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  • https://doi.org/10.1109/ict4m68001.2025.11363504Copy DOI Icon

Optimizing Transaction Classification through Hybrid Feature Engineering and Advanced Machine Learning Algorithms

  • Nov 26, 2025
  • Adel Rajab
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Abstract

The accelerated adoption of bitcoin and other cryptocurrencies has facilities swift, decentralized transfer of value while simultaneously opening venues for illicit behavior such as money laundering, fraud, and the financing of terrorism. Because block chain records are pseudonymous and generate high dimensional data, effective detection demands sophisticated machine-learning (ML) models combined with network and graph-analysis methods to achieve reliable classification. This study offers a comparative assessment of ML classifiers to identify illegal activity in cryptocurrency transactions based on the Elliptic Bitcoin Transaction dataset. A two-stage feature selection approach including variance threshold method and random forest based feature ranking method was utilized to extract most informative features. Six ML classifiers, namely Random Forest (RF), K-Nearest Neighbor (KNN), Logistic Regression (LR), Support Vector Classifier (SVC), Gradient Boosting (GB), and Multilayer Perceptron (MLP), were chosen and compared on a stratified train-test split based on accuracy, precision, recall, f1 score, confusion matrix, and ROCU-AUC score. The performance results illustrate how RF, GB, and the rest of the methods consistently produced the best 98% accuracy rate with almost flawless classification scores of (0.997, 0.994, and 0.982, respectively). However, the KNN achieved an AUC value of 0.963, and the margin-based SVC achieved an AUC value of 0.981. The results shows that using ensemble methods can greatly improve how intrusions are detection in cryptocurrency network, these models are able to spot subtle patterns in blockchain transactions, which has practical value for making Bitcoin networks more secure.

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