Peel chain

A sequence of transactions in which funds move through successive addresses, each time sending (“peeling off”) a portion to another destination, often a service deposit address, while the remainder continues to a new address. The pattern is characteristic of the UTXO model, where wallets commonly generate a new change address for each payment. Exchange hot wallets may also produce similar patterns when processing withdrawals individually. On account-based networks, where there is no change output, a comparable pattern must be deliberately created by moving funds through successive addresses.

Tracing a peel chain in the UTXO model depends on identifying the change output at each step (see Change address). Because change identification relies on heuristics, an error at one step can lead the investigation down the wrong path; uncertain links should be documented and reassessed. A peel chain alone does not indicate laundering. Its significance depends on context, including the source of funds, the destinations of peeled amounts, and the speed and regularity of transactions, which may indicate automation.