What is crypto dust?

Crypto dust refers to small amounts of cryptocurrency sent to numerous wallet addresses, either for benevolent or malicious intentions. Typically, dust involves an amount of cryptocurrency that is equal to or lower than the transaction fee. In Bitcoin, for instance, Bitcoin Core software sets a dust limit of around 546 satoshis (0.00000546 BTC), the smaller denomination of Bitcoin (BTC). Transactions of such amounts may be rejected by wallet nodes that enforce the limit. Dust can also result from rounding errors or transaction fees, and the small amounts accumulated over time may not be tradeable but can be converted into the exchange’s native token.

While crypto dust has been mostly used for legitimate purposes, such as alternative advertising methods, it’s still important for users to be aware of dust attacks and take precautions. Dusting can involve sending promotional messages, replacing the more traditional mailshots. Nonetheless, even though crypto dust is not a significant threat, users should be informed of its existence and take measures to safeguard themselves in case of an attack.

Because blockchain transactions are transparent and traceable, the attacker can see when the dust is moved from one address to another and try to track down the owner of the wallet. The attacker’s goal is not to steal cryptocurrency but to associate the victim’s wallet with other wallets that may contain personal information that can be used to exploit or scam the victim.

Dusting attacks can happen on many public blockchains like Bitcoin, Litecoin, and Dogecoin. The attacker can use the information gained from a dusting attack to launch phishing scams, extortion threats, blackmail, or identity theft to make money. It’s important to be aware of dusting attacks and take measures to protect your privacy if you are targeted.

Not all of them are Scams

Not all the small amounts of cryptocurrency transferred to a crypto wallet’s address is bad. This transfer is called “dusting,” and it can be used for reasons other than hacking activities. For example, governments can use dusting to link a specific cryptocurrency address to an individual or an organization to identify criminal activities, such as money laundering or terrorist threats. Developers can use dusting to test their software’s strength and security protocols to identify vulnerabilities and improve performance. Dusting can also happen when crypto traders make trades, and it’s not considered an attack. Many exchanges offer the option to swap these small amounts of cryptocurrency for their native tokens to use in future trades or another cryptocurrency with a low transaction fee.

Working

Malicious actors take advantage of the fact that crypto users often overlook small amounts of cryptocurrency that are transferred to their wallets. Because of the transparency and traceability of blockchains, transaction movements can be tracked, potentially leading to the identification of wallet owners. To carry out a successful dust attack, the owner of the wallet must combine the crypto dust with other funds and use it for other transactions.

When the target of the attack includes a small amount of cryptocurrency in other transactions, they may unknowingly send the dust to an off-blockchain centralized organization. Because these organizations must comply with Know Your Customer (KYC) regulations, they will store the personal data of the victim. This makes the victim vulnerable to phishing scams, cyber extortion threats, blackmail, and other targeted hacks aimed at stealing sensitive information.

UTXO-based addresses, used in various blockchains such as Bitcoin, Litecoin, and Dash, are more vulnerable to dusting attacks. This is because they generate a new address for each transaction’s remaining change. UTXO prevents double-spending and is an unspent transaction output that remains after a transaction is executed and can be used as input on another transaction. It’s like receiving a change after paying for a purchase. Just like this change can be used in other transactions later, the crypto dust from multiple addresses can be spent in other transactions. Attackers can trace a thread to determine the victim’s identity by detecting the origins of funds from the dust attack transaction using advanced technological tools.

Can dusting attacks steal crypto?

A traditional dusting attack is used to identify the individuals or groups behind the wallets, deanonymize them, and break their privacy and identity. Such activities cannot steal cryptocurrency directly but are aimed at detecting victims’ social activities — tracked down through the combination of different addresses — to then blackmail them, for example.

Over time and with the technology’s new use cases, such as nonfungible tokens (NFT) and decentralized finance (DeFi), attackers have become more sophisticated and have learned to disguise scam tokens as airdrops of free cryptocurrency. The wallet holders can access these appealing free tokens by claiming them from popular NFT projects on phishing sites created by hackers that seem legitimate. Such sites are so similar to the authentic ones that it’s difficult for the average cryptocurrency enthusiast to differentiate one from another.

The phishing sites won’t steal usernames and passwords but will convince the victim to connect their wallet to the malicious sites. By granting these phishing sites permission to access their wallets, the unknowing victim enables the hacker to move their funds and NFT assets to their wallets, stealing crypto using harmful lines of code in smart contracts.

Increasingly, dusting attacks occur on browser-based wallets like MetaMask and the Trust wallet, which are primarily used as a getaway to decentralized applications (DApps) and Web3 services. Browser-based wallets are particularly vulnerable to dusting attacks because they are more accessible to the public and can be more easily targeted by hackers or scammers. 

Stealing of Cryptocurrency

While traditional dusting attacks do not directly steal cryptocurrency from users, they can be used to identify and deanonymize wallet holders, compromising their privacy and security. This is done by combining different addresses to trace a victim’s social activities, which can then be used for blackmail or other malicious purposes.

Hackers have become more sophisticated over time, using phishing sites that offer free tokens disguised as airdrops for popular NFT projects and DeFi. Victims who claim these tokens on fake websites may unknowingly grant the hackers permission to access their wallets, allowing them to steal funds and NFT assets using malicious code in smart contracts.

Browser-based wallets like MetaMask and Trust Wallet are particularly vulnerable to dusting attacks because they are more accessible and easily targeted by hackers. While the attacks themselves do not directly steal funds, they can lead to phishing and other forms of attacks that compromise users’ crypto assets.

Identification :

Small amounts of extra cryptocurrency appearing in a wallet are a clear indicator of a dusting attack. The dusting attack transaction will be visible in the wallet’s transaction history, making it easy to verify if any malicious deposits occurred. Cryptocurrency exchanges that comply with KYC and AML regulations store their customers’ data and can be targeted by cryptocurrency scams.

In October 2020, Binance experienced a dusting attack in which small amounts of BNB were sent to multiple wallets. Once the victim sent the dust in combination with other funds, they received a transaction confirmation with a malware link that would trick them into unknowingly becoming hacked.

Following a dusting attack, cryptocurrency providers such as exchanges or wallets are typically advised to take strict measures to prevent future attacks. In late 2018, the developers of Samourai Wallet warned their users of a dusting attack and encouraged them to mark UTXOs as “Do Not Spend” to address the issue. The wallet’s development team later implemented a real-time dust-tracking alert and an easy-to-use feature for marking suspicious funds with a “Do Not Spend” note to help users better protect their transactions against future attacks.

Prevention of Dusting Attacks

While it’s not common for cryptocurrency users to fall victim to dusting attacks, it’s still important to take precautions against these types of attacks. The cost of launching a dusting attack has risen due to the high transaction fees associated with the Bitcoin blockchain. However, users can take steps to secure their funds and protect their privacy.

One method to prevent deanonymization is to refrain from moving dust funds, as this makes it more difficult for attackers to trace the thread of transactions. Additionally, using privacy tools like TOR or VPNs can increase anonymity and security. It’s also recommended to use a hierarchical deterministic (HD) wallet, which automatically creates a new address for each transaction, making it harder for hackers to track transactions.

Another effective practice is to use dust conversion services, which swap crypto dust into native tokens for future trades.

Users should also be aware of other cyber threats besides dusting and deanonymizing attacks, such as ransomware and crypto-jacking. It’s crucial to exercise caution and understand the risks associated with using cryptocurrency.