, their address or date and place of birth, plus the beneficiary’s name and account or wallet address.

How providers exchange the data

Providers use messaging networks and protocols to find each other and exchange the data securely. Most use a common data format, IVMS 101, so that a name or an address means the same thing in every system. Two practical problems remain: identifying which provider controls the receiving address, and the “sunrise issue” — some countries enforce the Travel Rule while others don’t yet, so a counterparty may be unable to receive the data.

Self-hosted wallets

When a customer sends to or receives from a self-hosted wallet, there is no second provider to receive the data. Under the EU regulation, the provider still records the information, and for transfers above €1,000 it must verify that the self-hosted wallet is owned or controlled by its own customer — for example with a signed message or a small test transfer.

Investigations, reporting and tipping-off

When an alert can’t be explained, it becomes an investigation. When an investigation leaves a suspicion, it becomes a report to the national Financial Intelligence Unit (FIU). Doing this well — and keeping it confidential — is a legal duty.

Investigating a case

An investigator gathers the customer’s due diligence file, their full transaction history, an on-chain trace of the funds in question, open-source information and any earlier alerts. Questions to the customer are allowed and often useful, but they must not reveal that a report is being considered.

Reporting

• The European Union. Suspicious transactions must be reported to the national FIU promptly. In the Netherlands, providers report unusual transactions to FIU-Nederland.
• The United States. Money services businesses file a Suspicious Activity Report (SAR) with FinCEN for suspicious transactions of $2,000 or more, generally within 30 days of first detecting the facts.
• The United Kingdom. Firms submit suspicious activity reports to the National Crime Agency.

Tipping-off and record keeping

It is an offence to tell a customer, or anyone outside the people who need to know, that a report has been made or is being considered. Staff must handle questions from a customer about a blocked transfer carefully, using approved wording. Firms must keep due diligence records and transaction records — in the EU for five years after the relationship ends — so that investigators can reconstruct what happened.

Putting it together: a case study

This lesson walks through one case from the first alert to the final decision, using the skills from the whole course. The background is real; the platform and customer are fictional.

The background: the Bybit hack

On 21 February 2025, attackers stole about $1.5 billion in ether from the exchange Bybit by tricking the signers of a multi-signature wallet into approving a malicious transaction. The FBI attributed the theft to North Korea. In the following days, the stolen funds were split across thousands of addresses, swapped and bridged — mainly into bitcoin — and pushed towards exchanges and over-the-counter brokers. Analytics firms published the attackers’ addresses, and some exchanges and token issuers froze funds they could reach.

Day 1: the alert

At your platform, a deposit of 3.2 BTC from a new customer triggers an alert: analytics shows indirect exposure — two hops back — to a cluster labelled as Bybit hack proceeds. The customer was onboarded a week ago, stating “salary from IT freelancing” as the source of funds.

Days 1–3: the investigation

• Hold the funds. The deposit is credited to a restricted state while the case is open, as the terms of service allow.
• Trace on-chain. The trace shows the coins left the hack cluster 40 minutes before reaching the customer, through one intermediate address and a cross-chain bridge — a typical laundering hop, not years of normal trading.
• Check the customer. The ID was verified, but the stated freelance income doesn’t explain 3.2 BTC in the first week, and the customer can’t provide invoices or a history of the wallet.
• Consider sanctions. Funds attributed to a sanctioned state’s hackers raise sanctions issues as well as money laundering ones; legal counsel is involved.

The decision

The suspicion isn’t dispelled. The compliance officer files a report with the FIU, keeps the funds restricted in line with the authorities’ instructions and legal advice, and makes sure no one tells the customer about the report. The case file records every step, every source and every reason — the file is what a supervisor or court will look at later.

Careers in crypto compliance

The work in this course maps onto real roles: KYC and onboarding analysts, transaction monitoring and blockchain investigation analysts, sanctions specialists, Travel Rule and regulatory reporting specialists, and the compliance officer or MLRO who is accountable for the programme. Since MiCA and the Transfer of Funds Regulation, demand for these skills in European crypto firms has grown.

How smart contracts get attacked

A smart contract is a program that holds and moves real value, runs in public and usually can’t be changed once deployed. Every one of those properties makes security harder than in ordinary software.

Why contracts are special targets

• The code is public. Anyone can read a deployed contract and test attacks against a copy of the chain before spending a cent.
• Value sits inside it. A bug doesn’t leak data — it lets someone take the money directly.
• Transactions are final. There is no bank to call and no chargeback once funds are gone.
• Contracts call each other. Composability lets DeFi protocols build on each other, but a weakness in one can be exploited through another.
• Upgrades are hard. Immutable code can’t be patched; upgradeable code adds new risks around who controls the upgrade.

Five families of attacks

Code bugs — such as reentrancy or a missing check — are the classic case. But many of the largest losses came from elsewhere: stolen or misused admin keys, prices fed into a contract that could be manipulated, economic designs that could be gamed with borrowed money, and even compromised websites and developer machines that tricked users into signing harmful transactions.

Reentrancy and checks-effects-interactions

Reentrancy is the bug behind The DAO and still one of the most important to understand. It happens when a contract hands control to someone else before it has finished updating its own records.

The vulnerable pattern

This simplified vault lets users withdraw their balance. It sends the ether first and sets the balance to zero afterwards:

function withdraw() external {
    uint256 amount = balances[msg.sender];
    require(amount > 0, "nothing to withdraw");
    (bool ok, ) = msg.sender.call{value: amount}("");  // 1. send
    require(ok, "transfer failed");
    balances[msg.sender] = 0;                          // 2. update — too late
}

If the caller is a contract, sending ether runs its receive function. That function can call withdraw() again — and because the balance hasn’t been set to zero yet, the vault pays out the same balance a second time, and a third, until it is empty.

The fix: checks, effects, interactions

Order every function in three steps: first check the conditions, then update your own state, and only then interact with other contracts or send value.

function withdraw() external nonReentrant {
    uint256 amount = balances[msg.sender];
    require(amount > 0, "nothing to withdraw");  // checks
    balances[msg.sender] = 0;                     // effects
    (bool ok, ) = msg.sender.call{value: amount}("");  // interactions
    require(ok, "transfer failed");
}

A reentrancy guard — a lock such as the widely used nonReentrant modifier — adds a second layer by refusing nested calls. Watch out for cross-function reentrancy, where the attacker re-enters a different function that reads the not-yet-updated state, and read-only reentrancy, where another protocol reads a price or balance from your contract in the middle of an update.

Access control, upgrades and keys

Many contracts have powerful functions: minting tokens, pausing, changing parameters or upgrading the code. Whoever can call them effectively owns the protocol. Some of the largest losses in crypto came not from clever bugs but from this power falling into the wrong hands.

Missing or wrong checks

A sensitive function without a modifier such as onlyOwner can be called by anyone. Typical mistakes are initialisation functions that can be called a second time, functions marked public by accident, and checks that rely on tx.origin instead of msg.sender.

// Vulnerable: anyone can become the owner
function initialize(address newOwner) public {
    owner = newOwner;
}

// Safer: can only run once
function initialize(address newOwner) public initializer {
    owner = newOwner;
}

Upgradeable contracts

Proxy patterns let a team replace the logic behind a contract’s address. That makes fixes possible, but whoever controls the upgrade can also replace the logic with code that drains the funds. Proxies also bring technical risks such as storage collisions and uninitialised implementation contracts.

Keys are part of the code

Oracles and price manipulation

Lending protocols, derivatives and stablecoins need to know prices. A contract can’t look them up on the internet; it relies on an oracle. If an attacker can move the price the oracle reports, they can borrow too much, liquidate others unfairly or mint assets cheaply.

The danger of spot prices

The simplest oracle reads the current price from a decentralised exchange pool. But a pool’s price is just the ratio of its two reserves, and anyone with enough capital can change that ratio inside a single transaction — buy a lot to push the price up, use the inflated price, then sell back.

Safer oracle designs

• Time-weighted averages. A TWAP over several minutes or hours is much more expensive to move than a spot price.
• Decentralised oracle networks. Many independent nodes report prices aggregated from many markets.
• Sanity checks. Reject prices that are stale or move more than a set limit, and compare several sources.
• Conservative risk settings. Lower borrowing limits and caps for assets with thin markets.

Flash loans, front-running and MEV

Blockchains give anyone access to huge temporary capital and a public view of pending transactions. Both are features — and both change what an attacker can do.

Flash loans

A flash loan lets anyone borrow millions without collateral, as long as the loan is repaid within the same transaction. If it isn’t, the whole transaction is reverted as if it never happened. Flash loans are useful for arbitrage and refinancing, but they also mean that any weakness that “only” needs a lot of money can be exploited by anyone.

Front-running and MEV

Pending transactions wait in a public mempool before they are included in a block. Bots watch it and can place their own transactions before or after yours. The profit that block producers and bots can extract by ordering transactions is called maximal extractable value (MEV).

Defences

• Slippage limits. Set a maximum price difference so a sandwiched swap fails instead of filling at a bad price.
• Private transaction routes. Send transactions to block builders privately instead of through the public mempool.
• Commit–reveal. For auctions and votes, first commit to a hidden choice, then reveal it later.
• Snapshot-based governance and delays. Count votes from an earlier block and delay execution, so voting power can’t be borrowed for one transaction.

Cross-chain bridges: the biggest targets

Bridges move assets between blockchains. They often hold enormous pools of locked funds and depend on complex message verification — which has made them some of the most attacked systems in crypto.

How a lock-and-mint bridge works

A user locks tokens in a contract on chain A. The bridge verifies the deposit and mints a wrapped version of the token on chain B. To go back, the wrapped tokens are burned on chain B and the originals released on chain A. The wrapped token is only worth something as long as the locked funds are safe and the verification can’t be faked.

Where bridges break

Add the Ronin case from stage 1 — five of nine validator keys stolen — and the three main failure modes are clear: broken verification code, unsafe upgrades and too few or poorly protected signers.

What reduces bridge risk

• Strong verification. Many independent signers, or cryptographic proofs of the other chain’s state.
• Rate limits. Caps on how much can leave per hour, so an exploit can’t empty everything at once.
• Careful upgrades. Reviews and tests for every upgrade, including how values are initialised.
• Monitoring and pause. Watching for mints without matching deposits, with a way to pause quickly.

Secure development: tests, tools and standards

Audits catch problems late. Most security comes from how a contract is designed, written and tested before an auditor ever sees it.

Design for safety

• Keep it simple. Every extra feature is more code to attack. Separate the parts that hold funds from the parts that change often.
• Use audited building blocks. Widely used libraries for tokens, access control and reentrancy guards have been reviewed and battle-tested far more than new code.
• Use a current compiler. Since Solidity 0.8, arithmetic overflow and underflow revert automatically — a whole class of older bugs is gone if you don’t switch the checks off.
• Limit the blast radius. Caps, rate limits and pause switches limit how much one bug can cost.

Test like an attacker

• Unit tests. Cover every function, including the failure paths: what happens with zero, with the maximum, with the wrong caller?
• Fuzz and invariant tests. Let a tool throw thousands of random inputs and sequences at the contract while checking properties that must always hold — for example, “the sum of all balances equals the tokens held”.
• Static analysis. Tools such as Slither scan the code for known dangerous patterns in seconds.
• Formal verification. For the most critical logic, mathematically prove that key properties hold for all inputs.

Know the known bugs

Public catalogues of smart contract weaknesses, post-mortems of real exploits and the security sections of language documentation are the cheapest training a developer can get. Most exploits reuse ideas that were already public.

How a security audit works

An audit is an expert review of a contract before — and sometimes after — it goes live. It finds many problems, but it is a snapshot of one version of the code, not a guarantee.

The stages of an audit

1. Scope. Agree exactly which contracts, which commit and which assumptions are covered.
2. Understand. Read the documentation, the tests and the intended behaviour, and build a threat model: who could attack, with what, to gain what?
3. Review. Read the code line by line, run tools, write proof-of-concept exploits for suspected issues.
4. Report. Each finding gets a severity, a description, the impact and a recommended fix.
5. Fix review. The auditors check that the fixes work and don’t introduce new problems.

What an audit can’t do

• It covers one version. Code changed after the audit — even “small” upgrades — isn’t covered. Nomad’s exploit came from an upgrade.
• It has limited time. Auditors work for days or weeks; attackers have unlimited time once the code holds value.
• It may exclude the rest. Keys, front ends, oracles and off-chain systems are often out of scope — yet Ronin and Bybit failed there.

Many teams therefore combine audits with more than one firm, public audit contests, and bug bounty programmes that reward independent researchers for responsibly reporting bugs after launch.

Incident response: when an exploit happens

Exploits often unfold over minutes or hours. Teams that have prepared — with monitoring, a pause switch and a plan — can save funds that unprepared teams lose.

Before: prepare

• Monitoring. Alerts for unusual withdrawals, mints without deposits, sharp changes in balances or prices, and admin actions.
• Emergency controls. A pause function held by a multi-signature group that can act fast, with clear rules about when it may be used.
• A runbook. Who is called, who decides, who talks to users — written down and rehearsed.

During: contain

Pause affected contracts, revoke compromised keys and approvals, and, if possible, move funds still at risk to safety. Tell users clearly what is happening and what they should do — for example revoking token approvals — without speculating. Share the attacker’s addresses with exchanges, stablecoin issuers and security groups, who may be able to freeze funds, and involve law enforcement.

After: recover and learn

Finally, publish a post-mortem: what happened, why, what was lost and recovered, and what will change. Honest post-mortems are how the whole industry learns — and many of the cases in this course are known because teams published them.

What tokenisation is — and what it isn’t

Tokenisation means representing a right to a real-world asset — a fund share, a bond, gold in a vault — as a token on a blockchain. It has moved from pilot projects to products managed by some of the world’s largest asset managers.

The basic idea

A token is a record on a blockchain that says who holds what. For a tokenised asset, that record is linked to a legal right: ownership of a fund share, a claim on a bond issuer, or title to a bar of gold held by a custodian. The token makes the right easy to transfer and to program; the legal structure decides what the right actually is.

What tokenisation can improve

• Settlement. Transfers can settle in minutes, around the clock, instead of in days through several intermediaries.
• Programmability. Rules such as who may hold the asset, or how interest is paid, can be built into the token.
• Access and fractions. Assets can be split into smaller units, lowering minimum investments where the rules allow.
• Transparency. Supply and transfers are visible on the blockchain.

What it doesn’t fix

A token doesn’t make an illiquid asset liquid, doesn’t remove the need for a trustworthy custodian or issuer, and doesn’t change securities law. If the legal link between token and asset is weak, the token is just a number.

Which assets are being tokenised

Almost any asset can be tokenised in theory. In practice, a few asset classes lead — those where the benefits are clear and the legal path is well understood.

Government debt and money market funds

Tokenised funds that hold short-term US government debt became the largest category in 2024 and 2025, with total assets in the billions of dollars. They pay a yield, are simple to value every day and are attractive as an on-chain place to park cash — including as collateral in crypto markets.

Private credit

Platforms bring loans to businesses on-chain and let investors fund them. The yields can be higher, but so is the risk: a token doesn’t make a borrower more likely to repay.

Commodities, bonds, real estate and equities

• Gold. Tokens such as PAX Gold represent one fine troy ounce of gold held in professional vaults, with the issuer publishing regular reports on the holdings.
• Bonds. Issuers from development banks to industrial companies have issued digital bonds directly on blockchains — stage 2 looks at two examples.
• Real estate. Usually a company or fund owns the building and the tokens represent shares in it. Liquidity, valuation and local property law are the hard parts.
• Equities. Tokenised shares are subject to full securities law, and products differ widely in what holders actually own.

Legal structures: who owns what

The most important question in tokenisation isn’t technical: what exactly does the token holder own, and what happens if the issuer or custodian fails?

Four common structures

• Native digital securities. The law recognises the blockchain record itself as the register of the security — the token is the security.
• Fund or company shares. A fund or special-purpose company owns the asset, and the tokens represent its shares or units.
• Depositary or custodial claims. A custodian holds the asset, and the token is a claim to receive it or its value.
• Contractual claims. The token gives a contractual right against the issuer — the weakest form if the issuer becomes insolvent.

Laws that recognise tokens

• Germany. The Electronic Securities Act (eWpG) of 2021 allows bonds and some fund units to be issued as crypto securities registered on a blockchain.
• Switzerland. The DLT Act of 2021 introduced ledger-based securities that can be transferred on a blockchain.
• The European Union. The DLT Pilot Regime has applied since March 2023 and lets market infrastructures trade and settle tokenised securities under adjusted rules. MiCA, by contrast, doesn’t cover tokens that are financial instruments: tokenised securities fall under the existing securities laws.

Token standards and permissioned tokens

An ordinary token can be sent to any address. A tokenised security usually can’t: the law requires the issuer to know who holds it, to block transfers to ineligible investors and to act on court orders. That needs a different kind of token.

From open tokens to permissioned tokens

Standards such as ERC-20 on Ethereum or TRC-20 on TRON define basic functions: balance, transfer, approval. Permissioned token standards add rules that are checked on every transfer. ERC-3643, for example, links each holder address to a verified identity and runs every transfer through a compliance module that can, for instance, allow only verified investors from certain countries.

Typical controls in a security token

• Whitelists. Only addresses linked to verified investors can hold the token.
• Transfer rules. Limits by country, investor type, holding period or maximum number of holders.
• Freeze and forced transfer. The issuer’s agent can freeze tokens or move them, for example on a court order or after an investor loses their keys.
• Recovery. A verified investor who loses a wallet can have the tokens reissued to a new one.

These powers are the opposite of “code is law” — and that is intended. A regulated security must follow securities law, and an investor who loses a key must not lose their legal ownership.

Custody, oracles and the link to the real world

A tokenised asset lives in two worlds: the token on the blockchain and the asset in a vault, a register or a bank account. The bridge between them — custody, reporting and data feeds — is where much of the risk sits.

Custody of the underlying asset

Someone must hold the real asset: a custodian bank for securities, a vault for gold, a fund administrator for a fund’s cash. Investors depend on that party being solvent, honest and legally separated from the issuer, so that the assets are protected if the issuer fails.

Attestations and audits

Issuers publish reports from accountants showing that the assets match the tokens in circulation. As with stablecoins, it matters whether a report is a full audit or a limited attestation, how often it appears, and what exactly it checks.

Oracles for real-world data

Smart contracts that use tokenised assets need data from outside the chain: a fund’s net asset value (NAV) each day, the price of gold, interest rates, or confirmation that reserves exist. An oracle brings that data on-chain. If the data is wrong or late, a lending protocol might value the collateral incorrectly — the same oracle risk as in DeFi, applied to real-world prices.

The lifecycle: issuance, servicing and redemption

A tokenised asset goes through the same life as a traditional one — it is issued, it pays income, it changes hands and eventually it is redeemed. The difference is that each step can be automated and settled on-chain.

Issuance

Investors are onboarded with KYC and eligibility checks. They pay cash — through a bank or with stablecoins — and the issuer mints tokens to their verified addresses. The register on the blockchain is updated at the moment the tokens are created.

Servicing and transfers

Interest, coupons or dividends can be paid automatically to every holder, in proportion to their tokens, often in stablecoins. Transfers between eligible investors settle on-chain. When both the asset and the payment are tokens, they can be swapped in one atomic transaction — delivery versus payment — so neither side can default halfway.

Redemption

At maturity or on request, the investor returns the tokens, the issuer burns them and pays out the cash value. For funds, redemptions are usually processed at the next net asset value.

Secondary markets and liquidity

One of the most repeated promises of tokenisation is liquidity: that tokens of buildings or loans will trade as easily as shares. Reality is more complicated.

Why tokens don’t trade by themselves

• Transfer restrictions. A permissioned token can only move between eligible investors, which shrinks the pool of buyers.
• Licensed venues. Trading securities requires a licensed trading venue, such as a multilateral trading facility in the EU; many tokens have no such venue at all.
• Valuation. Buildings and private loans are hard to value daily, so buyers and sellers disagree on price.
• Fragmentation. The same kind of asset is issued on different blockchains and platforms that don’t connect.

Where liquidity really comes from

The tokens that are easiest to exit are those the issuer redeems directly — such as money market fund tokens that can be redeemed for cash at the daily net asset value. Their liquidity comes from the redemption promise, not from a trading market. For assets without such a promise, a token may simply have no buyer at a fair price.

Tokens as collateral

A growing use of tokenised government debt is as collateral: trading firms and crypto platforms can post a yield-bearing fund token instead of cash or stablecoins. This is one of the clearest practical benefits so far — an asset that earns interest and can move at any hour.

The risks of tokenised assets

Tokenisation combines the risks of the underlying asset with the risks of the technology and of the structure that links them. Investors and builders need to look at all three.

Asset risks

The token doesn’t change the asset: a loan can default, a property can fall in value, a bond issuer can fail. Market and liquidity risk stay the same — or grow, if the token adds a layer of transfer restrictions.

Structural risks

• Legal uncertainty. In some countries it isn’t clear whether the token or an off-chain register prevails if they disagree.
• Custodian and issuer. If they fail, investors depend on how well the assets were separated.
• Disclosure. Marketing may promise more than the documents give — as the “share of an apartment” example in stage 1 showed.

Technology risks

• Smart contract bugs. The same risks as in DeFi: access control, upgrades, oracle manipulation.
• Keys. The issuer’s admin keys — for minting, freezing and forced transfers — are high-value targets.
• Chain risk. Congestion, outages or reorganisations on the chain the token lives on.

Banks, central banks and the road ahead

Tokenisation is no longer only a crypto topic. Central banks, market infrastructures and the largest banks are testing how tokenised assets and tokenised money could work together.

Public-sector projects

• Project Guardian. Launched by the Monetary Authority of Singapore in 2022, it brings regulators and financial firms together to test tokenised assets; an early pilot traded tokenised government bonds and currencies on a public blockchain.
• Project Agorá. Started in 2024 by the Bank for International Settlements with seven central banks and dozens of private firms, it explores tokenised commercial bank deposits and central bank money on one shared platform for cross-border payments.
• The EU DLT Pilot Regime. Since 2023 it has let market infrastructures trade and settle tokenised securities under a supervised exemption.

Banks and market infrastructure

Large banks run blockchain platforms for tokenised deposits and repo transactions — JPMorgan’s platform, renamed Kinexys in 2024, is one example — and securities depositories and exchanges are building tokenised settlement into their systems.

What has to happen next

• Tokenised money. Atomic settlement needs a cash leg on-chain: regulated stablecoins, tokenised deposits or central bank money.
• Interoperability. Assets on different chains and platforms need to connect safely — without the bridge risks seen in DeFi.
• Legal certainty. More countries need laws that recognise tokens as the legal record.
• Standards and identity. Common ways to handle investor identity, eligibility and reporting across platforms.

Skills in demand

Tokenisation projects need people who understand both worlds: securities and fund law, custody and settlement, smart contracts and token standards, KYC and the Travel Rule. The combination — not any single skill — is what is scarce.