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Blockchain technology has revolutionized various industries by providing decentralized and secure ledger systems. However, auditing these transactions has become increasingly challenging due to the complexity of blockchain ecosystems and the need for regulatory compliance.

Explainable artificial intelligence (XAI) can offer a potential solution by analyzing large volumes of data to help auditors and regulators gain insights into complex transaction histories and verify compliance. XAI is a form of artificial intelligence that develops models capable of explaining the decisions they make. This transparency allows users to understand how and why algorithms make decisions and promotes better decision-making and increased confidence in the models.

In industries such as healthcare and finance, transparency and ethical decision-making are critical. XAI can help ensure that decisions are not based on incorrect data or bias by providing transparent explanations of how decisions are made.

Traditional financial audits are straightforward as auditors can access centralized records and databases easily. However, blockchains are not controlled by centralized entities, making it difficult for auditors to access information. Additionally, blockchain transactions can be complex and involve multiple parties and smart contracts, posing a challenge for auditors.

By integrating XAI into the auditing process, auditors can gain deeper insights into complex transaction histories and ensure compliance with regulatory requirements. XAI can process complex patterns within transactions, explain findings to auditors, detect and prevent fraud, detect errors, and share audit trail records securely.

However, the implementation of XAI in auditing blockchain transactions raises ethical considerations. Blockchain technology emphasizes decentralization and anonymity, and introducing AI for tracking and auditing transactions could compromise these principles. It is crucial to strike a balance between transparency and preserving the fundamental principles of blockchain technology.

Implementing XAI-based auditing solutions for blockchain transactions can enhance compliance, improve efficiency by automating analysis, and lead to new applications and features in blockchain systems.

In conclusion, XAI has the potential to revolutionize the auditing of blockchain transactions by providing transparency, efficiency, and enhanced compliance. However, careful consideration must be given to ethical concerns and maintaining the core principles of blockchain technology.

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The Role of Explainable AI in Auditing Blockchain Transactions - Fagen wasanni