Ethereum Fraud Prevention: A Supervised Learning Approach for Fraudulent Account Recognition

In recent times, blockchain technology, especially Ethereum, has gained tremendous popularity for supporting various financial transactions. Ethereum, the second most prominent cryptocurrency platform after Bitcoin, processes over one million transactions daily, known for its high security and ease of use. However, despite its robust security features, Ethereum faces challenges with illegal activities, which hinder its widespread adoption. To address this issue, this study focuses on detecting illicit activities on the Ethereum blockchain, particularly identifying illegal accounts using machine learning techniques. It proposes a novel method combining a convolutional neural network with an XGBoost classifier, aimed at differentiating between normal and illicit accounts based on transaction history. The XGBoost model, a tree-based ensemble classifier, not only improves accuracy but also prevents overfitting and enhances the model's generalizability. Its parallel tree-building feature also speeds up training, making the model more scalable. The model is trained on a balanced dataset of over 4,000 Ethereum accounts, encompassing both normal and fraudulent accounts. The results are promising, with the model achieving an accuracy of 99.7% and an average AUC of 0.9998 (std: 0.0008), outperforming standard machine learning models. This approach shows significant potential in combating illegal activities within the Ethereum blockchain.