Crypto Dusting Attacks: All You Need to Know

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By A D

Cryptocurrencies have built their ground as an alternative investment asset. And, as with any new technology, there have been instances of misuse and abuse. Infact, the DeFi space faced some major exploits and attacks in the last few years. Scammers are always looking for ways to take advantage of unsuspecting individuals, and the crypto industry has been no exception. From fraudulent ICOs to Ponzi schemes and ransomware attacks, the crypto space has seen some of the biggest and most devastating scams in history. Unfortuntely, this vast and varied world of crypto scams is expanding, the latest addition being “crypto dusting attacks”.

What are dusting attacks?

Crypto dust is a term used to refer to small amounts of cryptocurrency that can be sent to a large number of wallet addresses, either for benevolent or malicious purposes. It can also refer to the small amount of cryptocurrency left after a trade due to rounding errors or transaction fees.

“Crypto dusting attack” involves transferring little amounts of cryptocurrency, or “dust,” to several wallet addresses. By following the money as it is transferred from one address to another, this attack aims to compromise the wallet owners’ privacy. Attackers want to connect the target’s address to other addresses so they may use off-blockchain hacking techniques to identify the victim.

Crypto dustings are not all frauds. Other uses for dusting exist outside of hacking. To uncover a variety of criminal acts, like as money laundering, tax evasion, terrorist threats, etc., or to maintain regulatory compliance and safety, governments may employ dusting to connect a specific cryptocurrency address to a person or an organisation. In order to enhance the performance and security of their program, developers can also employ dusting to run stress tests on it. Dust is frequently given to cryptocurrency traders as a result of trades, and it is not regarded as an attack. Numerous exchanges give users the option of exchanging these modest quantities of cryptocurrency for their native tokens, which can be used in future transactions, or for another cryptocurrency with a low transaction cost.

How does a dusting attack work?

Dusting attacks work by relying on the fact that cryptocurrency users may not realise they have received tiny amounts of cryptocurrency in their wallet addresses. The attacker sends small amounts of cryptocurrency to various wallet addresses and then tracks the movement of those funds to identify the wallet owners. By combining the dust with other funds in the same wallet and using it for other transactions, the victim can inadvertently and unknowingly send the dust to an off-blockchain centralised organisation. This organisation must comply with KYC regulations, storing the personal data of the victim, who may become vulnerable to phishing, cyberextortion threats, blackmail, and other targeted hacks aimed at stealing sensitive information.

Traditional dusting attacks cannot directly steal crypto assets. However, hackers may use increasingly sophisticated tools to trick wallet holders into phishing sites and drain their funds. It’s important to note that even though traditional dusting attacks may not steal crypto directly, they can still be a threat to users’ privacy and security. By identifying and tracking users’ activities on the blockchain, attackers can gain access to sensitive information, such as passwords or personal details, and use them for fraudulent activities, including identity theft or phishing attacks.

Therefore, it’s crucial for users to remain vigilant and take steps to protect their privacy and security, such as using strong passwords, enabling two-factor authentication, and avoiding clicking on suspicious links or downloading unknown software.

How to identify dusting attacks?

Crypto dusting attacks can be identified by the sudden appearance of small amounts of cryptocurrency that are unsuitable for spending or withdrawing in a wallet’s transaction history. If a user receives such deposits, they should be cautious and avoid clicking on any accompanying links, which may contain malware that could compromise their wallet’s security. Cryptocurrency exchanges are particularly vulnerable to dusting attacks due to their compliance with KYC and AML regulations, which means they store customer data that can be targeted by attackers.

Binance logo with binance written. the exchange has also experienced crypto dusting attacks
Binance Exchange. Image Courtesy:binance

Binance Dusting Attack

In October 2020, Binance, one of the world’s largest cryptocurrency exchanges, experienced a dusting attack. The attackers sent small amounts of Binance Coin (BNB) to multiple wallets. Once the victim combined the dust with other funds, they received a transaction confirmation containing a malware link that would trick the victim into clicking on it and becoming unknowingly hacked. This attack demonstrates that dusting attacks can be used to distribute malware, and users must remain vigilant when receiving small amounts of cryptocurrency. Binance promptly implemented measures to prevent future dusting attacks, and users should take advantage of these measures to protect their funds.

Samourai wallet logo. The wallet has also has experience with crypto dusting attacks
Samourai Wallet. Image Courtesy:cryptoninjas

Samourai Wallet Dusting Attack

In late 2018, the developers of Samourai Wallet detected a dusting attack and warned some of their users to mark the Unspent Transaction Outputs (UTXOs) as “Do Not Spend.” This action helped tackle the issue by preventing the attacker from tracking a transaction that doesn’t occur. The wallet’s developers team implemented real-time dust-tracking alerts and an easy-to-use feature to mark suspicious funds with a “Do Not Spend” note to help users better protect their transactions against future dusting attacks. The Samourai Wallet dusting attack highlights the importance of using wallets that prioritize user security and actively take measures to prevent cyber attacks.

tornado cash logo. tornado has recently had crypto dusting attacks
Tonado Cash. Image Courtesy:the hill

Tornado Cash Dusting Attack

The Tornado Cash crypto mixer service was sanctioned by the government, which backfired onto innocent users due to the inability to refuse incoming cryptocurrency transfers. Anonymous trolls used Tornado Cash to perform a dusting attack on hundreds of victims, including high-profile celebrities, blockchain developers, and politicians. This resulted in their wallets being automatically blacklisted by several important DeFi apps, such as the front-end of the Aave lending/borrowing app and the Uniswap decentralized exchange app. This was the first time a dusting attack was used to offensively disrupt service for other users, and it highlights the need for stronger measures to prevent these types of attacks. DeFi developers quickly un-banned the victim’s accounts, but the incident serves as a warning to users to exercise caution and use trusted cryptocurrency services.

To prevent dusting attacks, users can take several steps to secure their funds.

  • Users can use privacy tools such as TOR or VPN to increase anonymity and strengthen security.
  • Using an HD wallet that automatically creates a new address for each new transaction can make it difficult for hackers to trace the thread of transactions.
  • Users can use dust conversion services that automatically swap crypto dust into native tokens to use in future trades.
  • Dusting attacks rely on combining analysis of multiple addresses, and attackers cannot track a transaction that does not occur, making it crucial for users to avoid moving any dust funds.

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