What is High Risk Bitcoin Address

If you are an independent private bitcoin trader or a peer-to-peer (P2P) exchanger and uses platform such as blockchain, paxful or localbitcoins etc to remit bitcoin to users you should avoid sending btc to address tagged as high level addresses to avoid breach of terms and getting your account terminated.

What are High Levels Wallets Addresses

Addresses identified as high risk is associated with:

  • Money laundering
  • Financing of crime & terrorism
  • Darkmarkets
  • Fraudulent trading
  • Scamming
  • Hacking
  • Malware

How to Spot a High Risk Bitcoin Address Format

Derivation path as “BIP49” are most likely used by the rich and might not necessarily mean they are involved in fraud.

Such as P2sh (Pay To Script Hash) are likely tagged  “high risk” by these platform

They start with number 3 instead of 1,2 or b just like this; 3D2CNM2a7NqLs5w6t6w8FKEQFZXbM8jmNp

The P2SH script function is most commonly used for multisig addresses which can specify, for example, that multiple digital signatures are required to authorize the transaction. This address format is also used to enable non-native segwit transactions using a process known as P2WPKH-in-P2SH.

What is P2PKH, P2PK, P2SH, P2WPKH?

P2PKH: Means Pay To Public Key Hash
This is how transactions are made. You are requiring the sender to supply a valid signature (from the private key) and public key. The transaction output script will use the signature and public key and through some cryptographic functions will check if it matches with the public key hash, if it does, then the funds will be spendable. This method conceals your public key in the form of a hash for extra security.

 

P2PK: Pay To Public Key
This is similar to P2PKH; the difference is that it does not conceal your public key. Anyone using this method to send funds over the P2P network is showing people their public key in the transaction details.

 

P2SH: Pay To Script Hash
The outputs of a transaction are just scripts that, if executed with specific parameters, will result in a boolean of true or false. If a miner runs the output script with the supplied parameters and results in true, the money will be sent to your desired output. P2SH is used for multi-signature wallets making the output scripts logic that checks for multiple signatures before accepting the transaction. P2SH can also be used to allow anyone, or no one, to spend the funds. If the output script of a P2SH transaction is just 1 for true, then attempting to spend the output without supplying parameters will just result in 1 making the money spendable by anyone who tries. This also applies to scripts that return 0, making the output spendable by no one.

 

P2WPKH: Pay To Witness Public Key Hash
This was a feature of segwit which stands for Segregated Witness. Instead of using scriptSig parameters to check the transaction validity, there is a new part of the transaction called witness where the validity occurs.

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