Cryptocurrencies aren’t entirely anonymous; they’re more like pseudonymous currencies. You can track transactions, but the identity of the parties involved stays unknown.
The majority of cryptocurrencies operate on open and decentralized blockchain networks. This means anyone can join the network and set up a digital wallet without giving out personal information. Thus, verifying the true identity associated with a cryptocurrency wallet address is difficult.
Nonetheless, while this does offer a degree of privacy for cryptocurrency users, every cryptocurrency transaction is documented in a public ledger and is accessible to anyone interested in tracking them. This can result in a security risk known as “dusting attacks” when malicious actors attempt to exploit this situation.
What is a Dusting Attack?
A dusting attack, also known as a dust attack, is a malicious activity in which hackers send small amounts of cryptocurrency to individuals’ wallets to monitor their transaction history.
The primary aim of dusting attacks is to unveil the owner of a wallet address and thus provide attackers with an opportunity to steal funds through methods like phishing.
In some instances, newly created tokens may entice users to activate a smart contract on a specific website, potentially resulting in the depletion of their funds if the contract has such permissions.
Dust attacks started with Bitcoin but are now occurring with Litecoin, BNB, and other cryptocurrencies that use a transparent and publicly accessible blockchain.
Dust attacks are typically carried out with one of two primary objectives:
- To lead unsuspecting users to malware, phishing websites, or advertisements. This scenario is common for account-based cryptocurrencies, where the dust transaction may contain embedded harmful links within the transaction details.
- To analyze how a wallet address interacts within the network. This analysis reveals other addresses owned by the user. This is typical for assets based on Unspent Transaction Outputs (UTXOs).
How Does a Dusting Attack Work?
The attacker initiates a dusting attack by sending small amounts of cryptocurrencies, “dust,” to many target addresses. These amounts are so small that most people won’t notice them in their wallets.
To illustrate, let’s consider a scenario where you have 0.6371149 BTC in your wallet and intend to transfer 0.6371 BTC to another wallet after deducting a transaction fee of 0.00001 BTC. This leaves a residual balance of 0.0000049 BTC (equivalent to 490 satoshis).
This small balance is called “dust” because it’s practically useless; it is insufficient to cover the fee for another transaction, and it would probably remain in the wallet until it accumulates.
Attackers can send hundreds of these tiny amounts across the blockchain network, hoping some will remain in the victim’s wallet.
Next, the attacker monitors those funds and all the transactions from the dusted wallets. They analyze everything together to figure out which addresses belong to the same wallet, as it’s common for someone with a crypto wallet to have multiple addresses.
The ultimate objective is to link the dusted wallets to the individuals or organizations behind them. Over time, the attacker unveils the identity of the entity using the dusted wallet. Once the wallets lose their anonymity, attackers may exploit this information for phishing attacks or cyber threats against their targets.
In the last quarter of 2020, a dusting attack occurred on the Binance Chain network. Hackers sent tiny amounts of BNB to multiple accounts and included a link falsely claiming to offer 50 BNB. However, this was just a ploy by the hackers to try and access users’ information.
If you have recently received a very small amount of BTC in your wallet unexpectedly, you may be the target of a “dusting attack” designed to deanonymise you by linking your inputs together – Samourai users can mark this utxo as “Do Not Spend” to nip the attack in the bud. pic.twitter.com/23MLFj4eXQ
— Samourai Wallet (@SamouraiWallet) October 25, 2018
Before the Binance Chain attack, hackers went after Samourai wallets. Despite developers’ warnings on social media and marking malicious funds as “do not spend,” some users still got tricked.
Attackers now send larger amounts than usual to targeted accounts to hide their dust attacks. So, it may not be so obvious to a user that they are experiencing a dust attack.
How to Get Rid of Crypto Dust
Here are a couple of ways to remove crypto dust from your wallet:
Maintain a Minimum Balance Threshold
Establish a minimum balance requirement for your wallet. When the balance falls below this threshold, then you increase your crypto holdings.
Convert Small Amounts to Other Tokens
If your crypto wallet service permits, convert the little amounts of crypto into other tokens. For example, if you possess 0.00004 BTC, you can exchange it for 1.1 USDT at the current exchange rate and subsequently convert it to your local currency for withdrawal to your bank account. Certain crypto exchanges, including Binance, Crypto.com, OKX, Gate.io, and others, allow users to convert small crypto amounts into the exchange’s native token every 24 hours.
How to Prevent a Crypto Dusting Attack
To avoid crypto dusting attacks, follow these steps:
Be Cautious with Addresses
Avoid dealing with unfamiliar or suspicious addresses to reduce the risk of receiving crypto dust. Stick to known and trusted addresses to maintain your privacy and security.
Blockchain analytics tools can spot patterns and connections between addresses, helping identify potential dusting attacks by revealing address clustering. This enables you to steer clear of suspicious addresses.
Choose a Secure Wallet
Opt for a secure crypto wallet equipped with strong security features like encryption, robust password requirements, and multi-factor authentication. These measures prevent unauthorized access and ensure that only you can initiate transactions.
You can also consider using a Hierarchical Deterministic (HD) Wallet. An HD wallet automatically generates new addresses for each transaction. This added security measure makes it difficult for malicious actors to track your transactions and discover your identity.
Explore Privacy Features & Tools
Some advanced wallets offer privacy features such as coin control, stealth addresses, or built-in mixing services. These features obscure transaction histories, making it challenging for attackers to trace your transactions or execute dusting attacks.
Privacy tools like The Onion Router (TOR) can also help enhance anonymity and make it challenging for attackers to trace your transactions.
Beware of Suspicious Airdrops
Protect yourself by avoiding suspicious crypto airdrops. Malicious individuals exploit the memecoin craze by enticing users to share their wallet addresses or interact with fraudulent smart contracts, promising rewards. Falling for these schemes makes you vulnerable to crypto dust, which can be used for significant attacks later on.
Other Purposes for Dusting Attacks
Beyond their malicious use, crypto dust serves legitimate purposes as well. Here are some non-malicious applications of dusting attacks:
Uncovering Illegal Activity
Uncovering Illegal Activity: Government agencies, including tax authorities and law enforcement, employ crypto dust in investigations related to crimes such as money laundering, tax evasion, and fraud. This data assists in identifying the individuals behind a wallet, tracking their transactions, and conducting thorough investigations. As an example, in August 2022, more than 600 wallet addresses were targeted in a crypto dusting attack. Data from the blockchain security firm PeckShield revealed that Aave, a DeFi lending protocol, restricted several users who had received 0.1 ETH each, valued at around $20, from the privacy protocol Tornado Cash, which was under sanctions.
Research
Some researchers and blockchain security firms employ dusting attacks in their studies, occasionally with financial support from governments.
Marketing
Dusting attacks are becoming more inventive, even being used for marketing purposes. While these may not align with the typical definition of a dusting attack, the techniques employed share similarities.
For example, when a new crypto project is launched, it might distribute a small quantity of its tokens to random addresses, effectively using this as a cost-effective marketing strategy to introduce the project to a broader audience. This approach can also be applied with NFTs, especially on blockchains with low transaction fees like Polygon.
Nonetheless, it’s imperative to remain vigilant and adaptable in response to potential risks. Make it a routine to regularly review and enhance your security measures to ensure the continuous protection of your cryptocurrency assets.
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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