As anonymous as investors would like Bitcoin to be, it isn’t. Hackers can still track funds and all the transactions with multiple methods. A hidden technique cybercriminals like to use is known as a dusting attack.
In dusting attacks, hackers will use a small amount of Bitcoin known as a “dust” and attempt to track investors to eventually break the privacy of their crypto wallets.
In this blog, we will talk about how dusting attacks work and some ways to protect yourself from them.
How Does a Dusting Attack Work?
The smallest unit of Bitcoin is 1 satoshi (0.000000001 BTC). Any amount that is defined as a satoshi is “dust”. When trading or exchanging crypto, it is common to leave behind a small amount of it after the trade is completed. This amount of BTC is so small that they are barely noticeable in transactions. However, some crypto is sent to wallets without the investor’s knowledge. This is where the hackers come in.
Imagine someone placed a dollar bill with a hidden tracker in a wallet they found on the floor. If they left the wallet on the floor and the owner came back for it, the scammer might be able to tie their identity to a bank account if they cashed the dollar in later.
To initiate a dusting attack, hackers will send a couple of satoshis to an active wallet. Then, they will begin “dusting” several different wallets to perform a combined analysis of several addresses. Eventually, they could link the addresses and eventually determine the identity of the person or the company behind the wallet.
When tracking down a person or crypto wallet provider’s identity, cybercriminals will use small details to trick users primarily through phishing campaigns. In this case, a hacker might send an investor an email claiming a Bitcoin transaction failed.
In a worst-case scenario, scammers can use info gained from dusting attacks to locate where someone lives. From here, they may attempt to take funds through threats of violence.
In the email, they would list the investor’s wallet address and transaction amount. Unsuspecting crypto traders would click the link to resend the payment, exposing their wallets in the process.
How Can I Protect Myself from Dusting Attacks?
It is important to keep an eye out for any potential phishing attempts. If you receive an email stating a crypto transaction failed, it is best to login into the exchange, or view the transaction on the wallet yourself, rather than click a random link.
Unfortunately, there is no real way to prevent hackers from sending “dust” to a wallet. The good news is cryptocurrency exchanges like Binance, FTX, or Gemini that allow investors the option to convert the dust into crypto. Some crypto wallets allow investors to mark dust in the “do not spend” category.
If possible, use a VPN when exchanging crypto. A virtual private network (VPN) is an Internet security service that creates an encrypted connection between a computer and one or more servers. VPNs help mask IP addresses from being seen by potential hackers.
Thankfully, dusting attacks are not dangerous outright. They really can only be made worse if a scammer can trick a crypto investor into falling for social engineering attempts. Crypto dust in your wallet does not give anyone immediate control of funds. The privacy and safety measures that wallets and exchanges have implemented have greatly reduced dusting attempts.
The risk is only increased if the common investor is not aware of scam emails or other phishing attempts. Investors are also more exposed if funds are transferred between cold and hot wallets because they can be easily linked. A good way to combat this is to change keys periodically and to break the links between connected wallets.
If you're trading in cryptocurrencies, it's a good idea to study up on all the different scams out there. Given how cryptocurrency is a growing technology in the financial world, scammers are using all kinds of tactics to fleece users of their coins. A dusting attack is just an entry-level point for hackers to access crypto. It isn’t as dangerous as cryptojacking or ransomware attacks.
It is important to note that dusting attacks do not always come from hackers or scammers. A branch of government such as a tax or law enforcement agency may perform a dusting attack to connect a person or group to an address. In this case, governments are looking for gangs, money launderers, or tax evaders. Mass dusting is also used by blockchain analytics firms, which study dust for academic reasons or have contracts with government agencies.
Not all dust attacks are considered “attacks.” They have also been used to advertise to cryptocurrency users, primarily by sending out messages included in the crypto dust, sort of like an email blast. Even the genesis block of Bitcoin (the first block of bitcoin ever mined) included a message!