Scalable Blockchain Fraud Detection Using Spatial-Temporal Graph Neural Networks

Abstract

The increasing adoption of blockchain technology has led to a surge in financial fraud, including money laundering, Ponzi schemes, and illicit fund transfers. Traditional fraud detection techniques, such as rule-based systems and supervised machine learning models, struggle to handle the high-volume, high-velocity, and dynamically evolving nature of blockchain transactions. These limitations necessitate a scalable and adaptive approach to detect fraudulent activities efficiently.

This study introduces a Spatial-Temporal Graph Neural Network (STGNN)-based fraud detection framework, specifically designed for scalable anomaly detection in large-scale blockchain networks. By modeling blockchain transactions as a spatial-temporal graph, the proposed system captures structural dependencies between wallets and temporal patterns of fund movements. The STGNN model employs graph convolutional networks (GCN) or graph attention networks (GAT) for spatial feature extraction and gated recurrent units (GRU) or temporal convolutional networks (TCN) for sequential fraud pattern recognition. Additionally, to ensure scalability, the framework incorporates graph partitioning techniques, parallelized mini-batch training, and distributed processing, enabling real-time fraud detection across high-throughput blockchain networks.

Extensive experiments conducted on Bitcoin and Ethereum transaction datasets demonstrate that the STGNN model achieves higher accuracy, lower false positive rates, and improved computational efficiency compared to rule-based fraud detection systems, supervised ML models, and static GNNs. Case studies further confirm the model’s effectiveness in detecting large-scale fraud schemes, such as DeFi exploits, cross-chain laundering, and coordinated illicit transactions.

This research highlights the potential of graph-based deep learning techniques in blockchain security, providing a foundation for future advancements in scalable fraud detection, cross-chain anomaly detection, and decentralized financial security monitoring.