Glossary term
Chain Hopping
Subject: Financial Crime, Money Laundering, Typologies and Asset Recovery
Also known as: Cross-chain laundering, Chain swapping
Chain hopping is swapping cryptocurrency from one blockchain to another, for example through bridges or exchanges, to break the trail of a transaction trace and make illicit funds harder to follow.
Explanation
Each blockchain has its own ledger and tools. When criminals convert coins on one chain into coins on another, a trace that works on the first chain stops at the swap, and investigators must follow the funds through the service used to switch. Methods include decentralised exchanges, cross-chain bridges, instant swap services and wrapped tokens. Repeating the hops through several chains, and combining them with mixers or privacy coins, makes tracing slower and more costly. Ransomware gangs and hackers who stole funds have used it. Blockchain analytics providers now follow bridges and many swaps, and virtual asset service providers screen incoming funds that have a history on several chains. Hops are not illegal in themselves, since people swap coins for ordinary reasons. The tactic works only while tracing tools stop at the edge of a single ledger.
Example
After a hack, 10 million in tokens are moved from one chain to another through a bridge, swapped into a privacy-oriented coin and sent onward. An exchange’s analytics tool, which follows the bridge, links a later deposit to the hack and holds it. Investigators share the trail with law enforcement.
Not to be confused with
- Layering
- The general laundering stage of obscuring origin through many transactions; chain hopping is one crypto-specific technique used in it.