This paper introduces a new metric to assess wallet risk based on transaction proximity to centralized exchanges and proposes several implementation methods.
In a new paper, the Circle Research team introduces Transaction Proximity, a graph-based metric that measures how many onchain “hops” separate any given wallet from centralized exchanges. Wallets sitting within one hop from an exchange are labeled as Easily Attainable Identities (EAIs). With real-time transaction proximity labeling, smart contracts and intermediaries can query “Is this counterparty an EAI (or near one)?” and dynamically decide access rights, delayed withdrawals, or additional attestations.
Why it matters
- Covers most real activity.
Among large USDC wallets on Ethereum, 56% are EAIs and 88% sit one hop away. - Captures money flows.
For USDC transfers above $2,000, 91% of transactions involve at least one EAI, meaning high-value movements are highly traceable without blanket KYC (see figure below). - Deters fraud.
An analysis of 431 known exploiter wallets found 83% are not EAIs, and 20% sit five hops or more from any exchange — patterns that may warrant caution for third-party integrators.
Transaction Proximity to EAI Wallets for USDC transfers (Figure 3 in the paper)
The paper details several ways to surface EAI data – from a straightforward onchain registry embedded in the token to Merkle-proof lists – each balancing gas cost, transparency, and maintenance overhead.
Read the full paper for details here. You may also read our blog to learn about fraud management and prevention.
